The French government likes social media — so much so that the country’s sovereign wealth fund has invested 10 million euros in an online network.
Viadeo, a company based in Paris that bills itself as the world’s second-largest social network for professionals, after LinkedIn, said Thursday that it had secured 24 million euros ($31.6 million) in new financing in what analysts described as the biggest investment ever in a European social network.
One of the new investors is a fund set up by the government of President Nicolas Sarkozy two years ago to buy strategic stakes in French companies, supporting their development — and, in some cases, to try to keep them out of foreign hands.
Governments across Europe are growing more active in their efforts to nurture technology start-ups, seeing them as one of the best hopes for producing economic growth. But usually these steps take the form of tax breaks or other financial incentives; it is unusual for public funds to take direct ownership stakes.
Except in France, that is. The government wealth fund, the Fonds Stratégique d’Investissement, has made 2.5 billion euros worth of investments in French technology groups, in giant companies like Groupe Bull but also in Internet firms like Dailymotion, a video-sharing service, and Skyrock, a blogging platform.
“The digital industry is among the leading sectors in France in terms of value added and employment,” said Jean d’Arthuys, a member of the executive committee of the fund, known as F.S.I., calling Viadeo a “French Internet champion.”
Viadeo said the new money would be used to finance its expansion in international markets. With 45 million members, Viadeo is less than a third the size of LinkedIn, the biggest global player in the business of connecting job seekers and headhunters via the Internet.
But Viadeo says it is the biggest player in France, as well as in China, where it claims 10 million members. It has also been expanding in India, Africa and other developing economies.
“These markets are now exploding for us,” Dan Serfaty, chief executive and a founder of Viadeo, said. “The market is there, but you need this kind of cash when you want to expand.”
Many European Internet companies, even those that have been successful in their domestic markets, have found it difficult to grow internationally. A number of French start-ups, including PriceMinister, an e-commerce business, and SeLoger, a real estate site, have been acquired by foreign companies, feeding concerns about France’s ability to hold its ground in the digital world.
Before the investment announced Tuesday, there were fears in France that Viadeo might also fall into the hands of foreign owners, or leave the country. In fact, Mr. Serfaty and the other founder, Thierry Lunati, had already moved their personal offices to Silicon Valley two years ago, while keeping Viadeo’s headquarters and much of the research and development operation in France. Mr. Serfaty has since moved again, to Beijing, where the company’s Chinese subsidiary, Tianji, is based.
Viadeo employs about 400 people worldwide, half of them in France. Mr. Serfaty said the new round of financing would allow the company to double its work force, with a “proportionate” number of those jobs being created in France.
He said there was no quid pro quo that Viadeo would stay in France in return for the investment from the strategic fund, but added: “I think it was important for them.”
“Companies that are based in France, with employees in France, with job offers in France, that’s something they looked at,” Mr. Serfaty said.
The 24 million euro investment also includes new money from Allianz, the German insurer, and Jefferies, the American investment bank.
By the standards of Silicon Valley, where Facebook has just agreed to buy Instagram for $1 billion, 24 million euros might not sound like much. But it is a sizable sum in the world of French start-ups, where Viadeo has raised less than 50 million euros over all since it was founded in 2004.
“There have been some very successful French Internet businesses, but they’ve been quite domestic businesses,” said Benjamin Robertson, a managing director at Jefferies. “Viadeo is one of the few that has managed to successfully internationalize on the back of its domestic position.”
The sovereign fund’s stake was not disclosed, but Mr. Serfaty said institutional investors, including the fund, would own less than a third of the company. The fund will, however, get a seat on Viadeo’s board.
Some wonder whether the freewheeling culture of a start-up could continue to thrive amid the scrutiny of a buttoned-down civil servant.
This concern was raised in 2009, when the F.S.I. invested 7.5 million euros in Dailymotion, France’s answer to YouTube. Dailymotion has continued to grow, but it has been swallowed up by another company with ties to the French government, France Télécom.
Last year, France Télécom, the former state-owned monopoly, reached an agreement to acquire 49 percent of Dailymotion in a deal that gave it the right to eventually take full ownership.
Mr. Serfaty said the plan for Viadeo was to sell stock to the public, perhaps two or three years from now. The company considered an initial public offering of shares last year but decided against it.
He said the company, which has been profitable since 2009, had spoken with a number of sovereign wealth funds but chose the F.S.I. in part because it had made a long-term commitment.
“What we liked with F.S.I. was this idea of anchoring Viadeo in Europe,” he said. “Having a long-term investor with deep pockets — we thought that could be very useful for us, with what we plan in the coming years.”