(Peter Gumbel is an award winning journalist and author who has lived in Paris since 2002. The opinions expressed are his own.)
By Peter Gumbel
Jan 23 (Reuters) - When entrepreneur-turned-venture capitalist Mark Bivens first moved to Paris in 2001, he regularly introduced himself as someone who had started three software companies in the U.S., two of which had flopped. That’s a badge of honor in Silicon Valley, where failure is viewed as a rite of passage. Not in France. One day, a French colleague took Bivens aside and gave him some friendly advice: if you want to reassure people, stop talking about the companies that didn’t work out. “I soon realized that failure carries a stigma,” Bivens says.
The French word “échec” is indeed loaded with negative connotations. It starts at school, where pupils who get bad marks can be quickly branded “in a situation of failure” early in their education, and often drop out before graduating. In the business world, failure has long been fatal: bankruptcy in France is a lengthy and complicated process, and can scar entrepreneurs for life. And in addition to the logistical hurdles of starting a new business after bankruptcy, second-chance entrepreneurs must contend with the social stigma associated with failure, which makes raising funds or even opening a new bank account difficult.
But at a time when France, and Europe more broadly, need a burst of entrepreneurial dynamism to jump-start their economies, an intriguing shift in mentality is starting to take place. It’s partly coming from the top. The French government is now wondering aloud whether this deeply ingrained aversion to failure is actually holding back the nation’s entrepreneurs, preventing them from attaining the sort of scale and greatness that startups in Silicon Valley have been able to achieve. The private sector, led by people with firsthand experience of failure, is also playing a role, by advocating changes that would lessen or remove the stigma and help entrepreneurs get back up on their feet.
Inspiration has come, in part, from the U.S. When Fleur Pellerin, the French minister in charge of innovation and small business, was attending the CES consumer electronics show in Las Vegas earlier this month, she met entrepreneurs and consultants who impressed on her the idea that failure can be beneficial. “I want to change the French cultural software about risk-taking and the vision of failure,” she said in an interview on her return. “Valuing failure is one of the major elements of economic dynamism.”
Public opinion seems to be on her side: a December poll showed that 83 percent of the French think people who fail in business are overly stigmatized. Seventy-one percent agree that in order to succeed professionally people need to take risks, even if that means failing from time to time.
This being France, Pellerin has a budget to combat failure, about $30 million. She plans to spend some of that on a series of events around France aimed at helping some of the 60,000 entrepreneurs who declare bankruptcy every year resuscitate their careers and try again. Through its “Rebound Charter” program, the government will work with four NGOs to organize these events and run coaching sessions, along the lines of FailCon in the U.S.
The rebounding entrepreneurs will also get a boost from the central bank, the Banque de France, which has recently adopted a more forgiving policy toward borrowers who filed for bankruptcy. For decades the bank put a special 040 code next to the names of bankrupt clients in its credit database, accessible by commercial banks and other lenders. But in September the bank abolished this special labeling; today, only fraudulent bankruptcies are still flagged. This is a good start, but it’s only one of a number of measures needed to help entrepreneurs rebound. In France, it can take as long as eight years for a person whose business has been liquidated to be discharged following bankruptcy - the longest time period of any EU country.
Philippe Rambaud is on the forefront of this French debate. He’s a former executive at food company Danone who set up his own business pre-testing products for his former firm and others, in France and the U.S. In 2008, his consultancy failed, the result of the financial crisis but also, he acknowledges, a consequence of some poor investment decisions. Rambaud experienced the “échec” stigma firsthand: when he tried to open a new account after his bankruptcy, his French bank saw the 040 notation and said no. He had to use personal connections to a friendly banker to get around that barrier. He eventually managed to get back on his entrepreneurial feet again, thanks to the loyalty of some former clients, but the experience was a wake-up call. “Failure is a real social problem in France,” he says. “We can’t continue to see it as the end of the adventure, as the result of incompetence.”
Hoping to pass on the lessons he has learned, in 2012 he created an association called 60000 Rebondir (which translates as “Rebound”), a reference to the number of annual bankruptcies in France. It’s one of four organizations throughout France that now host conferences and provide coaching to failed entrepreneurs.
Yet Rambaud says second-chance entrepreneurs are still stymied by a range of regulatory and other obstacles that prevent them from moving forward. He advocates the creation of a sort of unemployment insurance scheme that would help failed entrepreneurs in the immediate aftermath of their bankruptcy. He also thinks that commercial tribunals that oversee bankruptcy proceedings need to be overhauled and become experts at sorting through messy legal, financial and technical questions post-bankruptcy. Most of all, he says, France needs strong role models, business executives who have overcome failure to achieve success. He cites A.G. Lafley, the chief executive officer of Proctor and Gamble, who has spoken publicly about how many decisions turn out to be mistakes - and why that’s good. “I’ve never heard a CEO of a CAC40 company say that,” Rambaud says.
Still, Rambaud does see an evolution in French attitudes. For one thing, these days he is invited to teach classes on failure at leading French business schools. “Three years ago that would have been impossible.”
There are, of course, many other factors that explain why French and other European startups don’t often soar. Funding problems are one important issue. A recent EU report estimated that one in three small companies can’t get the financing it needs. While Europe has a venture capital industry, the average European VC fund is less than half the size of an average fund in the U.S., according to another EU report. And in many European countries, launching an initial public offering of a relatively new tech company is difficult. One successful French tech startup, an online advertising platform called Criteo that was founded in 2005 and now partners with Google, among others, launched its IPO on the NASDAQ last year, rather than stay in Europe.
Bivens, the Paris-based venture capitalist, welcomes the evolving French attitude to failure, although he is uneasy about the government’s role in it all. “It’s not in my DNA to think that government takes the lead in finding the solution,” he says. But he’s heartened to see that at least some of the change is being driven by “rebels and inventors,” who are embracing the global challenge of technological innovation. When he was first warned about talking of his business failures, he says he took the message to heart and held off. But now he’s gone back to discussing the flops openly. It helps to bond with his audiences, he says. Yet more evidence that something may finally be stirring in the land of risk aversion. (Peter Gumbel)