Are you working on the opening of your first French subsidiary? Well, you might want to hear from Alexandra Shainskaya who has helped not one, not two but three subsidiaries in France! In this blog post she shares her experience and advice to help you anticipate the different steps you will encounter.
To continue the discussion, join us for the upcoming breakfast on Oct 25 “The Future of Company. Global expansion: Where next?” where Alexandra will share her experience along with other entrepreneurs who expanded to Paris, London, Berlin, Tel Aviv or Tokyo. You can register here.
As an American CFO I have worked with a French subsidiary three times during my career so far (all three in Paris), twice from the setup stage and once with a more mature French company. In all three instances there were interesting challenges, good surprises as well as unpleasant ones, and many cultural and operational learnings.
A very nice surprise for an American company entering the French market is the availability of low-cost or even no-cost financing, particularly for innovative and/or technology start-ups. The French government and regional governments are currently very supportive of start-ups and innovation. For example, BPI France offers grants and zero-interest financing to French companies in certain sectors and at certain growth stages. The Paris Region offers the Paris Region Starter Pack, a grant of up to 250K EUR for foreign companies entering the Paris market. To claim it, companies must present a growth strategy for those three years, with a defined financial plan and potential to create jobs and spur development in France that will contribute to the development of the Paris Region.
If you are planning to conduct R&D activities in France, there are several great tax breaks for such activities (notably CIR, CII). There are also various contests and grants supported by local governments and institutions, depending on sector, size, and other criteria. In order to learn more about these opportunities you can do some research online yourself or contact a company in France that specializes in helping companies find suitable financial aid. Having previously benefited from R&D tax credits, loans from BPI and private banks, and several types of subsidies I can say that while the process is usually not short the outcome is well worth the effort. They key to getting through all the hurdles involved is asking for local help—see Tips section below.
Another great thing about doing business in Paris is the thriving start-up scene there. There are many resources and events available to young companies or those just entering the market, and most people are genuinely interested in helping each other. An almost zero-effort way to be invited to some useful events is to get on the distribution list of your VCs, law firms, accounting firms, and other vendors. You will find that many of them are plugged into the start-up scene and either hosting/co-hosting great events or sometimes promoting other ones.
[Notes from PRIME: Gary, the famous Tech blogger from New York has recently launched his Paris newsletter, subscribe to be in the know of all the upcoming events in the French capital]
One more thing to mention is that in recent years interest rates in France have been lower than those in the US. Thus, if you are able to obtain a loan for your French subsidiary through a French bank, it’s likely that the terms will be more favorable than what you might be able to get in the US (though expect a lower loan amount).
[Notes from PRIME: BPI France has representative in San Francisco and New York. We can introduce you to them.]
… and some Setbacks
You may have heard that most French people take vacation for most of August. It’s difficult for a US executive to imagine, but really almost no business transacts in France in the month of August and you should set your expectations accordingly.
Although you may have already been warned about the complexities of French employment law, once you begin to operate it may still come as a shock. Be sure that you are very comfortable with the vendor(s) you choose to help you with employment issues, namely attorneys and accountants, and that they are able to communicate complex issues to you effectively.
It also may come as a surprise that establishing a bank account and a legal entity can take on average at least 2 months in France. Compared to the ability to open an entity in about 10 minutes online in the US, this can be shocking.
[Notes from PRIME: See your previous article on How to start a company in France in 2018 by serial entrepreneur Guillaume Montard for French startups that offer solutions to ease and speed your set-up. Want more tips on Doing Business in France? Read our previous article on 7 Things to Know When You Want to do Business with a French Company in France by Philippe Andres, founder & CEO of Be2In Consulting]
Tips For Success
In order to minimize delays associated with administrative complexities, ask for help! I learned this from my French colleagues, who would send draft account-opening paperwork (for example) to the bank to verify correctness prior to submitting the signed version. We don’t usually do this in the US because of reduced complexity and therefore no need, but in France it’s quite normal and your administrative contacts will be very happy to help (as their time is saved as well).
Choose like-minded vendors and employees. As an older country, there are more people in France with antiquated mindsets that don’t necessarily fit well within a global start-up environment. It would be a mistake to hire those people into your global organizations, and you should be aware that with a thriving start-up scene there are many open-minded people and professional out there–so interview until you truly have the right fit, for employees and external consultants. For me, LinkedIn has been a great way to find wonderful employees in Paris.
Alexandra Shainskaya is currently CFO of Wibbitz, a start-up providing software that enables publishers, marketers, and agencies to create engaging video content quickly, easily, and at scale. Prior to that, Alexandra was CFO at Launchmetrics, a company specializing in technology for the fashion, luxury, and cosmetics industries. Throughout her career she has focused on working with start-up and growth-stage companies, mostly including international subsidiaries or expansions. Alexandra graduated with a BS from the NYU Stern School of Business and is a Certified Public Accountant in the US.