Alex Dewez, a companion at 20VC, simply launched its extremely anticipated State of the French tech ecosystem report. This can be a good followup to Atomico’s State of European Tech report, with a extra granular view on French startups particularly.
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 just down by $2 billion, nevertheless it represents a 50%+ drop in comparison with 2022 numbers.
In France, the overarching themes are roughly comparable. 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). Nonetheless, in 2022, French startups raised as a lot as €11.8 billion.
After all, knowledge on non-public corporations differ from one supply to a different. For example, based on 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 secure 12 months over 12 months, with synthetic intelligence representing a much bigger chunk of the entire quantity.
There are two methods to have a look at it. The pessimistic take could be that if it weren’t for synthetic intelligence, we might be in a startup funding slowdown. AI now represents 27% of the entire 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% 12 months over 12 months.
The optimistic take is that synthetic intelligence represents the subsequent huge alternative for startups, extra tech funders selecting to deal with this vertical particularly. It’s potential that some AI founders would have began a non-AI startup in a unique atmosphere. The tech trade is made out of porous verticals, with many traders adopting an opportunistic strategy with none particular funding vertical in thoughts.
Because of these metrics, France continues to be the third-largest tech ecosystem in Europe, behind the U.Ok. and Germany based mostly on whole funding quantities. Nonetheless, as Germany is a extra decentralized nation, Paris is the second European metropolis, forward of Berlin and behind London.
There are actually 45 unicorns in France — though a few of them are solely unicorns on paper and won’t 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 instrument Poolside.
2024 has additionally been a 12 months of large-scale bankruptcies. Some corporations which have been in bother embody Ynsect, Cubyn, Masteos, Luko and Cityscoot. The altering macroeconomic panorama has made it more durable to boost progress rounds with out a robust monetary efficiency to justify the funding.
Along with Poolside, different promising AI startups based mostly in France embody basis mannequin maker Mistral AI, AI-based drug discovery corporations Owkin and Aqemia, in addition to AI functions PhotoRoom and Mud.
Dewez believes there are a handful of late-stage corporations that might be able to go public as a result of they generate greater than $300 million in annual recurring income, develop by 20 to 30% 12 months over 12 months, and are worthwhile or about to grow to be worthwhile. Corporations that tick all these containers embody Again Market, Dataiku, Doctolib, Qonto and Content material Sq..
And but, identical to within the U.Ok., France stays a tepid market in terms of IPOs. Most French tech corporations are more likely to think about itemizing their corporations within the U.S. However that feels like a troublesome activity for corporations that don’t have already got prospects within the U.S. (Doctolib and Qonto, for example).
On the subject of exits, whereas the entire variety of exits is down 14% 12 months over 12 months, Dewez believes that the entire exit quantity has remained secure for the previous three years, hovering round €12 billion.
One final attention-grabbing tidbit that might be worrisome for the subsequent wave of startup founders, U.Ok. funds have been investing at a decrease tempo in French startups. It’s going to be attention-grabbing to see if this pattern may have wider implications for the general well being of the French tech ecosystems within the coming years.
