About three years ago, I thought it would be fun to teach a course about Paris startups. But I was pretty sure there were none. After some research I found out I was wrong.

There was enough going on there in 2014 to launch Babson College's Paris Startup Strategy Offshore Elective.

The Parisian startup scene has since strengthened. For example, last year Paris attracted almost as much startup capital as London. Specifically, French startup investments between Q2 and Q3 2016 rose by over 200% to $857 million in 65 mostly Parisian companies -- just $62 million behind London's total, according to CB Insights.

Last month I returned from the third running of this annual undergraduate course, and it's clear that Paris is making some progress. And that progress suggests four unexpected reasons why you should consider starting up in Paris.

Before getting into that, here is a brief description of my course.

  • Classes that cover theories seeking to explain questions: Why do some countries attract more private capital than others? Why does a small handful of cities spawn most startups and most cities do not? What makes the differences between the tiny number of successful startups and the rest?
  • Visits with startups, venture capitalists and incubators and tours of the Louvre and the Musee D'Orsay.
  • Consulting projects for Paris startups focusing on international expansion delivered over six weeks by student teams.

I continue to be surprised by the growth in Paris's startup scene for four reasons.

1. France embraced globalization and immigration in its latest election

France is likely to get more startup activity thanks to its most recent election. After all, while the UK voted to leave the EU, France voted to strengthen it. And if nothing else, that means companies that might have located in the UK who want easy access to customers across the EU will choose to locate in Paris over London.

After all, in May Emmanuel Macron took over as France's president .

During our pre-departure sessions, we examined the choice between Macron and Marine Le Pen, scion of a nationalist party promoting extreme anti-immigration policies and France's departure from the EU.

To be sure, Le Pen had significant support for many of the reasons that Britain voted to exit the EU in June 2016..

Last year, Paris was -- and still is -- in a state of emergency after the November 2015 terrorist attack. It still hosts roving bands of soldiers in popular tourist locations with their machine guns hanging around their necks ready to fire.

One of last year's most interesting insights was that people in Paris were "pissed off," according to our first speaker, Ary Schlumberger, a former student of mine at Babson.

There were many reasons for it. The most prominent of these was that the French government was trying to change a labor law that -- depending on your point of view -- was completely fair to workers or a huge barrier to the growth of the French economy, which suffered from roughly 10% unemployment.

That law did not pass, but the reasons its passage would be helpful to France are still around.

One of the entrepreneurs we met with last year, who has started a chain of successful eyeglass frame and hearing aid retailers, told us that about 9% of French workers belong to unions that give them the right to go on strike and get paid for it.

The official French work week is 35 hours. Unionized workers can go on strike on Mondays and Fridays to give themselves long weekends -- and they won't return to work until after they get paid for the days that they go on strike.

In 2016, the French government was trying to change the labor law so that the costs of hiring and firing workers would go down and make France a more attractive place to start a company.

But given the change in political circumstances, Paris's startup climate is likely to get better as London's is thrown into a state of considerable uncertainty over Brexit negotiations.

2. Macron is a former banker and an aspiring entrepreneur

Indeed, Macron -- in addition to having been a social economics minister and a banker at Rothschild -- is said to be entrepreneur-friendly and had planned to launch a startup with help from Xavier Niel, one of France's most successful entrepreneurs, before he decided to run for president of France.

We visited the headquarters of Free Mobile, Niel's telecommunications company, to hear from the leader of his soon-to-open startup incubator. He owes much of what Forbes estimated as his $9.5 billion net worth to his 55% stake in Iliad, the publicly traded parent company of Free Mobile, which "sells unlimited calls, texts and Internet for half the price of similar services sold by France's other three telecom networks," according to Forbes.

3.Niel is investing in the local startup scene

Free Mobile is a pillar company -- a local, publicly traded company that invests in startups. According to my Startup Common model, pillar companies are one of six essential elements -- in addition to universities, investment capital, human capital, mentors, and startup-friendly values -- for a vibrant local startup scene.

Niel is trying to make Paris more friendly for entrepreneurs. He sponsors 42, a free coding academy for young people in Paris and other locations. In addition, he is spending 250 million Euros to turn an abandoned train station in Paris called Station F into the world's largest startup incubator, which will host 1,000 startups when it opens, supposedly this July.

4. Parisian values are changing

While it's a mistake to oversimplify Parisian values -- it is still safe to say that many Parisian parents hope their children will graduate from elite universities such as Sciences Po -- from which Macron graduated -- and go on to a safe civil service or banking career.

We met Parisian entrepreneurs who came from that traditional background who were seeing better opportunities in startups. For example, last month we met with Florian Bressand, who left a partnership at McKinsey's Paris office to become chief operating officer at MIRAKL, which operates an e-commerce marketplace platform for retailers out of offices in Boston and Paris.

This kind of French talent going into startups suggests a possible shift that will boost Paris as a startup destination. Should you locate your company in the City of Lights?

Published on: Jun 26, 2017
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