(Bloomberg) -- It was not in vogue to found a startup in Paris when Jordane Giuly graduated a decade ago. “The cool thing was to go into banking or consulting. Three quarters of my friends did that when they started working.”

Giuly returned to Paris after completing his master’s degree at Stanford to start a string of companies that didn’t quite take off, before he co-founded expense management platform Spendesk in 2016, which was valued last year at $1.5 billion. Giuly left in 2020 to co-found Defacto, a firm that offers credit infrastructure. 

His office is nestled down a passageway in the capital’s former textile district. There’s a neon sign at the entrance, yet the lettering of the old fabric boutique still frames the window. Co-founder Morgan O'Hana says it was key for the company to be European from day one. Within six months it launched in Spain, Germany, Netherlands, then in Belgium, and within its first year, 10% of lending was international, she said.

This ambitious attitude can be found in a growing number of firms in the French capital, as its leaders eye up a place at the center of post-Brexit finance. According to one study by consultancy EY, France’s financial sector was slightly more popular than the UK for US backers in 2021.

London is still — by far — the biggest center for fintechs in Europe but its crown has slipped somewhat in recent years, even as the UK government routinely touts the sector’s importance to the economy. Last week, the founders of Revolut, a UK startup that’s pushing to receive a banking license from UK regulators, issued a blistering attack on London, criticizing the regulatory regime and shallower talent pool after the UK’s departure from the European Union.

Plenty in the bloc agree that the seismic shift of Brexit has helped Paris in its push to become a genuine alternative to London and Berlin — traditionally the continent’s tech hub — in recent years. 

“No one wants to hear about Brexit anymore, but its influence on fintech is undeniable,” says Nicolas Benady, the chief executive officer of embedded banking firm Swan. “Getting a first license in just one country is a huge task for a young startup, so if they have to choose which market, why would they choose 67 million people over 450 million people?”

All Aboard

While the startup scene in Paris — as in other tech hubs — has been hit this year by recent pullbacks in funding and rounds of layoffs, a good deal of fintech founders remain buoyant. 

Take Station F, which Giuly describes as like an outpost of Silicon Valley but with “less Patagonia, less avocado, and less smiles,” only half joking. The former railway depot, originally built in the 1920s, is as long as the Eiffel Tower is tall. French telecoms billionaire Xavier Niel reopened the site in 2017 with bastions of desks, walls of glass and plentiful monstera plants, turning it into a campus for thousands of entrepreneurs and coders. 

“Sometimes you have a robot just kicking your feet while you're working and that's normal,” says Charlotte Bellet, who founded her HR tech startup aHRtemis from her university dorm room just outside Paris. Six months later, she landed a spot on a competitive data-focused incubator program at Station F, which gave her access to investors and mentors. Apple Inc., Google and Meta Platforms Inc. as well as French fintech unicorn Qonto are among those offering support to startups here, alongside French business schools, international venture funds and legal offices. 

A third of companies joining startup programs here are from abroad, with an increasing presence from the UK, while 40% of companies are founded by women, a Station F spokesperson said. 

A generous tech visa program, public grants, and the fact founders are fiscally incentivised to back funds: Paris appeals to startups in plenty of ways. First-time fintech deals in the French capital rose by $22 million to $96.4 million in 2022, according to Pitchbook data.

Popular culture also made entrepreneurship “increasingly cool” on a more widespread basis, says Franco-American investor Zoe Mohl, VC at Balderton Capital. Qui Veut Etre Mon Associé? (the French version of TV show Shark Tank) features leading tech entrepreneurs turned investors, while last year ​​former Paris Saint-Germain player and World Cup champion Blaise Matuidi co-launched Origins Fund for underrepresented early stage founders.

French funding

Serial tech entrepreneur and investor Marc Ménasé is bullish about France’s role in building the next generation of tech infrastructure. “The web3 ecosystem in Paris is boiling,” he says. 

In February, he was invited to the Elysee Palace to toast the year’s class of French Tech Next40, a program that offers support to French scaleups. “It is necessary to accelerate, it’s a race,” President Emmanuel Macron said at the event. It’s part of the €34 billion “France 2030” investment plan, launched in 2021. Macron continued his push for businesses to choose France on Monday, meeting with about 200 business leaders including Elon Musk, Pfizer Inc.’s Albert Bourla and Walt Disney Co.’s Robert Iger at Versaille.

Even as strikes over pension reform brought piles of stinking garbage to the streets of Paris in recent months, investors and founders see a shift from the time of Macron’s predecessor, when entrepreneurs clubbed together as “Les Pigeons” to show Francois Hollande’s taxes made them feel like fall guys for France’s economic woes.

France bucked overall global downward trends last year. The value of all French fintech deals rose about 30% to $2.1 billion last year, according to Pitchbook analysis. London saw the value of such transactions drop by a fifth to around $10 billion while Berlin fell 10% to $2.7 billion. 

Ménasé says the stars are aligning for Paris. The city’s historic engineering schools are now joined by highly competitive free coding schools, boosting technical talent. State bank Bpifrance is driving public-backed investments, with between $1 million and $20 million toward startups. It also deals out €276 million ($302 million) of European Union funding for entrepreneurs through its InvestEU program.

As a result, the angel investor spends a lot more time looking for deals in Paris and doesn’t frequent London as much as he used to. “We always say the UK is an island, so will stay on the island,” Ménasé says.

Europe-first 

France has 27 unicorns, or privately-owned companies worth more than $1 billion. The country has already beaten Macron’s pledge to create 25 unicorns by 2025, increasing its total from just five in 2018. 

One of them is Spendesk, the expenses company Giuly co-founded, which is one of this year’s Next40 members. Chief Executive Officer Rodolphe Ardant says the culture of French entrepreneurship has drastically shifted from the traditional focus on the home market. “There has been this change of mindset happening and I've been a part of this generation of entrepreneurs. We can have global ambition, we can create global players, we can create global leaders,” he says. 

One practical example of this was to have English as the spoken and written language early on, Ardant adds. This was crucial for hiring international talent in a city where it can still be a challenge for a non-French speaker.

It’s also something that chimes with Benady, the CEO of Swan. “We are a European company first,” he says. Swan has offices in Paris and Berlin and just opened in Barcelona. Amsterdam is next, and the EU passporting system made it easy for the young startup to grow across the region. A UK operation would require additional licensing and local products. 

And it’s not just French-founded fintechs that see potential in France. Britain’s Revolut set up at Station F in 2017. Now it has 2 million French customers in its business here, based in the center of Paris at WeWork La Fayette, part of an EU operation that is incorporated in Lithuania. 

Nadim Chidiac, head of lending and head of Revolut France, says the company has close to 200 employees here but will double in size by the end of the year. The fintech has a generous remote-work policy, so Paris has become a hub that employees from other cities pass through. Chidiac is looking forward to the launch of personal loans in France for existing customers soon. “Our customers will be able to use Revolut as their main bank for all of their products and services,” he says. In London — where the fintech is headquartered — it’s yet to receive a banking license.

Mind Le Gap

Paris is just over two hours on the Eurostar to St. Pancras. The former industrial area around the London terminus has  enjoyed a renaissance in recent years – it’s where Alphabet Inc.’s $1.24 billion UK headquarters dominates, with Meta close by. Balderton Capital, early backer of Revolut and Zopa, is around the corner. While the UK retains its European dominance in fintech, these days plenty of workers there are finding themselves on the Eurostar to the continent.

“Brexit required relocation of significant amounts of fintech financial services talent out of London. That's I think an unassailable truth with no political tint to it,” says Rana Yared, who is a general partner at Balderton.Even five years ago, anyone who had left a major finance institution and wanted to make it as a fintech founder would have likely established their new startup in London, Yared says, “because the person was here.” Now, they might see the benefits of moving across the Channel. 

--With assistance from Alan Katz and Benoit Berthelot.

©2023 Bloomberg L.P.