Two fundamental cross currents with harsh impact on the future of the French economy went practically unnoticed, though they should have caused an outburst of national soul searching during the campaign: record high bankruptcies so far in 2012 and a plunge in venture capital investment.
The first two months were brutal: 10,900 companies filed for bankruptcy, a trajectory that might establish another sad record, beating the prior record of 2009 at the height of the financial crisis, when 61,595 companies went bust. And where is the new blood in the French economy supposed to come from? Not from startups and venture capital, it turns out.
Last year, venture capital firms invested only €822 million ($1 billion) in startups, down 21% from 2010, and down 10% from 2009 when France was in a recession. And only 604 startups were funded—during a period when over 58,000 companies went bankrupt. It's hard to imagine how France can regenerate itself. The decline accelerated in the second half of the year with VC funding dropping a breathtaking 24% from the same period a year earlier—after having fallen 19% in the first half.
And the future of startup funding doesn’t look bright: intentions by banks and insurance companies to allocate capital to venture investing collapsed by 69%. This is perhaps why there is such a vibrant community of French entrepreneurs and software engineers in Silicon Valley. They're going where they can thrive.
Bright spot: internet and ecommerce attracted over a quarter of VC funding in the second half. It now is the preferred sector, replacing biotech and medical devices. Some internet startups in France have proven that they can produce profitable exits for their investors—who, like their brethren in the US, are all looking for the next Facebook or Google.
And just then, an insidious and at once funny internet-age issue erupted in France, or more precisely in a tiny village in Maine-et-Loire, with worldwide implications. Read.... Can’t Even Urinate in his own Yard Anymore.
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