London is one of the world’s largest centres for financial institutions, being home to approximately 251 banks, 588 financial services companies, and hundreds, possibly thousands, of emerging fintech startups. The financial services sector in the UK accounts for approximately 9.4% of the country’s total GDP making it one of the largest globally, and more active than any of its European peers. Why are French entrepreneurs drawn to London? Is it really about the money?
However, within the past few years technological progress has forced all governments to turn towards entrepreneurs with a view to attracting or retaining them: clever branding, helpful legislation or increasing propaganda budgets, everyone wants more startups in their town.
This brought me to La Résidence de France in London. I was attending La French Tech, an event that the Minister of State for Digital Affairs Axelle Lemaire announced to be “the world premier of many more to come.” During the conference, we heard many French entrepreneurs proclaim jokingly that they had not chosen to move to the UK for “tax purposes”, emphasis on the NOT. During the Q&A session, the same young entrepreneurs spoke about the difficulty of getting funding in France. This peaked my interest.
Later I asked Lemaire in person: “Why do you think there is a leakage of French talent to the UK? Are there any legislations that will help the advancement of technology in France?” Unfortunately, the answer was unclear. Lemaire’s only comment was: “I’m truly baffled that French entrepreneurs are leaving home! It’s a lot easier to start a business in France than it is in London. How do we aim to change this? Well… Through you! The media!” Unsatisfied, off I went, to sate my curiosity.
Shortly after, I met Laure Crémieux, a 24-year-old Parisian contractor, currently freelancing in London for a French corporation, and one of the top global energy players.
I asked Crémieux her thoughts on what she later titled “The French Talent Exodus”. Passionately she explained how the initial incentives lure you in, “just for the laws and regulations to choke you.” She continues, “Talented entrepreneurs leave France, to the point where some of the country’s young business leaders have started a campaign to woo them and their international expertise back. It’s called ‘#ReviensLéon’ named after an 80’s TV ad enticing youngsters to eat at home. The target for this year’s campaign is the same: youngsters – now all grown up, living away from the homeland.”
This point was later reinforced by Sylvain Girard, a French entrepreneur and founder of Angus.ai.
Girard had been an expat for many years and has recently returned to France to start his business. When asked about the benefits of starting a business in France, Girard responded, “It all depends on what stage your business is at. In the early stages of a tech company, France is an excellent incubator. We have many engineers who are, after all, the producers of tech products. They are affordable and highly trained. And because the government aims to support French engineers, you get a tax exemptions in your first year of business. So when the company wants to scale up, or start their search for investment, they tend to move to places like London or Silicon Valley.”
French youngsters today take risks, think big, break conventions.
“France has never had an entrepreneurship-oriented culture”. Crémieux and Girard, whom I interviewed individually, answered in harmony. “The French population is rather reluctant to take any kind of risk. France has always been culturally far from the ‘self-made man’ ideology. French people have historically had a predisposition toward salaried jobs. Social protection of employees tend to encourage job stability. Hence the “Contrats à durée indéterminée” – the golden legislation that prohibit companies from firing their employees.”
Crémieux refers to the recent transformation of this convention brought about by French youngsters. “They are now taking bigger risk, for the first time in 10 years. Partly due to the high unemployment rate of 10.5%, France is seeing an increase in small businesses. Last year a quarter of recent graduates of HEC, an elite business school, have started their own company. That is a significant change as opposed to one in ten, just a decade ago.” Consequently, the French startup ecosystem – La French Tech – is growing rapidly. Startup weekends, investment fairs, and international campaigns are emerging everywhere to bring enthusiasm among spirited young self- starters. Crémieux, “The rise of digital sectors is often seen as an opportunity to grow a company without capital expenditure: no risk needs to be taken by timorous French entrepreneurs, all it takes is a computer and time. Finally this trend towards entrepreneurship is enhanced by success stories that show risk-free possibilities.”
To quote Marc Simoncini, one of France’s most successful web entrepreneurs: “Seen from abroad, France is the last country an entrepreneur wants to go to.” Pourquoi?
Crémieux, “Because France has kept its reputation of being an expensive country. Where tax rates are discouraging, labour laws are complicated, bureaucracy procedures are full of obstacles, banks are reluctant to offer credits and venture capitalists do not exist. And this is despite the country’s drastic efforts to become SME attractive. The main reason for French companies to collapse remains the lack of funding.”
Girard, “I think this is a bit more of a cliché than the reality. You have different instruments to employ people in France. You have many consultant contract laws, which are the same as that of the UK. You have many developers, and PHD’s that you can employ at very affordable prices.”
Surely, what’s drawing French startups to London is not just dire trade conditions in their homeland… Foreign corporations have been controlling 39% of UKpatents since 2012. This is far more than the EU as a whole, at just 13.7%. This exceeds the foreign-owned patents in the U.S. (perched at just 11.8%) by 27.2%. Of course, it is no surprise that the UK is the fastest growing region for Fintech investment (Accenture). The UK deal volumes have been growing at 74 percent a year since 2008, compared with 27 percent globally, and 13 percent in Silicon Valley. During the same period, the value of Fintech investment increased nearly eightfold, to US$265 million in 2013 – a rate of 51 percent a year, nearly twice the global average (26%), and more than twice that of Silicon Valley (23%).
I was determined to find British expertise on the subject. Thus, meeting Geoff Graham, Fitzgerald and Law (F&L), a global exponential advisory firm that works with US and EU tech firms who are looking to expand to the UK. F&L specialises in the taxation and accounting aspects of corporate expansions. The firm sees a large number of French Fintech startups, coming in search of funding. Graham, “Many French tech startups come to the UK when they are ready for their first round of funding, they see the UK as having greater access to funding. From conversations with them I gathered, rightly or wrongly, that London’s Fintech sector is far more developed than the rest of the EU.”
Surely, funding is not reason enough for so many foreign entrepreneurs to pack their bags and leave their home, friends, and family behind. What other reasons are there forcing entrepreneurs to migrate to Britain?
Graham, “The availability of VC investment remains at number 1. As reported by London and Partners earlier this year, London attracted 50% of all European Venture Capital investments. Access to mentorships, 36 out of 57 of European accelerators and incubators are based in London, like Level39 which is renown and very well regarded on a global scale. The English Language makes it so much easier and cheaper, to go global with your company. Which is especially useful when trying to attract American investors who understandably prefer to deal in English. Flexibility, lack of red tape. With our employment laws it is very easy to set up or fold a company.”
The UK’s leading financial infrastructure, supportive regulations, accelerators and mentorship programs for startups coupled with the availability of various means to capital and English as the main business language – these are all major factors that attract disruptors on a global scale; and not only the French.