The French Connection

Profile of the changing French entrepreneurial landscape.

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It's conventional wisdom that Europeans can't start companies and pose no threat to America's entrepreneurial dominance -- there's too little venture capital, too much respect for authority, no culture of risk. But now all that is changing. Especially in France

It is a seductive thought, this idea that the United States is the sole seat of entrepreneurship, that the entrepreneur and the venture capitalist are cultural heroes as uniquely American as the cowboy. Start a company with a lot of energy and a little capital in any other country, and the venture just won't fly. No other economy can accommodate entrepreneurship. No other culture will tolerate it. Yet in 1989, for the first time ever, more venture capital was invested in Europe than in the United States. That gap will continue to widen as the single European market, with 355 million people, becomes the world's largest, in 1992. Despite painful adjustments after 40 years of communism, investment capital will inevitably flow into Eastern Europe in the wake of the Berlin Wall's fall, an event that one French entrepreneur, Pierre Kreutz, dubs "as significant for Europe as the opening of the West was for America."

Peter Brooke, the chairman and CEO of Advent International Corp., a Boston-based venture-capital firm, is probably the savviest U.S. investor in European start-up and developing companies. He has been making such investments for 20 years. "A lot of people have commented that entrepreneurship in this country will always be a step ahead of everyone else. That is absolutely nutty," says Brooke. He argues that history has unduly favored the United States: for one thing, the United States has developed a large, homogeneous market "for entrepreneurs to practice on"; for another, two wars in the space of a generation reduced the European industrial base to rubble, giving the States an edge.

In 1983 membership in the European Venture Capital Association numbered 6 firms. Today the figure is 270. In 1987 Advent International closed a venture fund containing $220 million to be invested internationally. Two years later Advent closed another fund. That one had raised $230 million. Advent's portfolio contains many young companies already doing business throughout Europe, if not globally, even though their annual sales are often less than $10 million.

Behind those developments lie big questions. Can Europe, with its long-standing traditions, create a true culture of risk? Can the European welfare states withstand the fallout of chaos and failure that comes with entrepreneurial initiative? Is the United States at risk of being outinnovated by other countries around the globe, of being outbid for scarce capital in the years ahead?

"Europe is very confident about its destiny," says Advent International partner John Begg. And right now, he adds, despite a recession, the confidence is most palpable in France, where last year venture-capital investments exceeded West Germany's by 50%. Britain's economy remains weak and isolationist. Germany's is burdened by the cost of reunification and menaced by its proximity to the turmoil unfolding in the East. That gives France a window of opportunity, a chance to shuck its stodgy, socialist past and embrace an entrepreneur-driven future.

In the past 10 years only two countries -- the United States and the United Kingdom -- have had more venture capital invested in them than France has. Currently, in France roughly $3.2 billion of venture money has been invested, and another $2 billion is available for investment. According to the European Venture Capital Association, the amount of venture capital available for investment in France rose by 60% between 1988 and 1989, while new funds raised soared by 152% in the same period. That compares with an average increase for all Western Europe of 33% and 67%, respectively. Even though those numbers trailed off in 1990 because of recession and the Gulf War, new funds totaling $1.46 billion were committed to French venture-capital firms last year.

Those numbers don't surprise Advent's Peter Brooke. He claims the French are culturally predisposed to starting companies. "The French nation historically has been one of small shopkeepers. They are much more suited to this than you'd think." Moreover, Latin cultures like France and Italy encourage creativity. They have evolved "cultures of disobedience," as Brooke puts it. "There's a willingness to challenge the system."

Bertrand de Tournemire is 51 and has now embarked on his third commercial venture. "To start a company in France, two things are necessary," he says. "You have to be crazy and you have to be creative." Dapperly dressed in an ascot and a houndstooth coat, de Tournemire -- whose previous pursuits ranged from drilling for oil in Africa to growing grapes in Provence -- exudes a little of each of those qualities.

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