Oh, merde?

By Roxanne Varza on May 8th, 2012

It came as a bit of a suprise for some when François Hollande won the French presidential election on Sunday. As the first socialist to move into the Elysée Palace since 1995, President-elect Hollande ousted Nicolas Sarkozy with roughly four percent more votes.

Many – including Nobel prize-winning economist, Paul Krugman – have already ventured a guess as to what this means for the future of the euro zone. But with all eyes on the currency, many are turning a blind eye to what Hollande’s win could mean for other aspects of the economy, including investment and innovation.

Prior to the election, the two candidates had started to include digital economy, start-up ecosystem and innovation jargon into their discourses; but not very much and without really taking the time to elaborate on what they would propose for entrepreneurs.

Unlike Hollande, Sarkozy can point to a few improvements that he has made during the last five years. Sarkozy’s 28-year-old digital advisor, Nicolas Princen, has noted a few examples, including the creation of France’s auto-entrepreneur status in 2008.

This particular development made it fiscally more palatable for an individual to become an entrepreneur, enabling them to avoid certain taxes for up to three years if they fall below a certain revenue threshold.

In addition, the simplified process has made it far easier for one to set-up and start a business than was previously the case. With over 85,000 requests for this status since the beginning of the year, and nearly half of all companies created in France being micro-enterprises, many could potentially benefit from this scheme.

On the other side of the political spectrum, François Hollande’s digital advisor, Fleur Pellerin, confirmed that the president-elect would be concentrating on creating a “true ecosystem”. Sure, it sounds nice, but it actually means very little without the fine print.

What Pellerin did say, however, was that if elected, Hollande would focus primarily on innovation in the video games sector and in e-health. This is clearly a good start, as France already has very strong video game and health sectors. In fact, even Sarkozy himself took a step in making development of the video game sector more of a priority, with a tax credit in 2008 that would reduce development costs by up to 20 per cent.

But if we take a step back from the official political discourse, it becomes unclear what the future holds for France’s entrepreneurs. Local entrepreneurs also agree that it isn’t entirely clear what the Hollande presidency will mean for local innovation – then again, many also say that neither Sarkozy nor Hollande ever really made a strong case for web entrepreneurs.

Nicolas Metzke, chief executive officer and co-founder of Mosaic Lab and Hypeed, which was acquired by Ykone in December 2011, says that France probably needs to wait another two or three elections until a real “web native” can propose something concrete rather than just vague promises.

From the point of view of a start-up, Metzke affirms that this election was more or less neutral. However, he adds that it could be very difficult for a socialist president to encourage investors and individuals to make high-risk investments, which clearly is not good news for the local VC community.

Entrepreneur Cédric Giorgi shares Metzke’s point of view, agreeing that, at this stage, it isn’t clear what Hollande will do for start-ups. While Hollande’s bolshy statements about imposing a 75 per cent tax on anyone earning over €1 million or increasing the education workforce by 60,000 are meant to attract a certain electorate, they are worrying.

Still, Giorgi says that there could be positive outcomes, too, including less tax for small companies and a potential strengthening of France’s already-attractive R&D tax credit.

It’s hard to tell. During the final debate between Sarkozy and Hollande on May 2, Hollande presented himself as much more in favor of innovation and investment than had previously been the case. While many entrepreneurs are currently optimistic, the majority wouldn’t hesitate to leave to neighboring countries if Hollande doesn’t manage to provide the right local environment that encourages innovation. Only time will tell.