Alex Dewez, a associate at 20VC, simply launched its extremely anticipated State of the French tech ecosystem report. It is a good followup to Atomico’s State of European Tech report, with a extra granular view on French startups specifically.
As a reminder, the underside line of Atomico’s report is that European startups raised $45 billion in 2024 in comparison with $47 billion in 2023. That quantity is simply down by $2 billion, nevertheless it represents a 50%+ drop in comparison with 2022 numbers.
In France, the overarching themes are kind of related. In accordance with Dewez, with €7.1 billion in enterprise funding in 2024, that metric is barely up in comparison with 2023 (€6.8 billion). Nevertheless, in 2022, French startups raised as a lot as €11.8 billion.
In fact, knowledge on personal firms range from one supply to a different. As an illustration, in line with EY and as reported by Les Échos, enterprise funding is barely down in 2024 in comparison with 2023 (€7.8 billion vs. €8.3 billion).
The underside line is comparable. Enterprise funding is kind of steady yr over yr, with synthetic intelligence representing a much bigger chunk of the full quantity.
There are two methods to take a look at it. The pessimistic take could be that if it weren’t for synthetic intelligence, we’d be in a startup funding slowdown. AI now represents 27% of the full funding quantity in French startups. AI startups have raised 82% more cash in 2024 in comparison with 2023. And non-AI funding is down 11% yr over yr.
The optimistic take is that synthetic intelligence represents the subsequent huge alternative for startups, extra tech funders selecting to give attention to this vertical specifically. It’s potential that some AI founders would have began a non-AI startup in a distinct surroundings. The tech business is made out of porous verticals, with many buyers adopting an opportunistic strategy with none particular funding vertical in thoughts.
On account of these metrics, France continues to be the third-largest tech ecosystem in Europe, behind the U.Okay. and Germany based mostly on whole funding quantities. Nevertheless, as Germany is a extra decentralized nation, Paris is the second European metropolis, forward of Berlin and behind London.
There at the moment are 45 unicorns in France — though a few of them are solely unicorns on paper and may not maintain that label for lengthy. Three new startups joined the group in 2024 — accounting software program startup Pennylane, enterprise planning platform Pigment and AI-powered software program dev software Poolside.
2024 has additionally been a yr of large-scale bankruptcies. Some firms which were in bother embrace Ynsect, Cubyn, Masteos, Luko and Cityscoot. The altering macroeconomic panorama has made it tougher to boost progress rounds with no robust monetary efficiency to justify the funding.
Along with Poolside, different promising AI startups based mostly in France embrace basis mannequin maker Mistral AI, AI-based drug discovery firms Owkin and Aqemia, in addition to AI purposes PhotoRoom and Mud.
Dewez believes there are a handful of late-stage firms that may very well be able to go public as a result of they generate greater than $300 million in annual recurring income, develop by 20 to 30% yr over yr, and are worthwhile or about to develop into worthwhile. Corporations that tick all these containers embrace Again Market, Dataiku, Doctolib, Qonto and Content material Sq..
And but, identical to within the U.Okay., France stays a tepid market with regards to IPOs. Most French tech firms are prone to take into account itemizing their firms within the U.S. However that feels like a troublesome process for firms that don’t have already got clients within the U.S. (Doctolib and Qonto, as an example).
On the subject of exits, whereas the full variety of exits is down 14% yr over yr, Dewez believes that the full exit quantity has remained steady for the previous three years, hovering round €12 billion.
One final attention-grabbing tidbit that may very well be worrisome for the subsequent wave of startup founders, U.Okay. funds have been investing at a decrease tempo in French startups. It’s going to be attention-grabbing to see if this pattern could have wider implications for the general well being of the French tech ecosystems within the coming years.
