In the French venture capital milieu, the Dailymotion folk tale is seen as yet another blow to an already weak funding ecosystem. All the people I spoke with last week—VCs, entrepreneurs—say the same thing: The incursion of politics in the destiny of a tech startup sends a terrible message to the VC community—especially to non-French investors. If a startup becomes successful, it is likely to become a political issue in such a way that financial considerations become secondary, at everyone’s expense: employees, founders, and funders.
Such government-induced repellent is the last thing the French economy needs. When it comes to supporting innovation, France already has an image problem—unfair in parts.
For one, the country does not really like entrepreneurs. Despite efforts deployed by all administrations from left to right, public opinion remains suspicious of entrepreneurship, startups, etc. No one really likes success stories here, including the press—which doesn’t help. A few entrepreneurs get lionized, as long as they don’t disturb the establishment, or don’t hire and fire like entrepreneurs.
1Then there are structural obstacles. Here is a list of the most quoted issues by French VCs and entrepreneurs:
Taxes
In due fairness, they note, this problem is largely overstated: Looking at the details, the French tax system is not worse than anywhere else. Actually, many tax incentives favor investments in startups. But some items—stock options, capital gains, a misbegotten Wealth Tax—have justifiably created a perception of a hostile tax environment.
Administrative weight and scrutiny
Today, it doesn’t take more time to start a company in France than in the US or the UK. But after a year, the administrative burden falls on young entrepreneurs’ shoulders, with scores of complicated taxes and paperworks requirements. And the tax collector is watching: in 2012, about one out of five startups endured a tax investigation, twice the previous year’s rate.
Labor laws
A startup requires flexibility—a concept opposed by the super-rigid French labor code that imposes the same obligations on a 10-person company as are held by a big corporation. As a result, entrepreneurs are virtually unable to adjust their staffing to the uncertainties of the business; in every incubator, you hear: “Well I could easily hire three more
via qz.com