How France Supercharged Its Startup Ecosystem – And How Canada Could Do The Same

How Canada can 10x its startup ecosystem: Lessons from France’s innovation boom —

By Greg Boutin —

Canada has long prided itself on being a hub for innovation, with its tech hubs in cities like Toronto, Vancouver, and Montreal nurturing talent and startups. However, despite its strengths, Canada’s startup ecosystem has yet to reach its full potential on the global stage. While countries like France have aggressively scaled their startup scenes, Canada still struggles with what could be called “small thinking” and limited investments from its largest institutional capital providers, which holds back the explosive growth seen in other nations.

France’s startup revolution over the past decade offers a blueprint for Canada to follow. By learning from France’s bold initiatives, Canada can “supercharge” its innovation sector, unlock growth, and establish itself as a global powerhouse for technology and entrepreneurship.

We are at a critical juncture when it comes to funding startups in Canada, and I believe we need better leadership driven by an ambitious vision to win, and become the top innovation hotbed on the planet. It especially saddens me to see our current leadership concerns (see ‘Former CVCA chair alleges CEO “appeared unwilling or unable to advocate” for membership in meeting with foreign LPs’).

As both a Canadian tech entrepreneur with a multimillion exit, and a former Commercial Attaché in charge of helping French companies export, I have experienced both ecosystems. I saw exponential improvements in the Canadian ecosystem since I settled in the Greater Toronto Area in 2002, but I also continue to see major opportunities for improvements. As a former consultant too, I like to benchmark our performance and learn from best practices elsewhere, as well as share my thoughts to further test them and ultimately strengthen them. Please help me do that by reviewing my article below.

France’s Transformation: From Bureaucracy to a Startup Haven

France, traditionally known for its bureaucratic hurdles and high taxes, might have seemed like an unlikely place for a startup renaissance. Yet, over the past decade, the country has transformed itself into one of Europe’s leading tech hubs. Through a combination of government initiatives, private sector collaboration, and a strategic focus on innovation, France has proven that even long-standing challenges can be overcome with the right approach.

The catalyst for France’s transformation was a concerted effort led by the government and private sector to revamp its startup ecosystem. A cornerstone of this effort was the creation of La French Tech, an initiative launched in 2013 aimed at promoting French startups both locally and globally. The government pumped billions into the ecosystem through direct investment, tax incentives, and support programs like Bpifrance, the country’s public investment bank, which has provided significant funding to startups.

Explosive Growth in France’s Startup Scene

France’s efforts have paid off handsomely. In 2022 alone, French startups raised a record-breaking €13.5 billion ($14.7 billion USD) in venture capital funding, up from just €5 billion in 2019—a nearly threefold increase in just three years. The number of tech startups in France has also skyrocketed, with over 12,000 startups now operating across the country, compared to just a few thousand a decade ago.

Furthermore, France is now home to more than 25 unicorns (startups valued at over $1 billion), including high-profile companies like Doctolib, Back Market, and Qonto, all of which have attracted substantial international investment. In fact, France’s unicorn count is second only to the U.K. in Europe, surpassing even Germany in terms of high-value startups.

Bpifrance, the country’s public investment bank, has been instrumental in this growth, deploying over €20 billion in direct investments and leveraging another €50 billion through co-investments with private partners. This level of public-private cooperation has been key to accelerating growth.

The Role of Institutional Capital in France’s Success

One of the most critical factors in France’s startup boom has been the involvement of institutional capital—namely, insurance companies, banks, and pension funds. Recognizing the importance of scaling investments in tech and venture capital, France has actively sought to enroll large capital providers into the ecosystem.

In 2019, French President Emmanuel Macron announced an ambitious plan to raise €5 billion from major institutional investors to invest directly in French startups and scale-ups. This bold move galvanized capital from France’s largest insurers and pension funds, including AXA, BNP Paribas, and Crédit Agricole, all of which pledged significant funds to help supercharge the startup ecosystem.

This influx of capital from institutional investors has allowed France to bridge the gap between early-stage funding and the later growth-stage capital that startups need to scale globally. It’s a model that has proven highly effective in creating a pipeline of high-growth companies capable of competing on the international stage.

The Canadian Situation: Opportunities and Challenges

Canada has many of the same ingredients that allowed France to transform its startup ecosystem. With world-class universities, a diverse talent pool, and strong links to major markets like the United States, Canada is well-positioned to become a global tech leader. However, certain barriers continue to hold the country back.

One of the major challenges is a fragmented and overly cautious approach to supporting startups. While there are numerous funding programs, incubators, and accelerators across the country, there is often a lack of coordination between federal, provincial, and municipal efforts. This fragmented landscape leads to inefficiencies, missed opportunities, and startups struggling to navigate complex regulatory environments.

Another issue is the conservative mentality that often permeates the Limited Partners behind Canadian venture capital (VC), and drives the smaller investments from local VCs. Canadian investors tend to be more risk-averse than their American or European counterparts, resulting in smaller funding rounds and a slower growth trajectory for many startups. In contrast, countries like France have encouraged more aggressive investment, helping their startups scale faster and compete globally.

Moreover, while Canada’s immigration policies are relatively open, they remain slower and less streamlined compared to countries like France, where entrepreneur visas and immigration reforms have made it easy for international talent to settle.

What Canada Can Learn from France to 10x Its Startup Ecosystem

To truly unlock its potential and 10x its startup ecosystem, Canada can take a page from France’s playbook in several key areas:

1. Government-Led Innovation Initiatives

France’s La French Tech shows the impact a coordinated, government-led effort can have on a startup ecosystem. Canada should consider creating a similar national initiative to bring together its fragmented support systems and present a unified front. This would not only help promote Canadian startups internationally but also provide a clearer path for entrepreneurs navigating government programs and funding opportunities.

2. Increased Investment in Startups

While Canada has strong venture capital firms and government funding bodies like the Business Development Bank of Canada (BDC), it needs to embrace a more aggressive funding model. France’s Bpifrance has poured billions into startups, and Canada could replicate this success by scaling up public investment in emerging sectors like artificial intelligence, clean technology, and life sciences. A dedicated fund for growth-stage companies would also help prevent the talent drain to Silicon Valley and other major markets.

3. Engaging Large Capital Providers

One of the most significant lessons from France is the importance of engaging large capital providers—insurance companies, banks, and pension funds. These institutions often manage billions, if not trillions, in assets and have the financial power to significantly boost the scale of startup funding.

Canada’s institutional investors, such as CPPIB (Canada Pension Plan Investment Board), its large banks (RBC, TD , CIBC, BMO, Scotiabank) and insurance companies (e.g. Canada Life, SunLife), are among the largest in the world, managing hundreds of billions in assets. However, they have been slow to invest heavily in venture capital and tech startups (with some possible exception, such as OMERS – I’d like to add a chart of VC investments by large Canadian capital providers here, if anyone finds one). To 10x its ecosystem, Canada needs to encourage these major institutional players to deploy more capital into VC funds and directly into scaling tech companies.

This could be achieved through public-private partnerships, tax incentives, or regulatory changes that incentivize long-term investment in innovation. By involving institutional investors, Canada could unlock the massive capital reserves needed to support startups at all stages of their growth.

4. Streamlined Immigration for Global Talent

One of the biggest advantages France has created is a fast-track visa system for tech entrepreneurs and skilled workers. Canada already benefits from being an attractive destination for talent, but its immigration processes are still bogged down by red tape. Streamlining entrepreneur visas, simplifying pathways for foreign workers, and making it easier for international students to stay in the country after graduation would give Canada a much-needed edge in the global war for talent.

5. Fostering a Bold Investment Culture

Canada’s investment culture is often characterized as risk-averse, with smaller funding rounds compared to the U.S. and even Europe. To 10x its startup ecosystem, Canada needs to encourage a bold, risk-taking mentality among its venture capitalists and investors. Programs that incentivize higher-risk investments in startups, such as tax breaks for early-stage investments or public-private co-investment schemes, could help nurture a culture of bigger bets and faster growth.

6. Promoting Collaboration Between Public and Private Sectors

France’s success was not solely due to government action but was also driven by close collaboration with the private sector. In Canada, fostering more partnerships between universities, large corporations, and startups could create a more vibrant ecosystem. This would enable faster commercialization of research and development and help startups gain access to mentorship, customers, and strategic partnerships.

The Opportunity Ahead

Canada has an incredible opportunity to become a global leader in the startup space. However, to seize this opportunity, it needs to move beyond piecemeal reforms and embrace bold, coordinated action on a national scale. By learning from France’s experience and adopting similar strategies—such as increased investment, streamlined immigration, and most importantly, enrolling large capital providers like banks, pension funds, and insurance companies—Canada can supercharge its startup ecosystem and establish itself as a global innovation powerhouse.

In a world increasingly driven by technology and innovation, Canada cannot afford to fall behind, and should ambition to lead the pack. It’s time for the country to think big, act boldly, and 10x its startup ecosystem.

Source: Greg Boutin