Alex Dewez, a associate at 20VC, simply launched its extremely anticipated State of the French tech ecosystem report. This is a pleasant 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 barely down by $2 billion, however it represents a 50%+ drop in comparison with 2022 numbers.
In France, the overarching themes are kind of related. According to Dewez, with €7.1 billion in enterprise funding in 2024, that metric is barely up in comparison with 2023 (€6.8 billion). However, in 2022, French startups raised as a lot as €11.8 billion.
Of course, information on personal firms fluctuate from one supply to a different. For occasion, 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 backside line is comparable. Venture funding is kind of secure 12 months over 12 months, with synthetic intelligence representing an even bigger chunk of the whole quantity.
There are two methods to take a look at it. The pessimistic take can be that if it weren’t for synthetic intelligence, we might be in a startup funding slowdown. AI now represents 27% of the whole 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 concentrate on this vertical specifically. It’s potential that some AI founders would have began a non-AI startup in a special setting. The tech business is made out of porous verticals, with many traders adopting an opportunistic method with none particular funding vertical in thoughts.
As a results of these metrics, France continues to be the third-largest tech ecosystem in Europe, behind the U.Okay. and Germany primarily based on whole funding quantities. However, 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 won’t hold 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 device Poolside.
2024 has additionally been a 12 months 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 lift development rounds and not using a sturdy monetary efficiency to justify the funding.
In addition to Poolside, different promising AI startups primarily based in France embrace basis mannequin maker Mistral AI, AI-based drug discovery firms Owkin and Aqemia, in addition to AI functions PhotoRoom and Dust.
Dewez believes there are a handful of late-stage firms 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 turn out to be worthwhile. Companies that tick all these bins embrace Back Market, Dataiku, Doctolib, Qonto and Content Square.
And but, identical to within the U.Okay., France stays a tepid market in relation to IPOs. Most French tech firms are more likely to contemplate itemizing their firms within the U.S. But that feels like a tough process for firms that don’t have already got clients within the U.S. (Doctolib and Qonto, for example).
When it involves exits, whereas the whole variety of exits is down 14% 12 months over 12 months, Dewez believes that the whole exit quantity has remained secure for the previous three years, hovering round €12 billion.
One final fascinating tidbit that might 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 fascinating to see if this pattern could have wider implications for the general well being of the French tech ecosystems within the coming years.
