Bpifrance gives French startup scene major checkup

It’s late Friday at a café in Paris’ sixth arrondissement, and most locals are on their second glass of wine. The moment Nicolas Dufourcq appears, shakes Red Herring’s hand and orders a glass of mineral water, it is as if it were 9am on a Monday morning. Dufourcq is steady, outspoken and not a little combative as he reels off his commitments to French business, and his dislike of enduring perceptions of Gallic entrepreneurialism. It’s difficult to get a word in, as if you’d want to.

That ructious streak is a major reason why Dufourcq has become one of France’s most important businessmen. After a long career in major industry, the 51-year-old Parisian was picked by then-Prime Minister Jean-Marc Ayrault in January 2013, to head up the Banque Public d’Investissement (Public Investment Bank) of France, or Bpifrance.

Some insiders voiced surprise. But in the intervening 28 months, Dufourcq has shown his commitment to stimulating French industry, by visiting a frankly mind-boggling number of entrepreneurs. Between June 3 and December 3 last year, he says, Dufourcq “cruised France” through 35 meetings in 35 cities, meeting two-to-four hundred entrepreneurs in each. “I met around 11,000 entrepreneurs,” he adds.

That itinerant philosophy, which Dufourcq likens to the role of a “countryside doctor”, has been passed on to Bpifrance’s employees: each one must visit between 150 and 200 entrepreneurs per year. The effect is to “restore confidence,” says Dufourcq. “But not just that. It is restoring the value that we are here to build.”

One of those entrepreneurs was Cédric Hutchings, CEO of Withings, a health device company based in the Paris suburbs. In 2013 Bpifrance co-invested in a €23 million ($25.3 million) funding round. In fact, as we speak Dufourcq points out that he is wearing a Withings Activité, a watch that tracks activity throughout the day.

“(Bpifrance) is really engaged in meeting opportunities that are right for the company to participate in,” says Hutchings. “They have a special impact in terms of visibility, media and heading out of their offices. This is especially important for Withings, which does consumer products. It’s a very important part of Withings.”

Recession hit France hard

France as a whole needs to get out of the office. The global recession hit the country hard, and foreign direct investment, reports The Wall Street Journal, has dropped by 94% over the past decade, from $93.3 billion in 2005-07, to just $12.7 billion in 2013. Paris was once considered a hotbed of tech talent, but has fallen behind London and Berlin in recent years as a European startup hub.

Part of that downfall has been deserved, admits Dufourcq: French business owners are far too risk-and-debt averse, and many are willing to make exits that undermine their own ambition. But an unfair global perception of France, and the French, has also contributed.

“It’s all a perception: France is in the middle ages; France does not exist, and so on,” says Dufourcq. “No-one knows that we have 90 venture capital funds in Paris. In Berlin, ten. No-one knows that we have a million engineers in France, the same as Germany.” The legal environment, he adds, is far cheaper than in the US: “You don’t need lawyers to start your company.”

Labor is another area in which Bpifrance must combat negative perceptions, adds Dufourcq. But there is some truth to France’s reputation as a difficult place in the field. “When I talk to entrepreneurs they tell me that the cost of labor is not the problem,” he says. “The problem is the code of labor, and the perception of that code. It’s the lack of transparency and visibility. The perception (of France) in the U.S. is just ludicrous…French people work really hard.”

Positive psychology is the key to breaking France’s cycle of underperformance, says Dufourcq, who stresses to meeting attendees the importance of smiling. “‘You’re in the elite,’ I tell them. So you have to show a positivity. Second, you are entrepreneurs, not employees: you have to think like that, develop your companies. You make €50 million? How could you €100 million?”

It’s that ‘unicorn’ ambition, as Dufourcq coins it, that will make France a global business superpower once more. “It’s not because you do well that you are a unicorn,” he says. “The problem is not competence, technology, intellectual property or infrastructure. It’s the level of ambition.”

This isn’t helped by a proliferation of old-money, family-run SMEs which bristle at the thought of being lectured to about their own ambitions. But those perceptions, as with those of France itself, are changing, Dufourcq insists.

‘Easy to deal with’

Francois Hollande has already expressed his desire to make France “simple”, meaning easy to deal with. And Bpifrance, founded in 2012 and with an investment kitty of some €20 billion ($21.7 billion), the President has the perfect tool. Those 90 venture capital funds? Bpifrance funds them all. And the abundance of cash allows Bpifrance not only to seed positivity in the minds of local entrepreneurs, but to monetize companies into being more comfortable with debt: an issue that has arguably kept France, and Europe, behind its American counterparts.

“It was even a slogan of ours,” he says. “Debt: a bad word or the basis of a big project? In many situations we put a company in debt, go for the development. And it’s really working. Refrain from the temptation to sell too fast. It is so frequent that we run our cars at 80mph when we could be doing 120mph. We need someone to kick our asses.”

You won’t find Dufourcq driving a car, though: he claims to be the only CEO with €60 million ($65 million) that doesn’t own one. It is on two wheels that the storied businessman navigated his home city, and many others – whether by bicycle or his beloved motorbike. It’s a quietly original streak with which he has carved a formidable career, and a current place as France’s business czar.

Educated at Paris’ Haute Etudes Commercials (HEC) business school, Dufourcq’s entrepreneurial streak was already evident, having created five startups before he had even graduated. Dufourcq then joined the office of René Teulade, then minister of Social Affairs and Integration, in 1992. A year of finance inspection then prefaced a 1994 move to France Télécom, at which he held several high-ranking roles before moving to IT services and consulting giant Capgemini in 2002 as managing director.

There Dufourcq was responsible for France, Germany and central and southern Europe (Dufourcq speaks fluent English and German), growing the business and winning Hudson’s CFO of the Year award in 2007. Dufourcq is also on the board of Babelstore SA, online buying platform Priceminister and Euler Hermes.

Daniel Kahn is another leading light of France’s tech industry who has helped local firms get their feet off the ground. The lawyer, educated in France and the US and with business ties to Israel, China and Luxembourg, believes that Bpifrance has done a good job geeing up entrepreneurs to step up to the next level. But he worries that money is being spread too thin, and put into too many middle-of-the-road outfits. “I think France has to be more ambitious, look at companies which are doing unique things rather than e-commerce, for example,” he says.

That said, changes are beginning to be seen on the ground in French industry. “Everybody now wants to do a BlaBlaCar, a Criteo,” says Dufourcq. “In 2015 it will be Cellectis. “Thanks to the growth fund we can put massive capital to work and (companies) don’t need to be sold, or to go abroad.” The new generation of entrepreneurs, he adds, are aiming for €1 billion ($1.097 billion) exits. “We used to have one unicorn every six or seven years,” he adds. “Now you have one every year.”

France will enjoy more exits in general, says Xavier Lazarus, partner at Paris’ Elaia Partners – partly due to its own shortcomings: “One of the reasons Criteo is worth what it’s worth today is that no-one came to acquire it before. No-one thought that an ad-tech company could be worth so much. They said, name another company coming out of Paris that has been important in data or ad-tech.

“The CEOs of these local companies worth, perhaps, $10m-$50m, they now know that they can find a market and can have board members from high levels and they can have early, mid-or-late-stage VCs on board,” adds Lazarus. “So they have more to grow with. They also say no to a quick out, they want to go to the market. Everything is giving a better chance for the next Criteo to happen.”

Great opportunities

Francophone countries were once thought to provide great opportunities for startups to grow and expand. But today most everyone agrees that it is not ambitious enough to look at them alone. France still trades mostly with its European neighbors. And Dufourcq doesn’t want to burn those bridges. But he is eager to help French businesses deal with the rest of the world. Bpifrance has its Franco-Euro fund, for example, which is worth €1 billion. And a Franco-Chinese fund, based out of Shanghai, is slated for the near future.

It is another aspect of French business that must change, says Dufourcq, for the country’s potential to be met. “It’s different territories for different businesses,” he says. “If you are in the chicken business, go to Brazil, go to India, go to Saudi Arabia. If you’re making more delicate foods go to Stockholm or London. There are lots of people in luxury food here who don’t even go to London – it’s two hours on the train! We organize things for them with our partner Business France.”

Daniel Kahn has also been lobbying for greater cooperation with emerging markets. He believes that in particular China is still, despite its years as an important player, vastly misunderstood by French entrepreneurs. “People have the wrong idea about China, which has changed a lot,” he says. Europe-China relations, he says, will be key in advancing the economies of both in the coming years.

“We need to have more training, more traveling, more people going to the US,” adds Lazarus bluntly. “It takes a hundred years to build a hundred-year-old oak. If we don’t increase all these things, if we don’t increase investment and innovation and market size, it will be too little.”

Dufourcq is moving fast. He created the first growth tech fund, Large Venture Fund (LVF), which has a €600 million ($659 million) fund and 60% of French biotech listings. Bpifrance has also helped Paris, Berlin and San Francisco-based Partech Ventures to create a growth fund of €600m, with 25 pure seed funds, 70 series A rounds and 3-4 accelerators. “With that you have the whole pyramid,” he adds.

Cédric Hutchings believes in the progress Bpifrance is making: “We are starting to shift the cultural drawback we have here, that we look too much at the national market. In terms of access to capital, Bpifrance is filling a gap that there was no capital for acceleration funds and other investments.”

Bpifrance’s four core value are proximity, simplicity, determination and optimism. Dufourcq embodies them all, with a drive and passion that is clear to see, even late on a Friday night. “An entrepreneur is an emotional machine,” he says. “The power of it is unbelievable. So if it’s underused, it’s heartbreaking. What we are doing is maximizing the energy of these entrepreneurs.

“France can never change? Today I am not confronted with that reaction,” he adds. “It may have been the case before, but what I’m saying is beginning to become the lingua franca of at least part of the elite. It’s interesting what is happening in France. We have passed a tipping point. It’s not visible yet, but the positive psychology has gained a lot of ground in the leading circles.”

With Nicolas Dufourcq at its helm, French entrepreneurialism has been getting an effective checkup.