To boost entrepreneurship, France tries to change its attitude toward failure

By Peter Gumbel
January 23, 2014

When entrepreneur-turned-venture capitalist Mark Bivens first moved to Paris in 2001, he regularly introduced himself as someone who had started three software companies in the U.S., two of which had flopped. That’s a badge of honor in Silicon Valley, where failure is viewed as a rite of passage. Not in France. One day, a French colleague took Bivens aside and gave him some friendly advice: if you want to reassure people, stop talking about the companies that didn’t work out. “I soon realized that failure carries a stigma,” Bivens says.

The French word “échec” is indeed loaded with negative connotations. It starts at school, where pupils who get bad marks can be quickly branded “in a situation of failure” early in their education, and often drop out before graduating. In the business world, failure has long been fatal: bankruptcy in France is a lengthy and complicated process, and can scar entrepreneurs for life. And in addition to the logistical hurdles of starting a new business after bankruptcy, second-chance entrepreneurs must contend with the social stigma associated with failure, which makes raising funds or even opening a new bank account difficult.

But at a time when France, and Europe more broadly, need a burst of entrepreneurial dynamism to jump-start their economies, an intriguing shift in mentality is starting to take place. It’s partly coming from the top. The French government is now wondering aloud whether this deeply ingrained aversion to failure is actually holding back the nation’s entrepreneurs, preventing them from attaining the sort of scale and greatness that startups in Silicon Valley have been able to achieve. The private sector, led by people with firsthand experience of failure, is also playing a role, by advocating changes that would lessen or remove the stigma and help entrepreneurs get back up on their feet.

Inspiration has come, in part, from the U.S. When Fleur Pellerin, the French minister in charge of innovation and small business, was attending the CES consumer electronics show in Las Vegas earlier this month, she met entrepreneurs and consultants who impressed on her the idea that failure can be beneficial. “I want to change the French cultural software about risk-taking and the vision of failure,” she said in an interview on her return. “Valuing failure is one of the major elements of economic dynamism.”

Public opinion seems to be on her side: a December poll showed that 83 percent of the French think people who fail in business are overly stigmatized. Seventy-one percent agree that in order to succeed professionally people need to take risks, even if that means failing from time to time.

This being France, Pellerin has a budget to combat failure, about $30 million. She plans to spend some of that on a series of events around France aimed at helping some of the 60,000 entrepreneurs who declare bankruptcy every year resuscitate their careers and try again. Through its “Rebound Charter” program, the government will work with four NGOs to organize these events and run coaching sessions, along the lines of FailCon in the U.S.

The rebounding entrepreneurs will also get a boost from the central bank, the Banque de France, which has recently adopted a more forgiving policy toward borrowers who filed for bankruptcy. For decades the bank put a special 040 code next to the names of bankrupt clients in its credit database, accessible by commercial banks and other lenders. But in September the bank abolished this special labeling; today, only fraudulent bankruptcies are still flagged. This is a good start, but it’s only one of a number of measures needed to help entrepreneurs rebound. In France, it can take as long as eight years for a person whose business has been liquidated to be discharged following bankruptcy — the longest time period of any EU country.

Philippe Rambaud is on the forefront of this French debate. He’s a former executive at food company Danone who set up his own business pre-testing products for his former firm and others, in France and the U.S. In 2008, his consultancy failed, the result of the financial crisis but also, he acknowledges, a consequence of some poor investment decisions. Rambaud experienced the “échec” stigma firsthand: when he tried to open a new account after his bankruptcy, his French bank saw the 040 notation and said no. He had to use personal connections to a friendly banker to get around that barrier. He eventually managed to get back on his entrepreneurial feet again, thanks to the loyalty of some former clients, but the experience was a wake-up call. “Failure is a real social problem in France,” he says. “We can’t continue to see it as the end of the adventure, as the result of incompetence.”

Hoping to pass on the lessons he has learned, in 2012 he created an association called 60000 Rebondir (which translates as “Rebound”), a reference to the number of annual bankruptcies in France. It’s one of four organizations throughout France that now host conferences and provide coaching to failed entrepreneurs.

Yet Rambaud says second-chance entrepreneurs are still stymied by a range of regulatory and other obstacles that prevent them from moving forward. He advocates the creation of a sort of unemployment insurance scheme that would help failed entrepreneurs in the immediate aftermath of their bankruptcy. He also thinks that commercial tribunals that oversee bankruptcy proceedings need to be overhauled and become experts at sorting through messy legal, financial and technical questions post-bankruptcy. Most of all, he says, France needs strong role models, business executives who have overcome failure to achieve success. He cites A.G. Lafley, the chief executive officer of Proctor and Gamble, who has spoken publicly about how many decisions turn out to be mistakes — and why that’s good. “I’ve never heard a CEO of a CAC40 company say that,” Rambaud says.

Still, Rambaud does see an evolution in French attitudes. For one thing, these days he is invited to teach classes on failure at leading French business schools. “Three years ago that would have been impossible.”

There are, of course, many other factors that explain why French and other European startups don’t often soar. Funding problems are one important issue. A recent EU report estimated that one in three small companies can’t get the financing it needs. While Europe has a venture capital industry, the average European VC fund is less than half the size of an average fund in the U.S., according to another EU report. And in many European countries, launching an initial public offering of a relatively new tech company is difficult. One successful French tech startup, an online advertising platform called Criteo that was founded in 2005 and now partners with Google, among others, launched its IPO on the NASDAQ last year, rather than stay in Europe.

Bivens, the Paris-based venture capitalist, welcomes the evolving French attitude to failure, although he is uneasy about the government’s role in it all. “It’s not in my DNA to think that government takes the lead in finding the solution,” he says. But he’s heartened to see that at least some of the change is being driven by “rebels and inventors,” who are embracing the global challenge of technological innovation. When he was first warned about talking of his business failures, he says he took the message to heart and held off. But now he’s gone back to discussing the flops openly. It helps to bond with his audiences, he says. Yet more evidence that something may finally be stirring in the land of risk aversion.

PHOTO: French job seeker Alexandre, 24-years-old, works on a laptop in his bedroom at his mother’s home in Pessac near Bordeaux June 17, 2013. REUTERS/Regis Duvignau

11 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

I just read the title and I’m LMFAO!!!!

Posted by tmc | Report as abusive

I just read the title and I’m LMFAO!!!!

Posted by tmc | Report as abusive

There is a fine line between reasonable societal debt forgiveness and the Wild West business bankruptcy laws of the USA. Donald Trump being a perfect example.

How many small businesses has he wounded and killed during his multiple bankruptcies? And he’s considered a business expert. Any fool can screw people, it takes skill to give fair value and service for reasonable compensation.

The West Virginia chemical spill is another warning. 300,000 people in the Kanawha Valley with no water or bad water for weeks and the chemical company that caused it just filed Chapter 11 and the principles will likely never have to pay for what they’ve done.

The French should think twice about relaxing their bankruptcy rules.

Posted by ltcrunch | Report as abusive

Hm… and what exactly made you laughing, tmc?
France – as the country with the lowest GINI coefficient (excluding Scandinavian community nations) – has been going its own way. The French have their mission: they keep trying to develop a society based on the traditional egalitarianism. It is a hard task.
However, France is the leader of the social progress throughout the world.
It deserves respect how they keep their values.
Despite all the troubles in the economy. Which, in fact, are manageable.
So the issue of “failure,” or the issue of “social envy” are important not only for France – but for the whole world.

Posted by OUTPOST2012.NET | Report as abusive

They obviously are not so arrogant that they cannot try to correct a grass roots problem in their country. America, on the other hand would rather you pull their nails out than admit something needs to change…

Posted by BidnisMan | Report as abusive

Just a word of caution to all entrepreneurs thinking of working in France. I have lived here for over ten years and have a great love of France. However, in January 2013 I suffered a major fall needing a serious Knee operation. Because I am self-employed I have only actually earned 1900 Euro in the last 16 months. ( I am currently surviving on 400 Euros pm social benefits ) In april 2013 I received a summons for payment from their RSI ( gov. collector of health charges ) for immediate payment of 1800 Euros in Cotisations ! ! As I was unable to pay this, I wrote back, outlining my situation and asked for a delay, but got No reply. Last month I received a bailiffs notice that they have issued a court order to SEIZE MY CAR ! This is my only vehicle and I need this to regain income again once my recuperation is finished ( expected in April/May ) Only French bureaucracy could issue such a summons, thus condemning me TO REMAIN on social assistance !! This is absolutely insanity ! If any journalist wishes to contact me I will happily provide all documents etc – maybe President Hollande could lend me his scooter !

Posted by homme_anglais | Report as abusive

Honesty? I laughed because of the American stereotyping of the French and how well this supports it. Truly I should not have done so, but still can’t keep the smirk off my face thinking about it no matter how hard I try.

Posted by tmc | Report as abusive

“He had to use personal connections to a friendly banker to get around that barrier. He eventually managed to get back on his entrepreneurial feet again, thanks to the loyalty of some former clients”

This statement highlights another issue for French entrepreneurs (interestingly the word word itself is derived from Old French: entreprendre – to undertake) besides the French attitude toward failure – the outsized role of personal connections and personal loyalty in getting anything done.

Posted by walstir | Report as abusive

So let me get this straight, America celebrates failure because I assume we believe that taking risks is necessary and that it’s not possible for everyone to be successful all the time? But when it comes to the welfare state and the social safety net, we insist on cuts to programs because we suddenly believe that capitalism guarantees success for all?

Posted by delta5297 | Report as abusive

“France Changes Attitude Toward Failure.”

Out of necessity :)

Just kidding. We’ll always love you, France. Thomas Jefferson vouches for you.

Posted by AlkalineState | Report as abusive

There are a couple of issues associated with promoting this change….the first is cultural.

Fear of failure is a cultural trait, and it would optimistically take at least one generation to root that out of the culture. Since WW2,you have two, and potentially a third generation that has operated under a risk-adverse model.

Second, the French would have to modify their tax system, allowing entrepreneurs to keep more of the wealth they created. Third, you have to have a reference point–you cannot say we are going to implement a model similar to Silicon Valley without the appreciation that most start-ups do not last five years. Fourth, where does one secure the risk capital? Does France have an angel-investor community? Do they have venture capital sources that will fund start-ups and risk 100% loss of their capital. Fifth, do you impose the social safety nets on start-ups, starting with the employment laws that make it difficult to modify your employee base to respond to changes in your market? Sixth, it government prepared to get out of the way? Can the entrenched bureaucrats let go?

These may be bigger hurdles than the French citizenry is prepared to endure.

Posted by COindependent | Report as abusive