Facebook Finds No Friends Among Tax-Happy French Candidates
Jacques-Antoine Granjon, the long- haired founder of Paris’s Vente-Privee.com, says French presidential candidates are missing the point when it comes to creating jobs.
“Tax, tax, tax, that’s all I’ve heard,” Granjon, the 49- year-old creator of Europe’s biggest online flash-sale retailer, said in an interview. “The Web is a goldmine for jobs, but politicians just don’t get it.”
While a 12-year-high jobless rate has prompted French candidates to make cutting unemployment a top priority, they’ve said little about encouraging the creation of the next Facebook Inc. (FB) or Google Inc. in France. Entrepreneurs like Granjon say they have little hope the winning candidate will replicate Silicon Valley’s flourishing ecosystem of ideas, investment and education in Paris’s Internet district, dubbed Silicon Sentier.
Slapping more taxes on entrepreneurs and Web companies may push startups away from Paris’s nascent technology hub. The next president should take a leaf out of the playbook of Google, Microsoft (MSFT) Corp. and Facebook, which foster French startups, say businessmen such as Dan Serfaty, who started Viadeo, a European version of LinkedIn Corp. (LNKD)
The French units of the U.S. companies identify local initiatives, support them with funds and technology and export their ideas outside their home market.
“France has a very promising ecosystem; it’s packed with seed companies, innovative startups, engineers and talent,” said Olivier Esper, Google (GOOG)’s policy counsel in France, where the Mountain View, California-based company has more than doubled its staff in the past 18 months to 400 people, mostly engineers. “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 in that vote squaring off on May 6. As election campaigning has heated up, the two frontrunners’ efforts have turned into a race to tax the most.
President Nicolas Sarkozy has revived proposals to tax companies like Google, Amazon and EBay Inc. (EBAY) for revenue they make in France, accusing them of “fiscal dumping” in a speech on April 5. Socialist candidate Francois Hollande plans to slap a 75 percent tax for all personal income exceeding 1 million euros ($1.31 million), drawing criticism from entrepreneurs.
“Entrepreneurs get hit by more stray bullets,” Marc Simoncini, founder of the French dating site Meetic (MEET), said in a Twitter post after Hollande’s “millionaire tax” announcement.
What Entrepreneurs Want
Technology startups had expected more from Sarkozy, who created a National Internet Council in April 2011 to advise him and hosted the likes of Google, Facebook and EBay at a Paris Internet conference dubbed the e-G8 in May. Google and Microsoft opened more than 40,000 square meters, or about 431,000 square feet, of research space in the city in the past three years.
Entrepreneurs said they want politicians to talk more about the Web in the campaign, recognizing it as a vector of growth and jobs.
They want enterprise creators to be put at the center of jobs plans with fiscal measures that induce investors to fund innovative startups and lower charges on young companies.
Meetic’s Simoncini, who in May agreed to sell 16 percent of the company to IAC/InterActiveCorp, was among French “business angels,” to invest more than 350 million euros in about 300 companies last year, including 120 startups, according to Eric Harle, president of France’s Venture Capitalist Association.
France can create the next Facebook or Twitter if it can keep deep-pocketed investors happy and attract even bigger financial fish, said Serfaty, whose Viadeo is the world’s second-biggest social network for professionals behind LinkedIn.
Candidates have instead fueled populist hostility toward finance. Hollande, who leads in the polls in the decisive second round of the election, said in his first major speech in January that finance is his “greatest adversary.”
Serfaty said Paris-based Viadeo opened offices in the Silicon Valley in March 2011 -- to go where the money is. He also sought funding in October from the Fonds Strategique d’Investissement, or FSI, the French sovereign fund set up in 2008 by Sarkozy. Viadeo today said it raised $32 million in financing, including $10 from the FSI.
The FSI’s presence in Web companies is minuscule stacked up against its more hefty investments. While it invested 7.5 million euros in Dailymotion SA, France’s version of YouTube, in 2009, its biggest holding is a 13.5 percent stake, valued at 3.8 billion euros, in one-time state monopoly France Telecom SA. (FTE) Gemalto NV, a maker of smart chips used in bank and identity cards, and patent-rich Silicon-On-Insulator Technologies, or Soitec, are among “digital” companies the FSI has invested in.
“If you want your companies to develop and not just get bought out, you need the right financial tissue,” said Jean Ferre, head of platforms and ecosystem development in France for Microsoft. “You need business angels, venture-capitalists and the possibility for entrepreneurs to get their business listed on the stock market.”
Microsoft’s Bizspark, which helps some 30,000 startups worldwide grow through networking, mentoring and technology, grew out of a French initiative in 2005. The program is helping French online advertising company Criteo operate in the U.S., for example, Ferre said.
“Three geeks can get together in a garage somewhere in France and, next thing you know, their Facebook app is a worldwide bestseller,” said Julien Codorniou, Facebook France’s head of partnerships. “There are no such things as international barriers anymore.”
Paf Le Chien
In a country where successful startups have often been bought out, politicians need to focus on helping local successes to grow, entrepreneurs said. Germany’s Axel Springer acquired real estate ads website SeLoger.com in 2010. The same year, Japanese company Rakuten Inc. (4755) bought France’s Priceminister.
“My students know if things get too rough in France, they can pack-up and leave,” said Guilhem Bertholet, who helped create business school HEC’s incubator for startups and struck a deal with Google for 250,000 euros of annual financing for a university chair. “Singapore is a popular destination.”
Entrepreneur Tariq Krim, who sold his company Netvibes to local software-maker Dassault Systemes SA two months ago, said the country would be drained of its gray matter as more startups get taken over by foreign competitors and cities like London or Berlin prove better at attracting talent.
Earlybird Venture Capital, a fund based in the German capital, said last week that it raised $100 million to invest in startups. In the U.K., Prime Minister David Cameron has backed plans to create a “Tech City” in East London.
“Politicians often point to factories to talk about the industrial sector, but industry today in France also means tech startups,” Krim said. “That’s where jobs are being created.”
As heavier industry moves to low-wage parts of the world, politicians would do well to court technology startups instead of getting in their way, said Granjon of Vente-Privee.com, which is pushing into the U.S. by teaming up with American Express Co. (AXP)
“The Internet scares politicians,” he said. “It’s new and they’re having trouble keeping pace with it. Companies don’t vote, so politicians just aren’t interested in them.”
To contact the reporter on this story: Marie Mawad in Paris at firstname.lastname@example.org