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France Says 'Non' to Yahoo

The Dailymotion office in Paris. Photograph: Sipa via AP Images Close

The Dailymotion office in Paris. Photograph: Sipa via AP Images

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The Dailymotion office in Paris. Photograph: Sipa via AP Images

For years, France sat on the sidelines while foreigners snapped up its most prized startups. So when Yahoo started circling Dailymotion, a smaller, French-born version of YouTube, the government put its foot down.

Industry Minister Arnaud Montebourg ruled that Dailymotion, a "strategic" company and one of the few with the technology to rival Google Inc.’s YouTube, couldn’t be sold to Yahoo. France didn't want the startup to become a unit of the Silicon Valley-based company, Montebourg said in an interview with Bloomberg News.

"You’re welcome, but we need to work together on Dailymotion’s development in the U.S.," Montebourg said he told the U.S. company at a meeting last month with Yahoo Chief Operating Officer Henrique de Castro. The government has a 27 percent stake in France Telecom SA, owner of Dailymotion.

While some pointed fingers at the state’s heavy hand and what it will mean for foreign investment, the Dailymotion case also revived debates about the inability of French startups to catapult their ideas onto the world stage.

France, which has elite math and science universities and produces the highest number of graduates in these fields in the European Union, has struggled to come up with a winning formula to spawn the next technology giant to take on the likes of Google, Apple or Facebook.

The record shows most of France’s successful entrepreneurs in the past decade have chosen to sell their businesses to foreign investors. Germany’s SAP AG in 2007 acquired Business Objects for 4.8 billion euros. Axel Springer AG bought Web portal Aufeminin.com that same year and real estate ads website SeLoger.com in 2010. Japan's Rakuten bought Priceminister in 2010. The following year, dating site Meetic was acquired by the U.S.’s Match.com.

The solution for France may be to look at things differently and stop trying to turn local startups into global brands at all costs, argued Yves Gassot, who heads Montpellier, France-based technology researcher Idate Digiworld.

"Maybe you’ll have a series of smaller companies, maybe they’ll be sold off," Gassot said. "The important thing is to make sure the money is reinvested here so the next generation of young engineers also gets a chance at the entrepreneurial adventure."

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