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Startup ecosystem of Paris

Tuesday, January 5, 2021

France is rarely considered as a cradle of startups, both worldwide and in Europe. Education, investment and journalism have always been strong sides of this country, and in recent years, they have further strengthened their positions. While the French, and Parisian ecosystem in particular, already offers significant opportunities for entrepreneurs, there is still a large room for improvement.

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With this, entrepreneurs and investors often mention problems that include high taxes and language barrier. However, with every year, startups started to take more and more noticeable places in French business. In the StartupBlink report for 2019, Paris became the 13th city in the world and the leader of startup ecosystem development in France. Today, in our material, we are going to analyze the components of this success.

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Numbers and facts

Perhaps, the main advantage of Paris is its location — the center of Western Europe, which is the perfect place for traveling to the largest European capitals: London, Amsterdam, Berlin, Madrid, Rome or Luxembourg within no more than 3 hours. The same fact attracts a huge number of tourists to the city — 30 million people a year.

At the same time, Paris is actively investing in the development of infrastructure for startups — the amount reaches €1 billion, and Microsoft is launching one of its corporate incubators in this city. In Paris itself, there are more than 4,000 startups, and in the Paris metropolitan area there are three times as many — 12,000.

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Startup ecosystem of Paris

Strong sides

Education

France boasts some of the oldest European universities, which still produce talented engineers. What’s more important, even more graduates choose startups instead of careers in corporate giants, like Goldman Sachs and Bain. School 42, which was founded by serial entrepreneur Xavier Niel, and now is a free-of-charge school for those who begin their path in IT (in Ukraine, there is a similar school, called UNIT.city). An interesting fact that its graduates easily find work, both in the largest FAANG IT giants, and in local start-ups that hire only their first employees.

Finances

Alaven, Elaia and Isai are a few French funds that are ready to support the entrepreneurs at the earliest stages.

Over the 20 years on the market, Alaven has managed to raise 5 funds, which have funded more than 130 startups. Among its core values, the foundation emphasizes honesty with the founders, which is the best support for them. The fund’s team consists of both serial entrepreneurs and experts in specific fields to identify promising projects that can multiply capital.

Elaia is a French foundation with a focus on the early stages of development projects in the fields of DeepTech and e-commerce, founded in 2002. The main feedback from the fund’s portfolio companies is that the fund’s money is really “smart”, since the fund provides both entrepreneurial and scientific support, declaring that the success of entrepreneurs in which they invested is their success — which is quite logical.

Xavier Niel has founded the project of 1000 startups (a.k.a. Station F), that can become the world’s largest incubator for technological projects. This superhub offers entrepreneurs access to a variety of incubation programs, upscale events and coworking space to work on their own projects.

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Negative aspects

The biggest disadvantage of France, and Paris in particular, are taxes, which are high (socialists periodically come to power and they are trying to introduce VERY high taxes: more than 50%, for those whose annual income exceeds €1 million — in this connection it is possible recall the demarche of the French actor Gerard Depardieu, who threatened to renounce his French citizenship), and a lot of paperwork. However, it is worth noting that the government is making more and more efforts to make the country more attractive for the development of innovative businesses.

The language issue is another disadvantage that awaits in France, which is known for its intolerance to English in any kind: in such a way, it can be a challenge to companies to find English-speaking employees. On the other hand, young people, who are becoming more and more in business, are ready to work, including in international companies, where English is the main language of communication.

Developing an idea in France and its success in the local market doesn’t mean that it successfully scales to international markets. First of all, this concerns multilingualism, which will significantly simplify the expansion of business outside the country.

And finally, life in Paris is not cheap at all. Although the capital of France is not the most expensive capital in Europe, it is one of the most expensive for sure. It is worth noting that in the suburbs, you can find much more affordable prices with convenient transport links.

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Startup ecosystem of Paris

Governmental support

Separately, it should be mentioned that support for innovative businesses has been a government priority for the past few years. In 2017, a special visa program for technology entrepreneurs was introduced, which allows the whole family to move to France from outside the European Union, obtain the right to live for 4 years (with the possibility of extension), plus there are no requirements for a higher education diploma. education. The visa is aimed at three categories: employees for technology companies, entrepreneurs and investors.

The governmental support makes entrepreneurship “fashionable” in the eyes of both youth and society in general. Before the COVID-19 pandemic, Paris hosted several technology events with the support of Emmanuel Macron, the most significant of which was the Tech for Good Summit, which was attended by the heads of 60 of the world’s largest IT companies, including Google, Facebook and Microsoft. Also in Paris was organized VivaTech — a large annual European conference for founders and investors with the participation of more than 3,000 investors and about 13,000 startups from 125 countries. After a break in 2020, it will again take place on June 17–21, 2021, but in a mixed format — online and offline.

Salon des Entrepreneurs is another conference that can show off with a hundred thousand audience, and it managed to happen in Paris on February 5–6, 2020, right before the pandemic began. Its participants include the President of Booking.com, the founder of OVH Cloud, and dozens of other eminent speakers, whose presentations and panel discussions are available online. In addition to Paris, the conference is traditionally held in three other cities — Lyon, Marseille and Nantes, but they are expecting guests already in 2021.

For the record, it is worth mentioning another conference that was the “progenitor” of the innovative climate in France — LeWeb, which was held in Paris from 2006 to 2015 and was originally a conference about blogs (recalls blogging camps in Eastern Europe, which took place at about the same time).

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Startup ecosystem of Paris

Success stories

After we’ve reviewed the approaches of Paris and France to the developments of innovative entrepreneurship, the logical question arises: “What are the success stories this region can share with us?”.

Alan is a health insurance startup that was founded in 2016 to make Health Care even more available. In April 2020, the startup closed Series C investments at the point of €50 million, and the overall sum of investments exceeded €125 million. Being the first independent project in the insurance industry since 1985, the company has been growing all these years, and the pandemic not only stopped the growth but has pushed to even greater development.

Everoad is another successful project hailing from Paris, often referred to as “Uber for Trucking,” offers a platform where cargo owners and drivers meet to set a fair price for transportation. In May 2020, the company was acquired by the German project called sennder, the amount of the transaction was not disclosed. The merger of the two companies will create a mega-platform for forwarding in Europe.

Kayrros is a company that offers analytical services to global players in the energy industry. With satellite imagery, IoT, machine learning, and in-house energy expertise, the project simplifies the process of predicting gas and oil consumption, production and transportation. The project has already raised more than $34 million in Series B investment stage.

Meero offers an innovative approach to production based on an AI solution. Photo and video processing, which previously required hours of professional operator’s work, now takes seconds using Meero algorithms. This has already been taken advantage of by such giants as Uber, LVMH, Just Eat, Accor and other clients from a list of 40,000 companies.

PayFit was launched in 2015 as a service for small and medium-sized businesses, helping to maximize the efficiency of accounting and vacation for company employees. By making it to KPMG’s list of Top 50 Startups, PayFit has grown from 100 to 2,600 customers in two years.

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Startup ecosystem of Paris

Investors

The next important participants in the ecosystem are those who finance entrepreneurs and their startups: investors on different development stages and in various industries.

Brighteye Ventures is a leading investment fund in the EdTech industry in Europe that invests at Seed and Series A stages. They are looking for innovative projects that improve the educational process and creativity by using the NextGen technologies. In their portfolio they have LitiGate, Aula, Ornikar, Lightneer and other projects.

Serena VC is another French fund that focuses on early stages, founded by entrepreneurs for entrepreneurs. Their motto is: the investor should work for their companies, and not otherwise. With the growing interest in AI, a separate Serena Data Ventures fund was launched, which focuses on European projects in the field of BigData and AI.

Orange Digital Ventures is the venture division of the Orange group, which was born in the depths of a telecom operator, and therefore their focus on networks, cybersecurity, FinTech solutions isn’t a big surprise. For the African market, Orange Digital Ventures Africa was launched, a $50 million fund focused on the local market. Among the company’s investments, there are Monzo, Yoko, Aire and others.

Partech Ventures is a venture fund, which, in addition to an office in Paris, has branches in Dakar, San Francisco and Berlin. The company focuses on the Seed and Growth stages in both software and hardware development. Odaseva, Ambler, Bearer and Sigfox are part of the fund’s portfolio. Like Orange Digital Ventures, Partech entered the African market in 2018 with a $100 million fund to invest in local projects.

CapHorn is a fund founded in 2010 with a focus on the b2b market, as well as SaaS companies. The size of the fund is €180 million, collected from 250 investors. Usually, money is invested in Series A or B in the amount of €2 to €20 million. The fund’s portfolio includes ReachFive, Allure Systems, EasyMovie, AntVoice, and Boxtal.

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Business angels

We should also mention those who are the first to believe in entrepreneurs’ new ideas and invest money at the earliest stage: business angels in Paris play no less a role in the ecosystem than in other parts of the world.

Jean-David Blanc is a French entrepreneur who became famous for his AlloCiné project, the leading resource for cinema and entertainment in France. He is also a business angel, Consultant and Strategic Advisor, with investments in projects such as Appsfire, Square Inc., The Cools, Meetic and Véoprint. In addition, Jean-David teaches and sponsors the startup program at #SUPDEWEB in Paris.

Marc Simoncini is a serial entrepreneur and business angel. He is the founder of Meetic and Sensee and now, he’s the CEO of Jaïna Capital, a venture capital fund that helps talented entrepreneurs. His portfolio includes Ifeelgoods, Made.com, OLX, Plyce, Winamax, Zilok and OuiСar.

Pierre Kosciusko-Morizet is a graduate from HEC Paris, best known as the former founder and CEO of PriceMinister, a pioneer in the field of e-commerce, which was later sold to Rakuten. After a successful exit, Pierre became a co-founder of the Isai fund and Kernel Investissements venture capital company, and with them he invested in Blablacar.

We’ve mentioned Xavier Niel many times in our today’s article but without him, our angel’s list wouldn’t be complete. As an investor, Xavier has supported over 400(!!!) startups, being a co-founder of the Kima Ventures fund.

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Startup ecosystem of Paris

Education

France, and Paris in particular, have always been famous for their education, although over the past few years this market has also undergone significant changes and mergers that have shaped the new face of French higher education.

First of all, we should note the merger of the Sorbonne and the University of Pierre and Marie Curie in 2018, as a result of which the Sorbonne retained its name and the third position in Paris among universities. More than 55 thousand students study within the walls of this university, among whom more than 10 thousand are international applicants. Although the main emphasis at the Sorbonne is on humanitarian subjects, this doesn’t exclude the fact that entrepreneurs and employees for start-ups grow from the number of graduates.

École Polytechnique is a co-founder of ParisTech — a consortium of prestigious higher education institutions that collaborate on joint teaching, research and innovation projects in science, technology and management and are focused on technical and business education. Back in 1976, the “polytech” moved from the Latin Quarter, where it was founded at one time, 30 km south of the center of Paris, spreading over an area of ​​160 hectares (such a space in the center of the capital can only be dreamed of), which allowed expanding — and today more than 4 600 people study and work within its walls.

PSL (Paris Sciences et Lettres Research University) — a top-tier university in Paris and France, which is the 52nd in QS World University Rankings; it was founded in 2010 from 9 participants, including École Normale Supérieure (ENS Paris) — one of the most prestigious university in Paris and of the whole France. In PSL, there are more than 20 000 students studying and the number of teachers are almost hitting 5 000 people, which not only boasts one of the best student-to-faculty ratios, but also has good connections in the business world.

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What’s next?

Paris has already established itself as a startup capital of France with the active participation of the state in the development of the industry. Considering that geography is on its side (from Paris you can easily get to all major European capitals, as well as take a transatlantic flight to the States), the city may well continue to turn into a powerful European innovation hub. The main thing is to overcome “locality” and become a truly global center. Will it succeed? Time will tell!

5 Jan 2021

 

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