Gambling on success

By M.S.

WHILE much of the world is swathed in gloom, the 48th annual Consumer Electronics Show (CES) in Las Vegas, which opened to the public on January 6th, is all jollity. Demand for such gadgets adds up to more than $1 trillion a year, according to the Consumer Electronic Association (CEA), which puts on the world’s most important consumer-tech jamboree. More than 3,600 companies are exhibiting in the Nevada city and more than 20,000 new products will be launched.

Among the novelties this year is an exceptionally strong French presence. Around 120 firms from France are showing their wares there, fewer than from China, the United States, South Korea or Taiwan, but more than from other European countries such as Germany and Britain.

Some are big companies applying new digital technology to essentially old businesses, among them the cosmetics giant L’Oréal, drinks-maker Pernod Ricard and La Poste. A swathe of established mid-sized tech firms are there too, a number of them serial winners of awards for innovation. The new Activité Pop smartwatch by Withings is attracting attention. So are Netatmo’s bracelet measuring sun exposure and Parrot’s mini-drones and fancy headphones.

The big increase, however, is in the number of French start-ups. Up from 38 in 2014 to 66 this year, they account for almost one in four of the firms in Eureka Park, an area reserved for start-ups. Only America has fielded more.

Two new outfits were among five French firms singled out by CES for their innovation. Lima makes a hardware adapter and a multi-platform app that allows people to have the same files on all their devices, regardless of operating system or storage capacity. Voxtok produces a top-quality audio box for playing stored music, a sort of “connected jukebox”. Then there is SlowControl’s smart baby bottle that tracks the amount of milk an infant consumes. Emiota is presenting a prototype belt that measures changes in the size of the wearer’s waist and adjusts accordingly. Cityzen Sciences produces a tee-shirt that tracks the heartbeat. All in all, the French offering is varied but with a particular strength in connected objects.

The French tech sector tends to be an undertold tale. France makes Luddite headlines when its taxi drivers strike against Uber, a cab-hailing app, or a government minister refuses to let Yahoo buy Dailymotion, which streams video clips. True, knowledgeable tech investors have kept an eye on French pépites for some time. Criteo, an ad-targeting firm, successfully went public on NASDAQ in 2013. BlaBlaCars, a ride-sharing enterprise, is growing fast now in 13 countries. Wit.ai, a voice-recognition specialist set up by Frenchmen in California, announced on January 5th that it is being bought by Facebook, the social-media behemoth. France itself, however, is seen primarily as a place where labour laws are rigid, social charges exorbitant and wealth creation deprecated—in short, to be avoided.

Yet France has more business start-ups than anywhere else in Europe, says Ubifrance, a government agency that promotes French products abroad. It has the greatest number of fast-growing technology firms in Europe, according to figures from Deloitte, a consulting firm. Paris alone has at least 4,000 tech debutants. The recent establishment in the capital of a big start-up incubator, backed by tech billionaire Xavier Niel, founder and boss of a disruptive telecoms company, Iliad, looks likely to keep up the momentum.

So too does an increasingly firm commitment to the sector by France’s Socialist government, which is beating the bushes for sources of growth in a generally morose economy. “La French Tech”, an amped-up branding campaign, was launched at the end of 2013 by Fleur Pellerin, then minister for the digital economy, to put the sector on the map at home and abroad. Axelle Lemaire, who replaced her in the job in April 2014, is pushing it actively. Ms Lemaire and her boss, the new economy minister Emmanuel Macron, descended on Las Vegas this week to put their case that investors underestimate France’s tech credentials.

Ms Lemaire makes three main points. French engineers are widely recognised for their quality and creativity. The fiscal environment rewards innovation and includes Europe’s most generous tax credit for research and development. Labour laws are becoming more flexible. In particular, a bill to be voted on within the next few weeks extends the scope for start-ups to give staff shares instead of cash salaries.

Steve Koenig, director of industry analysis at the CEA, is a fan. “France’s efforts to foster innovation lead other European countries," he says. But it remains to be seen how much all this will produce in practice.

Building a durable tech sector requires many start-ups to grow big enough to produce splashily profitable exits for their founders and backers. This motivates the next generation of risk-takers. Early-stage financing is reasonably plentiful in France, but finding capital for growth is often trickier. Promising new firms frequently emigrate to America or sell out too cheaply too soon. And getting business is as important as getting money; start-ups complain that big French companies are reluctant to place the orders they need in order to grow. Nevertheless, a change in the air is palpable. And “La French Tech” got off to a flying start this week in Vegas.