francedigitale

What can the France Digitale initiative achieve?

Start

On July 2, 2012, the France Digitale association was launched in Paris in the presence of Fleur Pellerin and nearly 200 people with a very good representation of the French digital ecosystem... or at least the Ile-de-France region.... (The presentation material for this launch is available at SlideShare Share).

France Digitale's mission is to promote the dynamism of French digital entrepreneurship with the particularity of bringing together both investors and entrepreneurs in this sector.

So then... what can we say about it, which possibly hasn't already been said?

In a slightly binary mode, I will cover the remarkable points and points of vigilance of this initiative.

Highlights

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A bi-business association

The first is that it is a rare professional initiative involving both investors (in venture capital) and digital entrepreneurs (rather emeritus). Indeed, professional associations in the sector tend to be sector-specific (software, video games, e-commerce, content, etc.), not necessarily focused on start-ups. And on the other, focused on investment with ACEC for venture capitalists and France Angels for business angel clubs. In the middle, we have the startups but there is not really a trade association.

Committed personalities

marieekelandThe second is the personalities that animate this association. They are very active in the ecosystem and of a very good level. Of particular note is the leadership of the very dynamic Marie Ekeland of Elaia Partners, who was very excited during the launch and who is co-chair of the association with Marc Ménasé of the firm Meninvest Meninvest.

Why two co-chairs, a governance structure that is usually flawed? Simply to respect the duality of the association's investors/entrepreneurs. We find it with the vice-presidents: Emmanuele Levi of 360 Capital and Eric Carreel de Withings, as well as the treasurer and general secretary.

Investors include both classic VCs such as ID Invest, Partech, Sofinova or Ventech and entrepreneurial funds such as ISAI and JAINA. But no business angels. On the startup side, there are of course web, e-commerce, software (Total Immersion, AllMyApps) but also hardware (Withings). It just lacks a little bit of hardware. What about Parrot and Archos, not to mention the semiconductor industry?

A prolixity of proposals

The third is the very good work of a dozen or so ACEC committees with proposals in a wide variety of areas, not just in the areas of financing and taxation, which are a regular focus of industry associations like ACEC. Moreover, these proposals, which are generally intended for the construction of public policies, are in the first instance iso-budgetary for the State.

I particularly appreciate the committee's report on the culture of innovation which advocates abolishing the artificial borders between trades (entrepreneurs, researchers, education, investors, SMEs). Especially if this also includes the trades themselves: engineers, researchers, sociologists, marketers, designers, graphic designers, lawyers, financiers, etc.

There are also some interesting proposals on the side funding ment such as the use of life insurance to finance startups, similar to what American pension funds do when they allocate a very small portion of their huge assets to finance venture capital funds. And also the call for IRC that could be allocated to the financing of startups by large companies.

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And then, in conjunction with the need for more ETIs, international orientation necessary for our startups. However, the subject seems to have only scratched the surface for the moment. The projection of our startups on a global scale is one of the few ways to make them reach ETI status. Of course, ETIs can be created in online commerce by remaining local. But this does nothing to improve the country's trade balance. A "strategic" ETI must improve the trade balance, otherwise its effect is neutral on the economy.

Fleur Pellerin in the square

fleurpellerin2The fourth was the presence at the launch of Fleur Pellerin. She remained there throughout the event, listening attentively to the proposals of the ten commissions, accompanied by her digital advisor Aymeril Hoang. Except that she moderated the ardour of all the participants by specifying that the budgetary constraints being what they are, her action was limited. Its constraints are probably not only budgetary.

The digital in dunning

There was also the promotion of digital technology as the cornerstone of France's economic recovery. And also that of entrepreneurial culture. As other associations point out, digital technology has a twofold impact on growth: in the digital industries themselves, especially when they can export, but also in the use of digital technology by all economic players and public services. It is not just about startups.

Studying for the future

Finally, France Digitale's action is based on measurement tools. In particular, it has just published a barometer carried out by Ernst & Young (Franck Sebag) which values job creation by start-ups. It is intended to be updated on an annual basis.

It was originally a study commissioned by Marie Ekeland on the Elaia Partners portfolio. The framework has been extended to the investment portfolios of all France Digitale members and now includes 107 companies. The figures are good, and for good reason: these companies are rather downstream in the innovation cycle, with companies handpicked by VCs.

Flags and points of vigilance

I've written down a few of them, as I should!

One more association?

The first, which has already given rise to quite a few comments, is the risk of increasing the fragmentation of professional association action in the digital sector. I had mapped it in The digital divide in the 2012 presidential elections. That's one more logo in the diagram! But OK, it's more transverse than the others.

There was indeed this "Digital Collective" which had brought together some twenty digital associations during the presidential election and organized a "Digital Collective". debate with Fleur Pellerin and Nicolas Princen representing respectively François Hollande and Nicolas Sarkozy between the two rounds. Then, nothing more. In practice, digital does not speak with one voice, and it is difficult to have only one, as the sector is so diversified with actors having very different issues and also very different interlocutors at the State level (Bercy, Culture, Education, Research).

What about the National Digital Council? It was challenged when it was created because it did not represent the entire digital ecosystem well. And indeed, it included only one startup, Melty's dynamic Alexandre Malsh, and no investors. Its initial Elysée-led constitution made its independence questionable, even though CNNum was quite productive in advising the government, which was able to show a good form of independence. The end of the presidency of this CNNum by Gilles Babinet and its replacement by Patrick Bertrand (ex AFDEL) has not been fully clarified. Was the CNNum too independent for political power?

The appointment by Fleur Pellerin of a new Secretary General in the person of Jean-Baptiste Souffron has caused a stir. Not because of the choice of the latter, but because it accentuated the impression that the political power had taken control of the tool. A bit like when Eric Besson tried to create a position of "government commissioner" within ARCEP in 2011. The previous Secretary General, Benoit Tabaka (a party at Google), had been chosen by the CNNum itself. This provoked an understandable psychodrama on the evening of 5 July 2012 with the resignation of all CNNum members except Gilles Babinet. In any case, a representative body of a sector cannot be defined by the State itself. It must take itself in hand. What would we say if the leaders of the FNSEA or the CGT were chosen by the government?

Net net, France Digitale is indeed one more link in the web of associations in the sector, but it still fills a void and its independence is very useful. Afterwards, it is a natural competition between associations on which one will be the most prolific and efficient in terms of proposals and lobbying.

The tough laws of lobbying

The second point is the chronic underestimation of the cumbersome nature of any lobbying activity. I documented it in 2011 in an article on how lobbying was or was not organised in the digital sector. Effective lobbying requires a presence in a whole host of places and not only at the executive level (Elysée, Matignon, Ministries): there is the administrative level and public institutions (Oséo, CDC, ANR, etc.), the legislative (National Assembly and Senate, its committees, its rapporteurs of government bills, its specialists in proposing amendments) not to mention the Independent Authorities (ARCEP, CSA, HADOPI) on certain subjects. And it is necessary to start all over again at each political alternation or even ministerial reshuffle.

When we propose measures to a government that fall under the law and even under the order in council, we have to give ourselves the means...in detail. Both in the drafting of legislation, with the help of legal experts, and also in the "operationalisation" of measures. Proposals such as "encouraging" this or that are far too vague. One has to be very precise in one's proposals. We also need to assess the effects of side-effects or circumvention, particularly in terms of taxation. This is a fine piece of work.

The situation is complicated by the current government, whose dominant ideology is not very entrepreneurial. Announcements in terms of taxation on investment in innovation are thus going in a very bad direction (rate of 25% of wealth tax exemption on investment in startups, whether via FCPIs or directly). There is a clear trend: under the cover of a budget shortage, the State is preparing to shift part of the financing of innovation from the private sector (encouraged by tax exemptions... decreasing) to the public sector (via its reinforcement, particularly via the Public Investment Bank, which has more resources). We undress Peter to dress Paul ... with a result that does not look any better.

Hardly launched, the association is therefore facing a wall. France Digitale is not about to change that. At the same time, vocal counter-powers are always useful in a democracy. It is good to persevere!

A feeling of déjà vu

francedigitale2The work themes of the France Digitale commissions give an impression of déjà vu, particularly the rapprochement between researchers and entrepreneurs (seen at CapIntech, the RETIS network, etc.) or the strengthening of financing, particularly for later-stage work (discussed at AFIC and France Angels). With messages seen many times in the palanque of studies and reports published for the government on how to improve innovation in France. On the menu: stability of tax systems, grouping of systems, geographical focus on a few clusters to avoid the current dispersion (72 competitiveness clusters, including a good dozen in the digital sector).

This brings us back to the age-old question of the relationship between large companies and SMEs, which has already been addressed by the Institut Montaigne and the Comité Richelieu and within the framework of the SME Pact. This theme of Open Innovation in large French groups is a key and complex subject, very often analysed from a macro-economic and statistical angle, as in this report by Nicolas Von Bulow, who leads one of France Digitale's commissions on the social and fiscal environment of innovative companies.

The "soft" and "sociological" dimension is often missing: the structure of our elites, the management methods of our large companies, the sectoral strategies of our companies, the shortcomings in terms of building "platforms" that can be extended by ecosystems (and as such, the presence of Withings in France Digitale will be enlightening). I myself dealt with the issue in 2008 in an eset of proposals made on the occasion of the consultation launched by Eric Besson for his Digital France 2012 plan. Proposals with little effect, but of which II then assessed the level of implementation. via public authorities or private or associative initiatives by the end of 2011.

In addition, the low number of acquisitions of digital start-ups by these large groups has other explanations. Admittedly, this phenomenon is clearly not specific to the digital sector. But in this industry, it is not helped by the fact that the major manufacturers in the sector are not doing well and that those who are (rather) doing better, such as telecom operators, do not have a real product strategy. However, there is a need to change habits and methods in the relationships between large groups and startups. All the big companies are interested in this but with more or less happiness and especially sometimes more or less deontology.

In addition, the association focuses quite a bit on the creation of ETIs. This is a commendable approach, particularly in view of the previous point. But be careful not to give the impression of wanting to dry out the "upstream pipe", at the priming level. The quality of an ecosystem comes both from the quantity and quality of the projects that feed this pipe and from the ability to grow the best ones. One should not be done to the exclusion of the other. It is the common lot of innovation to create a "funnel" that widens upstream and tightens as it goes along. This is what risk-taking is all about. Success comes from failure and even from numerous failures! When the association recommends greater selectivity (at the level of state aid), it would therefore be good to specify where and when and by whom. Oséo? FSI ? Big loan?

Overall positive balance sheet

Despite these various drawbacks, the launch of France Digitale adds a good voice to the strings of common sense to boost innovation in France. We must encourage them in this approach. And investors as well as entrepreneurs who feel motivated are welcome in this association to move the schmilblick forward.

As usual, I also captured this launch in the form of photos that you can find directly on my blog.

Article published on Olivier Ezratty's blog on July 6, 2012: http://www.oezratty.net/wordpress/2012/que-peut-donner-france-digitale/

{Jacuzzi on}

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