A semester of comparative studies
On January 12, 2023, Prime Minister Elisabeth Borne tasked deputy Paul Midy with a special mission to support investment in innovative start-ups and SMEs. To this end, Midy launched a comparative study between France and the UK, notably collecting feedback from 275 experts and examining 1,200 contributions received through a public consultation on the future development of the economy and the effectiveness of current support mechanisms in France.
High ambitions within a slowing context
Based on the results of this study, the deputy issued a set of recommendations for reinforcing the support mechanisms in place for innovative startups and SMEs in France. This is welcome news at a time when fundraising has slackened in the tech ecosystem, particularly through the first half of 2023. Despite this, Midy believes his recommendations can generate an additional €3 billion in support for startups and SMEs, while creating over 100,000 new jobs by 2027.
Mobilizing individual investors
One avenue for achieving this goal is to broaden the pool of investors, notably by encouraging more individuals to support innovative small companies. Inspired by the success of the British SEIS/EIS initiatives, ranked as the top innovation support tool by the European Commission, Midy proposes a tax deduction of 30-50% for individuals investing up to €1,000 in an innovative startup or SME, similar to donations made to charities. In addition, he also suggests directing a portion of funds invested in life insurance, employee savings and pension funds to startups.
Harnessing a venture capital community
Next, the report encourages more corporate groups to set up venture capital funds. In fact, of the 300 major groups in France, only 40 have a corporate VC fund. To change this situation, Midy proposes a local initiative to encourage the creation of new corporate venture capital (CVC) funds by easing the tax regime and raising the CVC investment ceiling from 20% to 50% of share capital. Moreover, the report also invites various corporate groups to pool their resources into a single CVC to enable new investment strategies in this area.
Encouraging public and private orders
In addition to investment tools, Paul Midy also recommends boosting the volume of purchase orders placed with innovative startups and SMEs. Drawing inspiration from the European Champions Alliance (ECA) initiative, which aims to create a purchasing database validated by a group of private buyers, the report proposes the creation of a “young company purchasing charter” with quantified commitments and incentives for the most exemplary groups. In this way, the report champions the same kind of collaboration between corporate groups and startups exemplified by the Paris-Saclay ecosystem.