A French Government Endeavour into Venture Capitalism

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The French State is investing large sums of money both in Paris and in rural areas to drive the French economy and create a start-up culture to attempt to rival Silicon Valley, to become the European Centre of Venture Capitalism in a Post-Brexit world.

In 2013, Bpifrance was created to circulate Venture Capital (VC) to start-ups. The Bank was founded by Caisse des Dépôts, an investment arm of the French State. The head of innovation at Bpifrance, Paul-François Fournier, has stated that the bank is “accelerating the start-up ecosystem” in France. In 2013 there were 1500 investments by the bank in start-ups this has risen to over 4000 in 2017, which totals a €20 billion direct investment in both small and large companies. Bpifrance is set to increase this investment, spurred on by Emmanuel Macron’s €10 billion privatization of hospitals and alike. The money is set to finance further start-ups and to train further the existing start-ups in digital tool use.

The French State will expand its stake in French Venture Capital funds which they are currently invested in about 100 of the 200 or so funds. In 2017 the investment in these funds has been raised from €80 million in 2013 to €180 million, across the next few years this investment is set to continue as in the past Venture Capitalism has been an excellent model for raising large amounts capital. This investment according to Paul-François Fournier is the reason that the VC industry is growing faster than in any other EU state. Currently, the EU investment Fund raises public money in Britain but Post-Brexit the tides may change as trading with the EU for the UK may be costlier and consequently some of the emerging firms may be less profitable.

 

The EU investment fund post-Brexit vote has already slowed down the approval of funds into British VC, and it is likely that this trend is set to continue with more money flowing into France and Germany. France is setting its self-up to be a great centre of investment in Tech, Fintech, VR and connected objects and allowing Frankfurt to take the investment banks. It appears as if the French government is playing an interesting game attracting greater investment in its own country by investing its state money as this is not always profitable. As when results are measured by increased productivity and job creation the private sector dominates and is far better at deploying capital.

A study conducted by Massimo Columbo of the Milan Polytechnic University studied 25,000 government VC investments in 28 countries between 2000-2014 and concluded that they only worked when the state was not in competition with the private sector. Bpifrance is typically greatly successful in investments within Science-orientated and manufacturing activities and also in start-ups in remote locations.

The French State model is a sight to admire and as the UK economy predictions continue to worsen and investment dwindles the UK government I hope may look to France to boost our Post-Brexit economy.