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    Europe Fintech Scene: Paris vs London – who wins?

    The competition for the top tech spot is fierce in Europe right now. The Parisian start-up scene has been growing drastically in the last few years, but the advantage remains with London which is already celebrating a record year for investment in 2017. There are two reasons for Paris to challenge London’s lead: the winning combination of a successful Fintech universe with highly qualified professionals moving from the City Of London; and the entrepreneurial spirit which makes it a magnet for international talents and investors.

     

    The Paris tech scene has done remarkably well in 2016, almost catching up with London with a record €2.9 billion invested in the French-Tech (+80% yoy) versus €3.5 billion for British start-ups. Government policies and investments in infrastructure paid off: the bureaucracy around setting up companies has been simplified, generous tax breaks on R&D drove down the cost of labour in the tech sector, and the BPI (Banque Publique d’Investissement) a mostly government funded investment fund invested approximately 2 billion in start-ups over the last few years. Last but not least, billionaire Xavier Niels has been an excellent PR for promoting Paris, and he opened the world’s largest incubator: Station F last year. As expected, this significant effort favoured a huge wave of young local entrepreneurs, and 2016 was their coronation year.

     

    The London tech scene, on the other hand, is more mature than Paris as demonstrated by the valuations of successful exits in 2016, £41 billion in the UK versus €3 billion in France. The success of London is built on two pillars: first, the City of London with its technical complexity and its huge international talent pool. The investment and finance industry has been in constant change and restructuring during the past 9 years. This has created opportunities. In 2016, 22% percent of investments in British start-ups were made in the Fintech sector versus 7% in France. This is just the tip of the iceberg as many professionals move on from the financial sectors to tech start-ups operating outside of the Fintech industry. The second pillar is the SEIS program offering huge tax reliefs to angel investors. The second pillar is the SEIS program offering huge tax reliefs to angel investors and hence making it easier to get a first seed in start-ups. As of 2016, the UK had 16,000 registered angel investors versus 8000 in France.

     

    It’s fair to say that the French way is substantially based on government investments, the BPI alone accounts for about 25% of investments in French Start-ups. The British system, as described above relies more on incentivising private investors with significant tax relief; a minimum of 50% of the money invested and when remaining invested for 3 years no capital gain tax. Both amount to the government providing a financial boost but each lead to different outcomes. This is not new, French capitalism has always worked this way, and the government has always seen the return on its investments with a high number top-notch global companies. On the downside, capital gain taxes (among others) are higher in France than anywhere else in Europe, and from a foreign entrepreneur perspective, getting into the public investment programmes requires networking, understanding of the bureaucracy, administration, and local culture even though you can apply in English. In other words, a foreign entrepreneur coming to France meets the inconvenience first and the advantages later. For as long as we live in an open world, I believe these drawbacks will always give London the edge over Paris.

     

    To conclude the Paris vs London debate: the key to success is in international talent. London wins for now.



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