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How Emmanuel Macron pulled off a French fintech boom

Brexit didn’t quite lure financial startups away from London but France’s status as a fintech hub is growing.

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Station F

From just three unicorns in 2017 to more than 25 now, France’s startups have come a long way, with president Emmanuel Macron largely credited with kickstarting the lagging ecosystem. 

And although founders agree that the French president, elected in 2017, accelerated the growth of the market, the country’s transformation into a startup hub started long before. 

“The tech ecosystem has dramatically changed. It started a bit earlier I think in 2013, especially under the ministry of Fleur Pellerin [who launched the French Tech label],” said Geoffroy Guigou, co-founder at instant credit provider Younited.

Younited is one of 10 French fintech unicorns. 

The French Tech Mission was created to provide support for the development and growth of the startup ecosystem in the country and is a part of the Ministry for the Economy, Finance and the Recovery. It now has a network of 13 hubs internationally, with 108 community satellites located 45 French cities and territories, as well as 63 foreign cities. 

While the seeds of the startup boom were sown before 2017, all founders AltFi spoke to agree that Macron’s business friendly attitude helped create an environment where innovation could thrive, a lot faster. 

The amount of capital invested in French startups has risen from €2.5bn in 2017 to €10.8bn in 2021, according to PitchBook data. 

So far in 2022, there have been 445 deals worth €6.2bn already. According to France Fintech, €2.3bn of that capital went to fintech startups in 2021. 

“The success of the French Tech ecosystem has been driven by the French government which, since 2017, has been implementing the biggest change in economic policy in recent decades by focusing on startup companies that will enable France to become a leading innovation hub,” said Clara Chappaz, director of La French Tech.

Read More: Meet France’s growing array of fintech unicorns

Changes implemented by Macron include a 30 per cent flat tax on capital gains, a corporate tax reduction to 25 per cent from 33.3 per cent, wealth tax reforms, labour market reforms and a relaxation of rules around business creator share subscription warrants (BSPCE) - a mechanism to encourage employee share ownership.

His government also launched initiatives like the Tibi, a programme to boost the financing of tech companies, as part of which €30bn has been invested in late-stage investment funds to support the development of scale-ups. 

Meanwhile, the French Tech Visa scheme has eased the recruitment process for talent from outside of France. Over the past three years, more than 1,200 companies have joined the visa programme. Qonto, for example, has hired more than 30 people using the French Tech Visa scheme. 

“Being able to attract non-European talent in France is super important. We have more than 600 people, with 45 nationalities on the team, and we are hiring a lot more,” said Alexandre Prot, co-founder and CEO of Qonto, a fintech unicorn that recently raised €486m.

Foreign investment

It’s not just non-European talent that French startups needed to grow – there was also a lack of foreign investor interest that needed to be addressed. 

Prot says he now sees a lot more non-French and non-Europan investors investing in French companies, allowing the country to catch up with Germany and the UK. 

Indeed, there is now more capital than ever deployed by foreign investors into France. Around 60 per cent of deal value recorded in 2021 had some sort of US investor participation, according to PitchBook, up from 28 per cent in 2017. 

Internationalisation more generally has been a big boon to French startups, not just of capital but of operations as well. 

According to La French Tech, about 30 French startups, like Doctolib and Vestiare Collective, bought foreign companies in 2021. In addition, 40 per cent of revenues of French Tech 120 companies – a list created by La French Tech - now come from outside of France. 

French startups have a big US presence as well, with companies like ABTasty and Contentsquare establishing operations in New York. 

Macron’s ambition to have a more united Europe is also helping the country’s startups scale internationally. 

“We are benefiting from that just from a basic point on licensing,” said Prot. “We have a French license but we use the European passporting to operate in Italy, Spain and Germany. This is key to us. The more KYC and AML aligned they are the better for us because we can have more scale and synergies and we can make Europe a really large market like we have in the US.”

There is one area France is lagging, in Guigou’s opinion. Over the last 10-20 years, he said only Younited and Memo Bank have received full credit institution licenses. But for many fintechs to start generating revenue, they need to be able to provide lending, brokerage of FX services, which all require a license. The country needs to catchup, Guigou said. 

Community approach

One of the characteristics that sets French tech apart is the community based approach to entrepreneurship, Guigou believes. 

Groups like the Galion project, created by Jean-Baptiste Rudelle, co-founder of Criteo and business angel Agathe Wautier, allow entrepreneurs to share best practice and help each other. There is also France Fintech, led by Alain Clot, which now has around 300 members. 

Successful French entrepreneurs are also re-investing in the French Tech ecosystem more than ever. In addition to individual angel investments there are also groups of small investors combining to create a critical mass of capital, Chappaz said. 

What next?

It is unclear whether French tech can sustain its accelerated pace of growth, particularly as the markets go through a difficult period with many predicting less availability of capital as venture capital funds take a step back from deploying their dry powder. 

Outsized rounds for highly valued startups have attracted investors to France, but “as growth becomes harder to come by, startups and investors are expected to struggle to keep up with the relentless pace of investment” according to Nalin Patel, senior analyst, EMEA private capital at PitchBook. 

He expects activity to slow in the coming quarters. This is set to make it more challenging for Macron as he looks to have 10 technology companies valued at €100bn each by 2030, following his recent re-election.

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