Paris Capitale Startup is a Huge Mistake by Pellerin

Innovation
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While a battle rages on between entrepreneurs & investors against the government’s proposed laws, dubbed The Pigeon Movement, Minister of the Digital Economy Fleur Pellerin has announced today her intention to build a tech hub for Paris. According to La Tribune, Fleur Pellerin has been inspired by London’s £10 Billion project “UK Tech City,” which currently includes a Campus in which resides Google’s London office, and also hosts startup events like Startup Weekend London.

An approximation of what I consider the “startup hub” of Paris

Fleur Pellerin’s aim is to “développer l’attractivité internationale de la France dans le numérique” – I’ve left it in French on purpose, you can google translate it. The only problem with her goal to create a physical hub for the Paris Startup Scene is that it already exists. It’s called the Silicon Sentier, after a metro stop called Sentier, and while it may not be the cheapest office space in the world, startups manage to get space nonetheless. From left to right on the map it’s about 15-20 minutes walk, or about 3-4 minutes by metro. There are 7 metro lines (3,4,5,7, 8,9, RER B) that run out to the suburbs of the city, which make it extremely practical for having meetings. The Gare Du Nord, a train station which connects the Eurostar to London & the Thalys to Benelux, is 3 stations by metro, or 10 minutes by Uber, if you’re impressing an out-of-town guest.
It’s the only place in Paris you can run into another entrepreneur on the street – I ran into PEG, Laurent Kretz & Guilhem Bertholet all over the course of about an hour last time when I was there for a meeting. In this tiny space, office space isn’t cheap like we would like it, but it’s central, and everyone has naturally come here already.

“Who’s here?” You might ask.

In no particular order:

Events happen there – like GirlzInWeb and Start In Paris (when it’s not done at Microsoft France), and it’s a generally agreed place for people to agree to get lunch/coffee/beer, because everyone is used to going there.
Now let’s take a look at where the most likely candidate for the French government’s tech hub is – Saclay, a long-supported “R&D hub” in France.

Yep…. that’s Saclay right there in the bottom left corner, well beyond the limits of the RER B, the train that runs through Charles de Gaulle airport, and about an hour from anything that has money or entrepreneurs.
L’informaticien has also speculated that Ivry is a possible location for the Paris hub – this can be seen on the far right of the photo above, in what I would call a “public transportation dark zone.”
Pellerin promises any physical site would be “in Paris or close by in the suburbs,” but this comes from the same government who thinks 12 years is an appropriate deal-flow cycle for tech entrepreneurs & investors, so “close” probably means Zone 5 or 6 in Paris.

Let’s not Forget: UK Tech City ISN’T a good example of how Government should work with startups…

Like most European entrepreneurs, I get all my news about UK Tech City from London’s most edgy tech blog, The Kernel. Founder & Editor Milo Yiannopoulos has taken every chance he has gotten to point out the holes in UK Tech City, and while he has a reputation for picking fights, my last encounter with him at the Pirate Summit suggested that he really is passionate about it. After TCIO (Tech City Investment Organisation) released their annual report earlier this year, Milo ripped that report a part in a series of 5 articles:

“Start-ups don’t need someone to do their PR. They need someone who can fix visa problems, advocate for a favourable regulatory and tax environment and connect them to customers and investors. (That said, I’ve never been convinced that introductions to venture capitalists by civil servants are a prudent use of public money. That’s simply not how companies get funded.)”
–What The Tech City Report Tells Us

We shouldn’t be following in the mistakes of the UK’s tech scene, which, except for speaking English & having a better financial investment background, has nothing to really offer us in terms of inspiration – the government should be doing what government’s do to support things. When they want to support education, they make books more easily accessible to students, they help teachers get trained, they don’t select students that fit good PR segments and buy their way to success.
If Pellerin wants to create international appeal in Paris, she should make Paris a great place to build companies – not because of a building, but by changing policy. Citizens all over the world are going to look back at this decade (’cause this is only the beginning) and say “Why were we letting government invest money in such high-risk assets as startups? During an Economic Crisis, nonetheless.”

Why not follow in their good footsteps?

London has done one thing, recently, that I would love to see spread to Paris: Index Ventures worked together with the Mayor of London to change policy in the IPO market: they lowered the capital requirements, making it possible for a European company to avoid acquisition or to IPO in the US – in short, making London an internationally appealing place to build your company.

Let’s get the Tax Proposal right, first.

The French government is not in a place to be spending money on a ‘startup hub’ right now – it’s a solution to a problem that doesn’t exist. Government’s shouldn’t be building hubs, they should be enabling other parties to do so. What they really need to focus on is that urgent request that the government repeal entirely it’s Finance Law Proposal in respect to capital gain’s tax – the request was signed by representatives from SMB assocations, heads of public company associations, France Digitale and the #geonpi.
Speaking with Elaia Capital partner Marie Ekeland, she summed up the recent demand, saying

“We want to start from zero and take the time to discuss the matter in order to understand the economic consequences of these measures… “

While the current government has recently backpedaled, creating exemptions for “creators” of the company, both founder and non-founder, Ekeland argues that there are plenty of counter examples of well-known successful startups whose founders wouldn’t qualify as “creators” under the 10% minimum required, let alone startup employees & business angels. As a counter, France Digitale has submitted a proposition that would set a baseline tax rate at 40% (10% higher than the current rate, when including all applicable taxes) for any one who took equity in the company while is was still a “SMB,” with a cap on Capital Gains Tax at 50% for any one who doesn’t qualify (with a descending tax rate based on time held on to the equity, I assume). You can read more about their proposition in Challenges[FR].