Paris, the upstart startup capital

28 Oct, 2016

Could Paris, the City of Light, soon become known as the City of Innovation helping propel young entrepreneurs to push technological and business frontiers? While efforts by Paris to lure financial companies from London in the wake of Britain's vote to leave the European Union have dominated the headlines, a different sort of rivalry has also been playing out.
With over three dozen startup incubators, including the continent's largest, and soon the world's largest, Paris is vying with London to become Europe's innovation capital. Although perceptions are that France is not as friendly a place to do business - it ranked 27th compared with 6th for Britain in the World Bank's ease of doing business last year - a recent survey shows that Paris is catching up to London and other top spots among start-ups.
"There isn't just Silicon Valley to help start-ups emerge, Paris is today in the top three world-wide," said Loic Dosseur, co-director of Paris and Co, the city's economic development and innovation agency. The EY consultancy found that France squeaked by Britain for the number of start-up financing operations in the first half of this year. Part of the reason is an expanding network of incubators to foster the growth of startups.
Incubators often provide startups with more than just office space, such as advice on different aspects of running a business and make them more visible to potential investors. Some focus on certain sectors to help promote better fertilisation of ideas. Take, for instance, The Tremplin, or Springboard in English, an incubator dedicated to helping sports-related startups that is located inside Jean Bouin stadium in Paris.
One of The Tremplin's clients is Yppa, which offers a platform to harness the smartphones of spectators for light shows at stadiums and concerts that launched in May. "You want to transmit, share what you've done, the adventure that you are living," said Yppa's co-founder Francois Decock. The Tremplin is one of nearly a dozen incubators that has been set up by Paris and Co in a city that now hosts some 250 startups.
Dosseur said The Tremplin's favourable atmosphere was in keen demand by startups, with eight applications for every place. And Paris is pushing forward to meet that demand. "We opened the Cargo this year which is the largest incubator in Europe with 15,000 square metres housing 50 startups," said Jean-Louis Missika, the assistant to Paris Mayor Anne Hidalgo for economic attractiveness and development.
Paris will soon get the world's largest incubator with Station F, a 34,000 square-metre (366,000 square-foot) facility bankrolled by Xavier Niel, who shook up the French internet and mobile market with his low-cost Free service. The report by EY found that in the first half of the year France edged out Britain in the number of financing operations for startups. France had 27 percent of the total operations, followed by 25 percent for Britain and 22 percent for Germany.
"The trend is good and achieving first place is interesting as it gives us arguments to attract foreign investors that want to invest in Europe, in particular the Chinese and Americans," said Jerome Faul, head of the innovation capital committee at the AFIC association of French private equity firms. By the amount raised, however, Britain was far in the lead at 34 percent, with France in second place at 16 percent, although that was still over one billion euros.
Martin Mignot, a partner at the Index Ventures, which operates in the United States and across Europe, says it is far easier to raise large amounts of late-stage funding in London due to the depth of the capital markets there. But for early stage startups "looking for only two, ten or even twenty million, then you can do it in Paris", said Mignot, whose firm has financed startups such as British food delivery service Deliveroo and the Paris-based online advertising firm Criteo, which has gone public.
While London still has the lead in attracting international talent, Mignot said Paris is attractive to companies as "it has a slightly lower cost base and probably more available talent, especially in engineering." Paris universities are especially known for producing quants - top-notch mathematicians - who create the algorithms behind software. "I think this is one area where France has a big advantage," he said.
Mignot said he was practically alone when he began looking for startups in France to invest in seven years ago, but now there are a number of foreign venture capital firms with staff based in Paris, which he pointed to as an indication of the development of the market. The French state has also played an important role in funding startups, with a 600-million-euro seed fund that it launched several years ago, mindful that they can drive the creation of new jobs.

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