Alex Dewez, a partner at 20VC, has unveiled the much-anticipated State of the French Tech Ecosystem report. This serves as a valuable follow-up to Atomico’s State of European Tech report, providing a more detailed analysis of French startups specifically.
To recap, Atomico’s report reveals that European startups secured $45 billion in funding during 2024, a slight decrease from $47 billion in 2023. While this reduction is only $2 billion, it reflects a staggering drop of over 50% compared to the figures from 2022.
In France, the overarching trends remain quite consistent. Dewez highlights that €7.1 billion was raised in venture capital in 2024, up from €6.8 billion in 2023. Nonetheless, this figure is significantly lower than the €11.8 billion raised by French startups in 2022.
It is important to note that data regarding private companies can vary by source. For example, according to EY and reported by Les Échos, venture funding has slightly dropped in 2024 compared to 2023, with figures showing €7.8 billion versus €8.3 billion.
Overall, the venture funding landscape appears stable year on year, with artificial intelligence commanding a larger share of the total funding.
There are two perspectives to consider. The pessimistic view suggests that without the influence of artificial intelligence, the startup funding landscape would have experienced a slowdown. AI now accounts for 27% of total funding for French startups, with AI-focused ventures raising 82% more in 2024 compared to 2023, while funding for non-AI-based startups has decreased by 11% year on year.
Conversely, the optimistic view posits that artificial intelligence represents a significant future opportunity for startups. More technology investors are honing in on this sector. It is possible that some founders who are now focused on AI would have pursued non-AI startups in a different market context, as the tech ecosystem comprises interlinked verticals, with many investors taking an opportunistic stance without a designated investment focus.
Consequently, France maintains its position as the third-largest tech ecosystem in Europe, following the U.K. and Germany based on overall funding. However, as Germany features a more decentralised structure, Paris stands as the second-largest city for tech funding in Europe, surpassing Berlin but trailing behind London.
Currently, France is home to 45 unicorns, though some may not retain their status for long. Three new startups entered this elite group in 2024: the accounting software company Pennylane, the business planning platform Pigment, and the AI-driven software development tool Poolside.
The year 2024 has also been marked by significant bankruptcies. Notable companies facing challenges include Ynsect, Cubyn, Masteos, Luko, and Cityscoot. The evolving macroeconomic landscape has made it increasingly difficult for firms to raise growth financing without demonstrating robust financial performance to attract investment.
In addition to Poolside, other promising AI startups in France include foundation model developer Mistral AI, AI-based drug discovery firms Owkin and Aqemia, alongside AI applications like PhotoRoom and Dust.
Dewez highlights that a select number of late-stage companies could be on the verge of going public, as they report over $300 million in annual recurring revenue, experience growth between 20 to 30% each year, and are currently profitable or nearing profitability. Notable companies meeting these criteria include Back Market, Dataiku, Doctolib, Qonto, and Content Square.
However, similar to the situation in the U.K., France’s marketplace for IPOs remains somewhat lacklustre. Many French tech firms appear inclined to pursue listings in the U.S., which poses considerable challenges for businesses that lack an established customer base in that region (such as Doctolib and Qonto).
Regarding exits, although the overall count of exits has decreased by 14% compared to the previous year, Dewez suggests that the total value of these exits has remained consistent over the last three years, stabilising around €12 billion.
Finally, an intriguing and potentially concerning trend for future startup founders is that U.K. investment funds are investing at a diminished rate in French startups. Observing whether this shift affects the overall vitality of the French tech ecosystem in the years ahead will be captivating.