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Go West, Young Frenchman (Int'l Edition)


International -- European Business: FRANCE

GO WEST, YOUNG FRENCHMAN (int'l edition)

A torrent of talent is leaving France

When Eric Di Benedetto got his degree from the Essec Graduate School of Management in Paris, he was one of a handful who headed for Silicon Valley. That was 1989, and Di Benedetto knew that in France, 15 years might pass before he could assume any serious responsibilities. In California's high-tech mecca, by contrast, his career took off. Last year, the 32-year-old expat launched a venture firm, Convergence Partners, with two U.S. colleagues--and had a fund worth $60 million the day it was born.

From Paris to Aix-en-Provence, the secret is out: Silicon Valley holds all the promise that the French economy lacks. And what began as a trickle of entrepreneurs and high-tech talent is turning into a torrent. For the new expatriates, the trip westward brings not only well-paid jobs but the chance to ride a high-tech revolution into the next century. For France, however, the trend is ominous. "The whole environment in France is tragic," says Alex Balkanski, a French transplant whose C-Cube Microsystems Inc., founded in Silicon Valley a decade ago, is now a $340 million company with 800 employees. The technological gap between the U.S. and France, he says, "is not closing, it's getting wider."

As recently as five years ago, few French graduates would have considered going abroad. Now, up to 25% of France's elite graduates are leaving. A recent poll showed 77% of French youth would accept a job overseas if it meant a promotion. Small wonder: Di Benedetto says a typical French business graduate earns half the salary of a newly minted MBA in the U.S. The exodus is even spawning a subculture. Magazines, trade fairs, clubs, and Web sites cater to those seeking careers abroad.

A brain drain of this magnitude is a serious blow for France. It is already struggling with 24% unemployment among those under 26, a business culture hostile to entrepreneurs, and an underdeveloped high-tech sector--the very problems driving engineers, programmers, and MBAs to vote with their feet. In effect, France is hemorrhaging its lifeblood--the people it needs to create new jobs and industries. Surveys already show a shortage of some 10,000 computer scientists. "The best and most gifted French people are leaving at a rate never seen in France," worries Christian Saint-Etienne, an economist at the University of Paris Dauphine. "It's a self-destructive process that no one in France has understood yet."

QUELLE PACT? Some analysts say the process reflects a frustration that runs deep among France's young. France has the smallest proportion of workers of any advanced democracy--38%, compared with more than 50% in the U.S. And it's numbers like these, experts believe, that are helping turn graduates into expatriates. "Behind the [exodus] is a rupture with the social pact," says Patrick Lemattre, a management professor at HEC, a Paris business school. "The next generation will refuse to pay for the retirement of this generation."

Many exiles head to Silicon Valley, where some transplants are now noted executives: 3Com Corp. chief Eric Benhamou, for instance, and Borland International Inc. founder Philippe Kahn. The number of citizens registered with France's consulate in San Francisco quadrupled, to 40,000, in the five years up to the start of 1997. French techies say the number of unregistered compatriots could total that many again.

But the exodus goes beyond new graduates. For capital-intensive startups--in biotechnology, for instance--it's more or less a must to get launched abroad. "If I tried to start my company in France, I most likely would have gone bankrupt," says Philippe Pouletty, a French immunologist who founded SangStat Medical Corp. in Menlo Park, Calif. Pouletty, who aims to become a global leader in drugs, monitoring products, and services aimed at heart-transplant patients, raised $25 million privately and $140 million on the NASDAQ exchange in 1993.

Some of the startups that have sprouted in France during the '90s are also shifting some operations to Silicon Valley--or to tech centers such as Boston and even London. Aplio Inc. was founded in France 15 months ago but is now revving up from a San Bruno (Calif.) head office. "I can build a company in one to two days in the U.S.," says 30-year-old CEO Olivier Zitoun.

Last year, when Aplio launched a device allowing telephones to send calls via the Internet, Zitoun and his company were featured on national television. It was just the kind of instant fame Zitoun needed to be reminded that he wasn't in France, where small companies are viewed as unstable and unreliable. "Most people here didn't even know we were a startup--or French," he says.

OPTION GAP. Indeed, there's much in the old country Zitoun and others will never miss. The bete noire of all French entrepreneurs is the punishing level of taxes on stock options. If options create $100 in gains, the government's take in taxes and social charges is $120, according to a survey by Ernst & Young. The government of Prime Minister Lionel Jospin recently cut social charges on stock-option gains for companies less than seven years old. But executives say growth companies need options to attract top talent beyond that time.

Young companies such as Business Objects, an $80 million software company in Paris, cannot persuade talented managers to stay without stock options. So most new hiring is in its U.S. unit. Business Objects now has 250 employees in San Jose, Calif., and 300 in Paris. "The price to the French economy is huge," says Denis Payre, co-founder of Business Objects and chairman of Growth Plus, a group fighting for tax changes.

To be sure, the French exodus in part reflects a healthy desire among young managers to gain international experience--and eventually take it home. On that assumption, government officials applaud the trend, saying the diaspora will create a globally savvy generation of French business executives. But educators, economists, and entrepreneurs warn that many of those leaving won't return.

One among them is venture capitalist Di Benedetto. "The French model is not working," he says flatly. That kind of rebuke is easily dismissed in Paris. The French government would do better to find ways to keep its bright people at home if it wants a dynamic economy.By Gail Edmondson in ParisReturn to top


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