Welcome to French Tech Updates! Your weekly source of startup, VC, and tech news and insights. I’m James, a startup-obsessed American living in Paris.

The future is…French? 🌍

A few weeks ago, I wrote about the growing number of French startups that are expanding beyond the country’s eight borders. This is an encouraging sign since French businesses have historically lagged behind peers when it comes to selling outside of their home country.

As of 2022, of all the French companies with 0-249 employees, only 6% sell internationally—well behind the EU average of 9%.

And I get it. France is a beautiful country. Why would you want to leave?

Geographic and architectural beauty aside, there are many other reasons why French companies have been reluctant to go global. For starters:

• 🙊 The language barrier

• 🚫 Conflicting regulations

• 💁‍♀️ Lack of government support for international expansion

• 🤷‍♂️ Cultural differences in new markets

As the 5th most populous country in Europe, many French companies also haven’t felt the need to subject themselves to the growing pains of international expansion. With 65 million people to sell to right here in France, why aim higher?

…unless you’re a VC-backed business that is.

Because once you start playing that game suddenly 65 million people isn’t all that much. Even if you expand to all French-speaking countries that only grows your TAM to 309 million French speakers compared to 1.5 billion English speakers. Never mind going international, simply changing the language of your product and sales materials can potentially triple the size of your market.

In the power-law business of venture capital-backed startups, you need to go after the biggest market you can. Any constraint you self-impose on your growth creates an opportunity for your competitors.

Across the Atlantic in the United States, which boasts a population 5X the size of France, the world’s largest tech companies are already operating this way. Their leaders were not content to dominate just one massive market in their home country—which is why 58% of revenues for S&P 500 companies in the information technology sector come from outside of the US.

58% of all revenue from the largest tech companies is international!

For companies like 🍎 Apple (65%), 🔎 Google (65%), and 🤳 Meta (63%) the amounts are even higher. If these tech giants had not expanded internationally they would be mere fractions of their current selves. Or maybe they would not exist at all after some faster-growing international competitor acquired or annihilated them.

For French startups to compete on the global stage they first need to open the door and enter the theater. That means pursuing bigger goals and taking the leap into international expansion.

In this special edition of French Tech Updates, I spoke with François Véron, General Partner at Newfund Capital, to discuss a critical part of this important trend—French startups expanding to The United States.

So with that, let’s jump into this week’s special edition update!

Interview with François Véron, Managing Partner at Newfund

Is expansion to the US something you expect we’ll see more of from French startups in 2024? If so, what do you think is driving that trend?

Yes, it's a trend that we are going to see more and more often. The reason seems simple to me:

1. People realize that with software, 'the world is flat' to borrow the expression.

2. The same technological infrastructure is available in Europe and the United States.

3. A significant market is necessary to justify fundraising, valuations, etc. Companies that are not international from the start, especially those not present in the United States, will not be financeable by venture capital.

With many US startups benefiting from easier access to capital and aggressive approaches to scaling, in which areas do you see French companies having an advantage when expanding to the US? 

We can naturally think of sectors such as culture, lifestyle, beauty, food, or even aeronautics, sectors where France is strong. But we need to go further, because precisely the entrepreneurial dynamic can completely reshuffle the deck. Who saw Sweden as particularly favorable to the emergence of the world leader in music, Spotify? Another example: what advantage did Romania have to give birth to the automation giant, UI Path, if not that its brilliant founder was born there? If we think in terms of opportunities, there are plenty.

Could you share any success stories that come to mind of French startups expanding to the US recently? 

Aircall immediately comes to mind because it is a company in which Newfund has invested that has an impressive track record in the United States (shoutout to Scott Chancellor, who joined Aircall after 7 years at AWS and 3 at Apptio). But I also immediately think of Algolia and Dataiku in software, or Tageos in hardware, one of our portfolio companies (again!) that has just opened an RFID label production factory in Raleigh, North Carolina.

Are there particular industries or sectors within the French startup ecosystem that you believe have a higher potential for successful expansion into the US?

I believe the best entrepreneurs will be keen to expand their business in the United States. You will be surprised by their diversity and sheer number.

I’ve noticed US VCs investing more in France over the last few years. How do you approach maintaining a competitive advantage over these investors? 

We’ve actually seen far fewer American funds in France since 2022. In a way, I regret it because I think we are playing a cooperative game, rather than a competitive one. But it's true that their near-absence for over a year makes the value proposition of Newfund, which has active teams on both sides of the Atlantic, all the more valid. And given the amount of work that needs to be done in the United States as long as IPOs have not fully resumed, I don't expect to see many partners from American funds in Paris soon. Unless, of course, it's for their vacations.

With the rise of remote work and virtual collaboration, how has this affected your approach to supporting French startups in their expansion efforts to the US, especially considering the challenges posed by physical distance and time zone differences?

That's a very good question, because one might initially think that a good Zoom connection is enough to multiply contacts and support the development of our portfolio companies in the United States. Practice shows that it's not so simple: you need a network, a precise understanding of the players and the market, and, as you point out, the time zone difference makes it essential to have an American team if you want to help startups expand in the USA. At Newfund, we have had a presence in the Bay Area since 2014, and it has steadily grown since then.