Many French startups, probably most of those you know, take State money in their early rounds. The State has a fund (BPI) whose policy it is to co-invest with the major French VCs. They have favorable terms for startups.
That being said, in general, the state is a passive investor. What happened with Dailymotion is way different.
First, the issue came from Arnaud Montebourg, a powerful Minister of the Economy with statist views in the former Socialist government. The current government is very different. (By the way, Montebourg was replaced by Emmanuel Macron, the current President of France, as Minister of the Economy under Hollande.)
Second and most important, by the time this happened Dailymotion had already been sold. It was a wholly owned subsidiary of France Télécom, the largest telecommunications operator in France (commercially known as Orange). That operator was state-owned until 2004, and even today the State is its largest shareholder.
In other words, the State prevented a former public company it basically still controlled from selling a wholly-owned subsidiary which happened to be a startup it bought before. I disagreed with the decision then, and I still disagree today, but it didn't prevent an exit. Rather, the actual exit of Dailymotion was to a company owned in part by the State...
EDITS:
- Looks like I was too slow to post and senko beat me to it.
- The "FSI" articles linked by others talk about, which invested in Dailymotion, is now part of the "BPI" I mentioned (it was merged with other vehicles that invested at different stages).
- Some French people regret Montebourg style, for instance a journalist recently tweeted his disagreement about the governmental OK to the sale of Photonis, a night vision company, to a foreign group (https://twitter.com/VincentLamigeon/status/11742379454543708...).
Sure. But the side effect of all this was to kill French investment for a while simply because founders had to argue why they thought they would not be given the 'dailymotion' treatment if successful. That these particular founders had already sold to an intermediary doesn't matter, after all it could have been Yahoo! knocking on their door as well, and it was the SIF clause that allowed them to block the deal.
it was the SIF clause that allowed them to block the deal
Not that I know of. The SIF didn't have any ownership of Dailymotion anymore. Their shares had been bought by Orange.
Montebourg just said publicly he wouldn't let Orange sell, and it killed the deal.
Only slightly related: why do French startups need to take State money? Because we have much less private investment, in part due to our social model. We don't have many pension funds because most of the retirement system is state-owned, we have few private universities because the best part of the higher education is state-owned... So basically we have no LPs.
The SIF didn't have any ownership of Dailymotion anymore. Their shares had been bought by Orange.
Ah, I did not know that, the way I heard it told - behind the scenes - was that their minority stake had that clause in it which gave them the legal power to stop the deal. I'm not sure on what legal grounds the French government would be able to stop this deal otherwise, if not through their control over Orange, which would seem to be a rather blunt instrument.
Because we have much less private investment, in part due to our social model.
We don't have many pension funds because most of the retirement system is state-owned, we have few private universities because the best part of the higher education is state-owned... So basically we have no LPs.
The LPs in most Western European VCs and PE parties are rarely pension funds. More often than not they are successful business people flush from selling earlier ventures. It is the lack of those that causes the dearth of capital in France, coupled with the rather difficult employment climate.
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Many French startups, probably most of those you know, take State money in their early rounds. The State has a fund (BPI) whose policy it is to co-invest with the major French VCs. They have favorable terms for startups.
That being said, in general, the state is a passive investor. What happened with Dailymotion is way different.
First, the issue came from Arnaud Montebourg, a powerful Minister of the Economy with statist views in the former Socialist government. The current government is very different. (By the way, Montebourg was replaced by Emmanuel Macron, the current President of France, as Minister of the Economy under Hollande.)
Second and most important, by the time this happened Dailymotion had already been sold. It was a wholly owned subsidiary of France Télécom, the largest telecommunications operator in France (commercially known as Orange). That operator was state-owned until 2004, and even today the State is its largest shareholder.
In other words, the State prevented a former public company it basically still controlled from selling a wholly-owned subsidiary which happened to be a startup it bought before. I disagreed with the decision then, and I still disagree today, but it didn't prevent an exit. Rather, the actual exit of Dailymotion was to a company owned in part by the State...
EDITS:
- Looks like I was too slow to post and senko beat me to it.
- The "FSI" articles linked by others talk about, which invested in Dailymotion, is now part of the "BPI" I mentioned (it was merged with other vehicles that invested at different stages).
- Some French people regret Montebourg style, for instance a journalist recently tweeted his disagreement about the governmental OK to the sale of Photonis, a night vision company, to a foreign group (https://twitter.com/VincentLamigeon/status/11742379454543708...).
Sure. But the side effect of all this was to kill French investment for a while simply because founders had to argue why they thought they would not be given the 'dailymotion' treatment if successful. That these particular founders had already sold to an intermediary doesn't matter, after all it could have been Yahoo! knocking on their door as well, and it was the SIF clause that allowed them to block the deal.
Not that I know of. The SIF didn't have any ownership of Dailymotion anymore. Their shares had been bought by Orange.
Montebourg just said publicly he wouldn't let Orange sell, and it killed the deal.
Only slightly related: why do French startups need to take State money? Because we have much less private investment, in part due to our social model. We don't have many pension funds because most of the retirement system is state-owned, we have few private universities because the best part of the higher education is state-owned... So basically we have no LPs.
Ah, I did not know that, the way I heard it told - behind the scenes - was that their minority stake had that clause in it which gave them the legal power to stop the deal. I'm not sure on what legal grounds the French government would be able to stop this deal otherwise, if not through their control over Orange, which would seem to be a rather blunt instrument.
The LPs in most Western European VCs and PE parties are rarely pension funds. More often than not they are successful business people flush from selling earlier ventures. It is the lack of those that causes the dearth of capital in France, coupled with the rather difficult employment climate.