A boost from public authorities
During the 2010s, France pursued a catch-up strategy to bolster innovation through an unprecedented mobilization of public funds, mainly focusing on entrepreneurship.
In 2012, the creation of the Public Investment Bank (Bpifrance) brought together various public funds to support research and investment. Thanks to its capacity to provide grants, material and real estate investments, or equity, Bpifrance became the central player in start-up financing. Its resources have almost doubled in 7 years, going from €17.3 billion in 2013 to nearly €30 billion in 2020.
In 2013, one year after the creation of Bpifrance, the "French Tech" label was launched to crystalize the French start-up ecosystem and promote its entrepreneurs. Labeling hubs as French Tech enables the public authorities and potential investors to identify the environments favorable to the development of French start-ups.
A number of public funding mechanisms have followed suit, such as the French Tech Exchange and the French Tech Acceleration fund. The French Tech Next 40 and French Tech 120 programs were launched in 2019, with the aim of bringing together the 40 and 120 most promising scale-ups (hyper-growth start-ups) each year. Together, these initiatives have bolstered the visibility of the start-ups with the strongest potential for international growth, enabling them to develop a network of investors, customers and partners.
Restructuring the ecosystem in this way has encouraged the development of local, public and private initiatives. In 2021, France counts over 100 accelerators and incubators, compared to only 30 in 2012. Among them, Station F, which opened in Paris in 2017, is now the largest incubator in the world and certainly emblematic of French Tech.
A favorable environment for private funding
This massive allocation of public resources towards start-ups has had a decisive leverage effect on the development of private funds in France.
Public subsidies, co-financing and guarantees have largely encouraged commercial banks to become more involved in the financing of innovative start-ups, both by developing their expertise in the matter, as well as by creating seed accelerators.
Public financial support has also been instrumental in the development of venture capital. The Fonds national d'amorçage (FNA, the National Seed Fund) is a fund of funds managed by Bpifrance, aiming to invest in private seed funds. A key actor in the development of venture capital in France, it is responsible for the investment of 29 private venture capital funds, averaged at €43.4 million, and supported a total of 483 companies in 2019.
Ambitious tax and regulatory reforms redirecting French savings towards investment have also been implemented. The government’s goal was to shift the historically high savings of French citizens towards investment in company shares and stocks, by reducing investment costs and by taxing real estate. In total, between 2008 and 2018, the annual amount of tax aid directed to innovation rose from €4.1 billion to €6.7 billion.
In 2020, French start-ups raised an unprecedented €5.4 billion. But this funding-driven strategy cannot fully bear fruit without adequate investment in human capital and research.