CLUSTERING ON THE RIVIERA

Despite being launched over 30 years ago, Sophia Antipolis in France doesn't yet have the high profile of other clusters like Silicon Valley in the US and Cambridge in the UK – but that doesn't mean it deserves to be written off.

Conventional wisdom in venture capital circles is that the growth of the life sciences and early-stage technology industries has been aided by the formation of “clusters”, where pools of entrepreneurs and innovators aggregate in regional areas. Venture capital firms will then surely follow, so the theory goes, enticed by the prospect of investing in cuttingedge technology.

Outside the US, the likes of Munich, Stockholm and Tel Aviv are widely regarded as leading clusters for largely technology-related investing, while the university towns of Cambridge and Oxford in the UK are widely viewed as key spawning grounds for life science and IT innovation.

Arguably less well known is Sophia Antipolis, located on the French Riviera between Nice and Cannes, although its mountains, trees and two-story buildings are reminiscent of Silicon Valley's famous landscape. Despite the Riviera's reputation for luxury beach holidays and the Cannes film festival, the region has, for some time, been building its presence as a centre of excellence for business.

Developed as a technology hub by the French local and national governments, and pioneered by Senator Pierre Laffitte who represents the area in the French Senate, Sophia Antipolis is home to more than 300 IT and telecom companies.

While businesses such as NCR, Digital Equipment and IBM in the IT sector and France Telecom and Ericsson in the telecoms field have all launched research centres and projects in the area, a number of start-ups and spin-outs have also been developed and gone on to successfully attract venture capital backing.

One example is Castify, a developer of network infrastructure software systems used in the distribution of rich media content, which was incubated at Eurecom, a communications research centre based in Sophia Antipolis, in 2000. Alta Berkeley, a London- and Geneva-based venture capital firm, led a €5 million ($6.4 million) first-round financing of Castify in 2001.

Hugh Smith, partner and chief operating officer at Alta Berkeley, says his fellow partner Barun Dutta acted as the conduit to Castify through his previous research role at AT&T Bell Labs, where Castify founder Jörg Nonnenmacher was a colleague. Networks of this type are the key to unlocking opportunities and the reason why clusters are so important. “You develop a worldwide network in the tech sector over the years and entrepreneurs speak to other entrepreneurs about who have taken VC money and from whom,” says Smith.

Sofinnova Partners, a French private equity firm, has also benefited from its relationship with Sophia Antipolis. The firm has invested in and exited from a number of telecom start-ups developed in the region, and currently maintains a stake in Quescom, a telephony-over-IP business that has also received venture financing from SPEF Venture, SG Asset Management, BayTech Venture Capital, Cross-Atlantic Ventures and Saffron Hill Ventures.

Olivier Protard, a managing partner at Sofinnova Partners, says that Sophia Antipolis is probably the longest established technology cluster in France. However, along with all other such clusters, it was hit by the tech downturn at the beginning of the decade. “The region attracted many start-ups in the 1990s and the likes of IBM came along to establish research centres and production facilities, but they suffered when the bubble burst. While it is coming back now, it is nothing compared to how productive it was,” reflects Protard. “If you asked me to name a company since 2000 from Sophia Antipolis that's been successful, I couldn't do it.”

The region has also been hampered by the lack of a strong university presence. “What's missing in terms of having a genuine cluster is the breadth and scope of university research,” says Protard. “It's never reached beyond one or two engineering schools and research centres, so you can't compare it with an Oxford or Cambridge – or even Strasbourg or Toulouse.”

Despite this, he adds that there are some promising signs: “Sophia Antipolis is still on the radar for us, even if it's not top in terms of the most attractive region to finance startups. It is doing a lot to attract local and foreign investors with its autumn venture capital summit, which is good for networking and seeing company pitches.”

Given its temperate climate and proximity to the beach, investors in search of relaxation as well as “the next big thing” might be well advised to consider a visit to Sophia Antipolis in the hunt for future IT and telecom stars.