Alex Dewespartner in 20 VCthe long awaited has just been released State of the French tech ecosystem report. This is a nice follow-up to Atomico’s State of European Tech report, with a more detailed view specifically on French startups.
We remind you that the conclusion of Atomico’s report is that European startups raised $45 billion in 2024 compared to $47 billion in 2023. This figure has only decreased by $2 billion, but represents a 50%+ drop compared to 2022 numbers.
In France, the general themes are more or less similar. According to Dewez, with €7.1 billion in business funding in 2024, this metric is slightly up compared to 2023 (€6.8 billion). However, in 2022, French startups raised up to €11.8 billion.
Of course, the figures for private companies vary from one source to another. For example, according to EY and as it states Les Echosventure funding is slightly down in 2024 compared to 2023 (€7.8 billion vs. €8.3 billion).
The essence is similar. Venture funding is more or less flat from year to year, with AI accounting for a larger portion of the total.
There are two ways to look at it. The pessimistic view would be that if it weren’t for AI, we’d be in for a slowdown in startup funding. AI now accounts for 27% of the total amount of funding 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 bullish view is that AI represents the next big opportunity for startups, with more tech funders choosing to focus on this industry in particular. It’s possible that some AI founders would have launched a non-AI startup in a different environment. The tech industry is made up of porous verticals, with many investors taking an opportunistic approach without any particular investment vertical in mind.
As a result of these metrics, France is still the third largest tech ecosystem in Europe, behind the UK 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 may not hold that label for long. Three new startups joined the fold in 2024 — accounting software startup Pennylane, business planning platform Pigment and AI-powered software development tool Poolside.
2024 was also a year of large-scale bankruptcies. Some companies that have experienced problems are Ynsect, Cubyn, Masteos, Luko and Cityscoot. The changing macroeconomic landscape has made it more difficult to raise development rounds without a strong financial return to justify the investment.
In addition to Poolside, other promising French-based AI startups include foundation model maker Mistral AI, AI-based drug discovery companies Okkin and Aqemia, as well as AI apps PhotoRoom and Dust.
Dewez believes there are few late-stage companies that could be ready to go public because they generate more than $300 million in annual recurring revenue, are growing 20 to 30 percent year-over-year, and are profitable or about to become profitable . Companies that tick all these boxes include Back Market, Dataiku, Doctolib, Qonto and Content Square.
And yet, like the UK, France remains a lukewarm market when it comes to IPOs. Most French tech companies are likely to consider listing their companies in the US, but that sounds like a tall order for companies that don’t already have US customers (for example, Doctolib and Qonto).
In terms of exits, while the total number of exits is down 14% year-on-year, Dewez believes the total amount of exits has remained stable over the past three years, hovering around €12 billion.
One last interesting fact that could be worrying for the next wave of startup founders, British funds are investing at a lower rate in French startups. It will be interesting to see if this trend has wider implications for the overall health of French tech ecosystems in the coming years.
