On top of Brexit, the optimism coursing through France’s startup ecosystem could alter Europe’s tech status quo.
Even with the more recent big political changes in France and the US, it’s June 2016’s shock Brexit referendum result that continues to reverberate across Europe’s business landscape.
In leading startup cities across Europe, questions are being asked about how Brexit will hit London. Could it now be possible that Paris’ accumulating successes and momentum could knock London off its spot as the leading European center for tech entrepreneurship?
Fresh hope and optimism are certainly pumping through France’s digital ecosystem, with France’s new president Emmanuel Macron, a former investment banker, telling the world: “I want France to be a nation that works with and for startups, and a nation that thinks and moves like a startup.”
Not long after Theresa May’s disastrous June re-election in the UK, Station F, the largest startup campus in the world, launched in Paris. Station F is the creation of French entrepreneur and billionaire Xavier Neil who funded it with a €250m ($297m) investment.
US and UK apply the most to Paris’s Station F
More than 2,300 startups from over 50 different countries applied to the Founders Program. Station F director Roxanne Varza says most of the applications were from the US and the UK.
“A lot of startups tell us in their applications that factors like Brexit, Donald Trump or even high Silicon Valley prices have influenced their decision to apply to Station F,” says Varza. “More recently, we’re also seeing a Macron effect, meaning that companies are also excited about the new president and what he stands for.”
Nicolas Colin, co-founder and director of entrepreneur site The Family, says they expected the UK government to adopt a very pro-business and pro-tech stance following Brexit.
“Unexpectedly it did the exact opposite,” he says. “And now, following the snap election, British politics has entered a long era of uncertainty. This can only weaken London, thus making Paris stronger.”
According to a recent survey of 357 businesses by UK employers’ group the CBI, which represents 190,000 UK businesses, over 40 percent of businesses say Brexit has already affected their investment decisions.
“There’s a risk that we will become stand-still Britain if we do not rise to La République‘s challenge,” says James Wise, a partner at Balderton Capital, a venture-capital firm in London.
“While France appears to have a renewed focus on shifting its economy towards one driven by technology and innovation, the UK’s technology sector has had a much tougher year,” he says, adding that former unicorns Powa Technologies and VE Interactive went into administration in the last 12 months.
London still leagues ahead of Paris?
While a Dealroom report for Q2 of 2017 showed France as Europe’s leader for the number of venture capital rounds with 208, compared with the UK’s 149, London saw record funding levels of €2bn ($2.38bn). However, in Q4 of 2016 France raised more than any other European country with €0.9bn ($1.07bn), while the UK raised €0.7bn ($0.83bn).
Improbable had raised $502m during Q2 and Farfetch $397m, but the report says the UK’s funding success was not just driven by these mega-rounds.
“London is still leagues ahead of Paris,” says Harry Briggs, partner at venture-capital fund BGF Ventures. “Generally, the tech scene in London remains very buoyant.”
Briggs says he’s noticed fewer French entrepreneurs moving to London, and a few returning from London to Paris, but hasn’t heard of any UK founders moving to Paris. “I have heard that a few Fintech companies are hedging their positions by creating a European office, in case the UK were to lose passporting rights,” he says.
However, Alice Zagury, co-founder and CEO of TheFamily, says, “What I know is that the VCs in London are seeing their requests for money from the European fund refused.”
Gerard Grech, chief executive of Tech City UK, which supports the growth of digital businesses throughout the UK, says the initial shock of Brexit has given way to pragmatism and resourcefulness.
For now he still sees London as still having the advantage. “More than a third of Europe’s tech unicorns [$1bn-valued businesses] are based in London and it is home to four of the continent’s powerhouse VC investors: Index Ventures, Accel, Balderton Capital, and Atomico,” he says.
Currently ranking first on the European Digital City Index, which compares how well cities support digital entrepreneurs, London is well ahead of Paris, which is ranked fifth. Stockholm is second, Amsterdam third, Helsinki fourth and Berlin is in sixth place.