Entrepreneurs: France's Newest Export

Entrepreneur' means little in France

Start-up hopefuls find a friendlier business environment in the U.S. than in their homeland, which favors larger employers.


NEW YORK (Fortune) -- An e-mail message with the provocative subject line, "Entrepreneurs: France's Newest Export," arrived at Fortune's offices one March evening at about 6:30 pm Eastern Time. (That's 12:30 am Paris time.) "More and more U.S. technology companies are founded by French entrepreneurs," it read.

France, of course, is well known for many of the finer things in life -- its cuisine, its wines, its culture -- but it is not notorious for its prowess in technological innovation.

As it turns out, there are some 400 to 500 French companies operating in California's Silicon Valley, according to French trade groups, among them are Talend, a data integration company founded in France in 2005 which now has offices in Los Altos, Calif. (and the UK, Germany, Belgium) and boasts clients such as Yahoo!, Virgin Mobile, Honda, Sony and the United Nations. VirtualLogix, a French virtualization software start-up based in Silicon Valley, has received financing from Cisco Systems, Intel and Motorola. Qualys, another privately held company offering network security software as a service to companies such as eBay, Cisco and Hewlett Packard, was started by two French entrepreneurs and is now based in Redwood Shores, Calif.

But international business experts suggest these success stories may be a result of -- despite the word's French origin -- unfriendly conditions for entrepreneurs.

"Overall France has been much more friendly to big firms than it has been to start-ups," says Isabelle Lescent-Giles, an associate professor of international business at San José State University whose studies compare business cultures in Europe, U.S. and Asia. "Launching a start-up in France is like playing Russian roulette in some ways."

Failure is not tolerated in French business culture as it is in the U.S., Lescent-Giles says, and both the legal and social consequences of bankruptcy are much more dire in France. The government dominates the economy, and the business elite is almost exclusively recruited from the elite schools, the Grandes écoles.

When the rogue trader Jérôme Kerviel, for example, lost $7.2 billion in the stock market for one of France's largest banks, Société Générale, last year, many local commentators seemed more puzzled by the fact that Kerviel -- who had not attended any of the elite schools -- had managed to make it to the trading floor in the first place, rather than by his ability to lose so much money without anyone noticing.

All this has created a culture of steady careers in big firms rather than of risky innovation in start-ups.

Indeed, some French entrepreneurs have moved to the U.S. in order to seek their fame and fortune in technology, including Eric Benhamou, a serial entrepreneur and an ex-CEO of Palm, and Jean-Louis Gassée, a one time president of computer products at Apple and the founder of Be Inc., the creator of Be operating system.

The business world may see more entrepreneurs coming out of France in coming years, but only because the newest generation of young adults -- sometimes known as millennials or Generation Y -- in general tend to be more interested in start-ups and less keen to work in large institutions.

The young French are no exception: They are much more international than the previous generations and are clearly more prone to starting their own companies.

Another factor may help fuel French entrepreneurship: France traditionally produces a lot of engineers who excel in mathematics and graphics, two skill sets that play into some of the hottest areas in tech right now: gaming and algorithm-driven programming (think Google and other search engines).

But some of the French companies making it in the Valley say they are only now reaping the efforts of years of hard work, aided, in part, by a close-knit network of French executives in the tech industry.

Talend is one of the companies benefiting from such ties. In January it secured $12 million in its third round of investments, going against the economic tide. The round brought in more than just money -- one of the main investors was the global investment giant Balderton Capital, and one of its general partners, Frenchman Bernard Liautaud, joined Talend's board.

The current economic downturn is of course challenging the French companies as well, even though the crisis has been slower to arrive in France. But the biggest advantage the French entrepreneurs might have vis-à-vis their American counterparts might be the lessons learned from their own culture.

After all, if a start-up has managed to survive the French business culture, making it in the U.S. might not be so hard after all.