Establishing The French Connections

Shortly after Denis Payre and Bernard Liautaud formed Business Objects, which makes intelligence software, they started shifting operations from Paris to San Jose, California. Today only the development team of the 11-year-old firm remains in its native land.

France was, and is, a tough place to do business. Liautaud recently did his best to encourage French entrepreneurs and global venture capitalists gathered in, of all places, Paris. The meeting, sponsored by the European Tech Tour Association, was intended to match start-ups with money-men. But the occasion also provided spirited discussion about what France was doing wrong with respect to fostering technology companies (a lot) and what it was doing right (read on).

Liautaud believes that taxes on stock options are too high and labor laws too rigid, citing the 35-hour-a-week work restriction, as well as the difficulty and expense of laying off workers. Privately, he says he is not sure he would start a business in France today.

Many of the companies that are launched in France have their roots in its research labs and are based on technologies that are often superior to those developed in the U.S. But such firms struggle because their founders believe that good products simply sell themselves. "The French are great engineers but terrible at marketing," says Liautaud. He puts the blame partly on the university system, which he says churns out technologists who lack business training and respect for marketing.

In the audience was Jean-Noël Grandval, who along with colleague Alexandre Dayon left Business Objects in 1999 to start InStranet. Its "enterprise information exchange software" helps companies become more efficient. Like Business Objects, which invested in this start-up, InStranet moved sales and management to the U.S., leaving research and development behind in Paris. Other entrepreneurs are thinking even more broadly. Take Arisem, a knowledge management company based in Paris. It told potential investors in a prospectus handed out during the Tech Tour that it wants to emulate France’s Vivendi Universal for its corporate strategy, Germany’s SAP for its business model, Cisco for its human relations and talent management and Yahoo for its speed in getting products to market.

Though lack of management expertise is often cited as another weakness, the country’s pool of seasoned executives is starting to get larger, says Jean-Bernard Schmidt, president of a Paris-based venture-capital fund, Sofinnova Partners. Consider the career of Pierre Liautaud, another Tech Tour participant and the brother of Business Objects’ CEO. This Liautaud started at IBM in 1982, first as an engineer for IBM France and later as vice president of marketing for its Internet unit in the U.S. He left Big Blue in 1999, returning to France to take the job of CEO of @Viso, an Internet incubator formed by Vivendi and Japan’s Softbank. Now he is CEO of ActiVia Networks, an Internet infrastructure start-up in Sophia Antipolis, the high-tech center near Nice.

ActiVia — whose technology stems from the biggest Internet project at INRIA, a publicly funded computer science research lab — makes the hardware and software add-ons that network operators need to better handle multimedia applications for big corporate customers. Communications infrastructure firms like Acti-Via are one of the strengths of France’s tech sector. Another French strength: optics and microelectromechanical systems (mems), machines too small to see with the human eye, used for industrial purposes like wireless network equipment. These kinds of French tech companies have global potential, says Sven Lingjaerde, head of the European Tech Tour Association, but only if they can build experienced management teams and get international expansion right.

Whether they can do all this exclusively from France is still an open question.