A dinner with President Hollande

Minister Emmanuel Macron invited me this week to join a group of international and French investors to discuss the French tech scene, followed by a dinner at the Elysee Palace with the President.

I’m impressed and pleased my Country started the “French Tech” program which promotes the French tech scene in France and internationally. I’m also impressed that both President Hollande, Ministers Macron and Lemaire put together such an event, it definitely shows they care and the participants were pleased. The goal was to increase awareness to the international VC community and eventually have them invest more in France, investing in startups or acquiring some of them.

Emmanuel Macron addressed the Uber issue immediately saying that it was totally legal and welcome in France, he just wanted “Uber Pop” (the French version of Uber X if I follow well) to follow the law. In his traditional non-bullshit style he addressed the concerns of the investors such as too much depending on the employee representation (comites d’entreprise) above 50 employees, social rules (such as to hire and fire) too complex “that we don’t even understand it”, etc. The participants were pleased by the answers he provided and seemed enthusiastic in investing more in France especially as they now have a direct contact with Emmanuel and his team.

France now has Bla-Bla car, Criteo and Sigfox, all international successes and “visible” from Silicon Valley, this is new, we used to have mostly copycats. I’m very enthusiastic and believe in the growth of the French tech scene.

Business angels are lacking though, as one of the major issue is the wealth tax (ISF).

President Hollande said “I created the 75% wealth tax to make sure I would cancel it later, please help me tell everyone that it doesn’t exist anymore”.

Yet, if you’re a business angel in France you’re paying around 1 to 2% in wealth tax on all your assets every year. Lots of successful entrepreneurs are leaving or left to London, Brussels or the U.S.

I’m in California myself and the level of tax is similar to France except for that wealth tax. The ISF is really not fair for business angels as if you invest in startups, you will have to pay that tax based on the value of the funding rounds as if it had already been sold or went public, while most startups end up dying. So you paid tax on capital that you end up losing and that is much needed in those startups.

The wealthy French can avoid paying ISF if they buy art, but not if they invest in highly risky startups, a real shame. Most startups are funded and discovered initially not by VCs but by business angels and they’re lacking in France. Those who left tend to invest where they are.

I heard at the Elysee “no-one can touch the ISF because it’s politically too risky”.

Well that causes real damage to the French tech scene, it’s too bad Hollande and Macron don’t dare changing it, or at least create an exception for technology investments.

It seems to me under Hollande the tax environment of entrepreneurs also became worse regarding capital gains, as a friend reminded me yesterday. If you sell your business in the first two years (which can happen!) capital gains are treated as a salary and are higher than 50% of whatever the entrepreneur sold for. After two years it’s about 40 to 45% if I understand well, which is still very high.

To be clear I am not against tax and paid quite a bit of it both in France and in the U.S. (again, California isn’t quite a tax heaven and quite similar with capital gains around 35% but no ISF) and I’m happy to do so, but I’m definitely against too much tax leading entrepreneurs to leave France, and I see it happen often. Entrepreneurs leaving France means less investment in future startups.

I had great time meeting with the President and Ministers Macron and Lemaire and offered my help, I’m proud to see my Country finally making change happen, I really liked that apparently they’re making learning coding compulsory as early as high school. I would suggest adding teaching entrepreneurship as early as possible. Betting on the self entrepreneurs and growth of the freelance industry is a sure path to millions of future jobs creations.

Teach the youth to create their own job instead of looking for one. As early as possible in the education process.

A great event and initiative, looking forward to many more and seeing more French entrepreneurs succeed.

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