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France's Silicon Valley Wants Some Respect

Sarkozy and vente-privee's Granjon (right): French techies feel unloved

Photograph by Ludovic-Pool/Sipa

Sarkozy and vente-privee's Granjon (right): French techies feel unloved

Jacques-Antoine Granjon, the long-haired founder of Paris’s, is not happy with France’s presidential candidates. “The Web is a gold mine for jobs,” says Granjon, the 49-year-old creator of Europe’s biggest online discount retailer. “But politicians just don’t get it.”

With the jobless rate at a 12-year high, the candidates are making cutting unemployment a top priority. But they haven’t said much about encouraging the creation of the next Facebook or Google (GOOG) in France. France’s Internet entrepreneurs have already made a decent contribution to the economy, according to a study by consultant McKinsey. The report says the French Internet sector contributed €72 billion ($94 billion) to France’s gross domestic product in 2010. That’s 3.7 percent of GDP. Internet businesses created 700,000 jobs from 1995 to 2010.

Yet Facebook, Google, and Microsoft (MSFT) do more to foster French startups than the government, say entrepreneurs such as Dan Serfaty, who started Paris-based Viadeo, a European social network for professionals that ranks second behind LinkedIn (LNKD) in subscribers. The French units of the U.S. companies identify local stars, support them with funds and technology, and export their ideas. “France has a very promising ecosystem; it’s packed with seed companies, innovative startups, engineers, and talent,” says Olivier Esper, Google’s policy counsel in France, where the company has more than doubled its staff in the past 18 months, to 400. “The country’s definitely at a turning point.”

The first round of the election will be held on April 22, with the top two contenders squaring off on May 6. The two front-runners’ efforts have already turned into a race to tax the most. President Nicolas Sarkozy has revived proposals to tax companies such as Google, (AMZN), and EBay (EBAY) on their French revenue, accusing them of “fiscal dumping”—paying barely any tax—in a speech on April 5. Socialist candidate François Hollande plans to slap a 75 percent tax on all personal income exceeding €1 million. “Entrepreneurs get hit by more stray bullets,” Marc Simoncini, founder of dating site Meetic, said in a Twitter post after Hollande’s “millionaire tax” announcement. Tech startups had expected more from Sarkozy, who created a National Internet Council in 2011 and hosted the likes of Google, Facebook, and EBay at an Internet conference.

To create the next Facebook or Twitter, France needs to keep investors happy, says Viadeo’s Serfaty. “If you want your companies to develop and not just get bought out, you need business angels, venture capitalists, and the possibility for entrepreneurs to get their business listed on the stock market,” says Jean Ferre, head of platforms and ecosystem development in France for Microsoft. The candidates have taken a different approach. In his first major campaign speech, Hollande said that finance is his “greatest adversary.”

French startups often have no choice but to sell out. Axel Springer acquired French real estate ads website in 2010, while Japan’s Rakuten bought France’s PriceMinister, which sells secondhand goods. Tariq Krim, who sold his software company Netvibes to Dassault Systemes (DSY:FP) two months ago, says France may lose its talent as more startups get taken over by foreign competitors, and London and Berlin prove better at luring workers.

As heavier industry moves to low-wage countries, politicians would do well to court tech startups instead of getting in their way, says Granjon. “The Internet scares politicians,” he says. “It’s new, and they’re having trouble keeping pace with it. Companies don’t vote, so politicians just aren’t interested in them.”

The bottom line: France’s tech business is now a $94 billion industry, but entrepreneurs say the presidential candidates pay little heed to its needs.

Mawad is a reporter for Bloomberg News in Paris.

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