Monday Note

Two weeks ago, I discussed what I called The Other French Paradox, that is how French taxpayers and French companies are at a (curable) disadvantage in Silicon Valley. Last week, I “shared” (we’re in California) my own plans to deal with the twin problems: a venture fund whose profits reverse the flow of money back to France and whose role is to help French high-tech start-ups achieve their full potential by becoming real members of the Silicon Valley ecosystem and, from there, by gaining access to Asian markets.

This week, as promised, I’ll deal with “mere matters of implementation”, questions and objections.

Sadly, I’ll explain the adjective in a moment, the first objection my compadres and I get is one of jobs outsourcing, or délocalisation: “When you transplant these companies to the Valley, French jobs disappear in the process.”
Understandably, if the company’s management team pulls up stakes and move to Mountain View or Palo Alto, there is a sense of loss, they’re gone, their salaries used to feed the local economy.
But, that’s where the “sadly” comes in, there seems to be little faith in the company’s success and in the resulting job creations back in France. Sometimes, I wonder if this lack of faith can’t be summarized thus, using a metaphoric pizza slice: to get a  bigger share, one can worry about its angle, is it 12 degrees or 15 degrees, or one can work to increase the pizza’s radius. Do we prefer a healthy but smaller company, all located in Brittany, or do we want an even healthier, larger enterprise, creating more jobs, both in France and in the US? Posed like this, the rhetorical question fails the “can you disagree” test, it’s framing.
For a way out of the frame, let’s turn to economic interest; in plainer English: making money.
The way we structure our investments in “transplanted” French startups keeps at least 50% of the engineering work, jobs, in France. We don’t do this because we’re nice guys, we want this because it makes economic sense. Let’s review.

First, Valley engineering projects are always “distributed”: parts of the team are local, others are all over the world. The Internet, VOIP, teleconferencing, “virtual presence” is now the term, all help teams work on a single project from several locations. The “day shift” works on the next version (release) of the operating system and, at 7pm, clicks on “build”, assembling the software modules into a testable object. This is a  complicated/automated process, it can take a couple of hours.
Back in Montpellier, France, the “night shift” comes to work at 7am (they’re engineers, not the normal type) and start load-testing the latest build. They log bug reports on the system, issue pithy email challenges to the day shift team’s intellectual virility and generally do their share to improve the product. The next morning, the day shift comes back to work in California and, as we say here, moves to the “rinse and repeat” procedure. Being 9 time zones apart is a blessing, it increases productivity, keeps people at work or at sleep instead of idly watching over each other’s shoulder.

Second, there is the small matter of cost: today, Valley engineers cost more than their French brothers and sisters. This is due to a combination of high demand, Google, Apple, Facebook, Twitter, Cisco, HP and so many others are hiring, and cost-of-living issues, mainly horribly expensive housing. Palo Alto real estate is more expensive than Paris’ or Beverly Hills’.
There is more than raw cost. I now have to tread delicately. As much as I love my fellow Valley geeks, I sometimes feel a je ne sais quoi in the air, a faint sense of entitlement, an occasional bout of me first coupled with a not-so-sporadic relaxation of the legendary work ethic. In other direct words: French engineers in France are good for business because they’re less afflicted with the Valley attitude. Our formula calls for transplanting the management team so they become part of the multicultural Valley brotherhood. And for keeping as much engineering work in France as possible.

Sometimes, in his presentation, an entrepreneur falls into what I call “explanation overload”, the fifteen (unranked) reasons why the business model will work. Not a good sign. What follows could expose our thesis to such overload criticism.

I have trouble with the notion of French engineers and business people leaving the country  is a bad thing. French technology needs ambassadors, the French culture virus needs carriers. Already, in a study already quoted two weeks ago, the Invest in France agency shows how insignificant France’s “brain drain” is (2% for scientists to North America), when compared to other European countries where it is as much as 4 to 8 times higher.
People who leave come back, they encourage a movement of ideas and wealth, their example creates hope, it motivates others to take more risk. Innovation breeds innovation. We already know we’ll reboot out of the current crisis through innovation, not “more of the same, only better”.

—JLG@mondaynote.com

Next week, we’ll dig into a venture fund’s business model and we’ll look at European and US venture-related job creation statistics.

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