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French Tech News: Independent Insurgency, CBD Confusion, And Map Making

More French are becoming self-employed. The CBD industry faces a hazy future. And startup maps galore.

Photo by Carl Campbell on Unsplash

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The French economy is booming. That seems to be a rather awkward thing to write in the middle of a pandemic and when there is still so much uncertainty. Nevertheless, according to INSEE, the French statistics agency, the country had 7% GDP in 2021 compared to an 8% drop in 2020, aka Year 1 Of Our Eternal Pandemic Without End.

Those numbers got a big boost from IT Services, which grew 2.9% in 2021. Which I will take as a hopeful sign that a country that feels woefully behind in the move to SaaS and which still sees major companies producing websites with a distinctly 1996 vibe is finally investing in the infrastructure to catapult its digital services into the 21st century.

While the INSEE numbers don't delve into it, that tech growth was likely boosted by the surging French Tech scene. Just this morning as I type this newsletter, my inbox is clogged with funding announcements. Pennylane: $57M. Descartes Underwriting: $120M. This caps a furious month that saw 5 new unicorns and a string of impressive fundings almost too big to count.

Though, of course, Maddyness is counting. And a quick glance at their handy-dandy venture tracker would suggest that January was a record month for La French Tech with €2.153bn raised, just topping the €2.03bn of September 2021.

Yet, this triumphant month also marks a slight tightening of entrepreneurial sphincters thanks to the tumbling U.S. stock markets. The diabolical duo of inflation and higher interest rates threatened by central banks has spooked investors has left everyone wondering whether we may see the end of days when anyone with a slide deck could raise a 9-figure round. (Or, at least it has felt that way.). There seems to be no consensus, other than everyone saying they are going to be a bit more prudent and sober and yada yada yada. We'll see.

However, it seems this era has left a permanent mark on France in one important way: The number of independent workers has exploded. According to social security agency Urssaf (a French acronym that stands for the Ninth Circle Of Bureaucratic Hell), the number of "autoentrepreneurs" (self-employed) rose 17.2% or about 400,000 in 2021 from 2020. (719,300 new autoentrepreneurs registered and 326,400 left.)

Plus de 2 millions d’autoentrepreneurs, la moitié sans revenus
2,23 millions d’autoentrepreneurs administrativement actifs fin juin 2021... Une progression de 17,2 % sur un an, selon des données publiées ce...

That's good news in some respects. Despite years of digital transformation, the French economy is still fairly rigid. It rewards the person who has one full-time job their whole life in terms of simple administrative tasks and a decent retirement. Striking out on one's own, even after years of reforms to lower the barriers, is still a daunting task in France. That more people are opting for this path can be seen as a tribute to the nation's rising entrepreneurial spirit.

But the Urssaf report carries an important caveat: Of those 719,300 new entrepreneurs, 118,300 were in the sector of "postal and courier activities." Aka, last-mile delivery services like Deliveroo. The rise of gig workers is happening everywhere. But schlepping around burgers on a bike is quite different than launching a SaaS startup. Creating a nation of delivery drivers probably isn't the long-term solution to building France's economic future.  

CBD Confusion

Last Fall I attended the Maddyness Keynote conference where I was surprised by the robust presence of CBD startups. (Finally, swag with a purpose!). While I've been following the rise of the cannabis sector in the U.S., I was less familiar with such startups in France.

But there are a growing number of stores that sell such products, including supermarket chain Monoprix. When I chatted with some of the CBD founders at Maddyness, I naturally asked them about the regulatory situation. Which they explained was...fuzzy. Rather than waiting for explicit permission, they had just jumped right in.

Well, things remain fuzzy, but last week a court gave France's CBD industry a boost when it temporarily overturned a government ban on any CBD products. The government had decreed that the "sale of CBD flowers or leaves, either to smoke or to drink in tea, directly to consumers is now banned." The government had argued that it's hard to monitor the amount of CBD in a product, but a court said that didn't hold water. Still, the rules remain unclear for most products. And even the government's position is hazy.

Last December, the cannabis-industry association (UIVEC) held a conference that included France's Industry Minister Agnes Pannier-Runacher and representatives of the Agriculture Department. Panier-Runacher said:

This variety of possible uses (of CBD) represents an opportunity for our economy since France is the leading European producer of hemp and among the leading producers in the world. We have what it takes to become one of the world leaders in this field.

But following the court ruling last week, Interior Minister Gérald Darmanin insisted that "all substances that come from cannabis...are very bad for your health."

For now, the CBD industry will likely just plow ahead in the face of this uncertainty and indecision. It's unlikely the government will muster the will to provide clarity on CBD before the April presidential elections.

Map Making

Everyone loves a good startup ecosystem map. At least, I think that must be true given the sheer volume I see!

In any case, several interesting ones appeared this week that provide some interesting views into French Tech.

  1. European Digital Health Ecosystem by newfund.  

2. French NewSpace Ecosystem by Aravind Ravichandran at TerraWatch Space.

3. Future French Unicorns by Klein Blue Partners.

In Other News...

Former Digital Minister Axelle Lemaire is leaving her consulting role at Roland Berger to become head of innovation for the French Red Cross.

Axelle Lemaire prend la tête de l’innovation de la Croix-Rouge française
Axelle Lemaire devient directrice déléguée à l’innovation de la Croix-Rouge française, et pilotera notamment l’accélérateur de startups 21.

The French Legion of Honor was handed out recently to 547 souls for their service to the nation. The recipients included a gaggle of notable French VCs: Stéphanie Hospital (One Ragtime), Marie Ekeland (2050), Fleur Pellerin (Korelya Capital), Philippe Colombel (Partech), Xavier Lazarus (Elaia), and Xavier Niel (Kima Ventures, Free).

Foodtech startup Frichti made big headlines when it announced it was in exclusive talks to be acquired by German delivery giant Gorillas. Frichti has raised $55.2 million from investors such as Eurazeo, Alven, and Felix Capital.

As such things go, it was a bit odd given that they were celebrating talks rather than a final deal. I've seen such announcements by big public companies who are under stock market disclosure requirements. So curious why they went public with talks that can often take weeks to finalize? Is there an issue at Frichti? Is Gorillas just pissing to mark its territory? Stay tuned.

Gorillas to acquire Frichti in latest instant grocery consolidation – TechCrunch
German startup Gorillas has announced that it plans to acquire Frichti, a French startup that delivers both ready-to-eat meals and groceries. The acquisition hasn’t closed just yet but both companies have entered exclusive discussions. “We don’t share details about the deal itself, espe…

Finally, Les Echos had a tough look at EuraTechnologies, the massive Lille incubator that Nicolas Brien, former president of France Digitale, left to run last year. The story raises two potentially troubling issues. First, startups are angry about a change in terms that requires them to pay a 3% commission to EuraTech on all money they raise. EuraTech leaders say the change is part of a new service to help startups find funding. In private missives, startups were apparently told to stop their public grumbling or hit the road.

Second, the story also claims Brien was forced to leave France Digitale last year amid an internal investigation into a management style that some employees deemed harassment. Brien denied the charges and noted that no formal harassment complaints have ever been filed against him.

EuraTechnologies : crise au sommet de l’incubateur iconique
En ce début d’année, le site d’ EuraTechnologies n’est pas très rempli. Comme toutes les entreprises et organismes publics français, le plus...

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