Jan 14, 2025

4:21 AM PST · January 14, 2025 Alex Dewez , a partner at 20VC , just released its highly anticipated State of the French tech ecosystem report. This is a nice followup to Atomico’s State of European Tech report, with a more granular view on French startups in particular. As a reminder, the bottom line of Atomico’s report is that European startups raised $45 billion in 2024 compared to $47 billion in 2023. That number is only down by $2 billion, but it represents a 50%+ drop compared to 2022 numbers . In France, the overarching themes are more or less similar. According to Dewez, with €7.1 billion in venture funding in 2024, that metric is slightly up compared to 2023 (€6.8 billion). However, in 2022, French startups raised as much as €11.8 billion. Of course, data on private companies vary from one source to another. For instance, according to EY and as reported by Les Échos , venture funding is slightly down in 2024 compared to 2023 (€7.8 billion vs. €8.3 billion). The bottom line is similar. Venture funding is more or less stable year over year, with artificial intelligence representing a bigger chunk of the total amount. There are two ways to look at it. The pessimistic take would be that if it weren’t for artificial intelligence, we would be in a startup funding slowdown. AI now represents 27% of the total funding amount in French startups. AI startups have raised 82% more money in 2024 compared to 2023. And non-AI funding is down 11% year over year. The optimistic take is that artificial intelligence represents the next big opportunity for startups, more tech funders choosing to focus on this vertical in particular. It’s possible that some AI founders would have started a non-AI startup in a different environment. The tech industry is made out of porous verticals, with many investors adopting an opportunistic approach without any specific investment vertical in mind. As a result of those metrics, France is still the third-largest tech ecosystem in Europe, behind the U.K. and Germany based on total funding amounts. However, as Germany is a more decentralized country, Paris is the second European city, ahead of Berlin and behind London. There are now 45 unicorns in France — although some of them are only unicorns on paper and might not keep that label for long. Three new startups joined the group in 2024 — accounting software startup Pennylane , business planning platform Pigment and AI-powered software dev tool Poolside . 2024 has also been a year of large-scale bankruptcies. Some companies that have been in trouble include Ynsect, Cubyn, Masteos, Luko and Cityscoot. The changing macroeconomic landscape has made it harder to raise growth rounds without a strong financial performance to justify the investment. In addition to Poolside, other promising AI startups based in France include foundation model maker Mistral AI , AI-based drug discovery companies Owkin and Aqemia , as well as AI applications PhotoRoom and Dust . Dewez believes there are a handful of late-stage companies that could be ready to go public because they generate more than $300 million in annual recurring revenue, grow by 20 to 30% year over year, and are profitable or about to become profitable. Companies that tick all those boxes include Back Market, Dataiku, Doctolib, Qonto and Content Square. And yet, just like in the U.K., France remains a tepid market when it comes to IPOs. Most French tech companies are likely to consider listing their companies in the U.S. But that sounds like a difficult task for companies that don’t already have customers in the U.S. (Doctolib and Qonto, for instance). When it comes to exits, while the total number of exits is down 14% year over year, Dewez believes that the total exit amount has remained stable for the past three years, hovering around €12 billion. One last interesting tidbit that could be worrisome for the next wave of startup founders, U.K. funds have been investing at a lower pace in French startups. It’s going to be interesting to see if this trend will have wider implications for the overall health of the French tech ecosystems in the coming years. Topics