Large corporate-startup pairings: a uniquely French model for tech innovation?

By July 22, 2016
Innovation VivaTech

[Inside Track] The first ever Viva Technology event attracted thousands of startups keen to hook up with the web giants and major corporations attending. Will this peculiarly French way of fostering tech innovation and entrepreneurship catch on?

French President Francois Hollande, Emmanuel Macron, Minister of the Economy, Finance and Industry, and Axelle Lemaire, Minister of State for Digital Affairs, were among the 45,000 visitors attending the first Viva Tech event in Paris running from 30 June to 2 July.  Some 5,000 startups showed up with a view to working hand-in-hand with major French companies – including BNP Paribas – and a number of Internet champions from abroad.
This first 3-day event was generally seen as a great success. It appears to point the way for what could well be a third – quintessentially French – way of driving the digital revolution.
Both French and foreign commentators assessing the movement known as ‘French Tech’ are fond of pointing out that France has not managed to create a ‘French Google’.

In a recent article, TechCrunch columnist Jon Evans even seemed to be gloating over the expected failure of French Tech and the flight abroad of young French talent. However, the main obstacle to the success of the French startup scene is not the high mortality rate of fledgling companies in the country, which is no higher or lower than elsewhere. It is the exit strategy of these startups that is threatening to stifle progress. It is no surprise that large established companies are looking to acquire promising startups, but the main ambition of the startup founders also appears to be to find a buyer among these ranks. And this is not only true for ‘tech’ startups. French multinational food-products corporation Danone has just taken a stake in French niche market food brand Michel et Augustin, the most successful French agrifood brand in recent years.This may seem to be a win-win approach, but it could in fact turn out to be a losing strategy in the long run if you subscribe to the theory that such takeovers are preventing the emergence of tomorrow’s large French firms, especially Internet-based enterprises.

The presence in Paris of the top people from the US web giants – including Eric Schmidt, Executive Chairman of Alphabet-Google, and John Chambers, the charismatic Executive Chairman of Cisco Systems – could be seen as the kiss of death. Did they come to satisfy themselves that their old French friend, a generous purveyor of research tax credits, would never give birth to a potential rival?

Nevertheless, the Viva Tech event saw a number of announcements of cooperation initiatives between startups and major corporates – including one international player that few would expect to see involved in this field, LVMH – which seem curiously free of the habitual big-business approach and dominating attitude characteristic of French multinationals. These seem to be open partnerships, sometimes a bit off-the-wall, where the mighty have no qualms about declaring that they need the more agile, innovative, goal-oriented smaller players. Similarly, the startups explain without hesitation that they are happy to benefit from this helping hand without feeling that they are selling their souls or giving up their independence. In fact the general trend appears to be that nowadays major companies would rather enter into partnership with a startup than acquire the newcomer outright.  

Of course, this is a far cry from those legendary US startups which started life in a garage in California. It is not however a million miles away from the spirit of Silicon Valley, where billionaire bosses invest at every turn in fledgling companies, hoping they have made the right bet.

The main difference is that in the buzzing French atmosphere of Viva Tech, the investments were not being made by individuals – business angels or venture capitalists – but by companies. Is this the result of unhappy memories among some French capitalists who got stung when the Internet bubble burst some 15 years ago? Or does it have more to do with the French taxation system?

No matter. What really counts is whether in the long term this corporate-startup partnership approach turns out to be an ephemeral phenomenon or a fundamental trend. We can only hope that it will be the latter, given that a) French startups need to be able to call on the considerable financial resources which French majors possess and b) that France needs to seize the opportunity to play a full part once again in the global innovation market.


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