Venture funding remains stable in France thanks to AI startups

Alex DeweysA partner 20VCJust its highly anticipated release The state of the French tech ecosystem Report This is an excellent follow-up to Atomico State of European Technology 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, up from $47 billion in 2023. That number is only down $2 billion, but it represents a 50%+ reduction 2022 number.

In France, the overarching themes are more or less the same. With €7.1 billion in venture funding in 2024, that metric is up slightly from 2023 (€6.8 billion), according to Dewez. However, in 2022, French startups raised 11.8 billion euros.

Of course, information on private companies varies from one source to another. For example, according to EY and reported by the echoVenture funding is slightly lower in 2024 than in 2023 (€7.8 billion vs. €8.3 billion).

Similar to the bottom line. Venture funding remains more or less stable over the years, with artificial intelligence representing a large portion of the total.

There are two ways of looking at it. The pessimistic take would be that if it weren’t for artificial intelligence, we’d be in a startup funding slump. AI now represents 27% of the total amount of funding in French startups. AI startups raised 82% more funding in 2024 than in 2023 And non-AI funds are down 11% year over year

Optimistic take on artificial intelligence represents The next big opportunity for startups, more tech funders are choosing to focus specifically on this vertical. It is possible that some AI founders started a non-AI startup in a different environment. As the tech industry is made up of porous verticals, many investors take an opportunistic approach without a specific investment vertical in mind.

As a result of these metrics, France still has the third largest technology ecosystem in Europe, behind the UK and Germany based on total funding volume. However, because Germany is a more decentralized country, Paris is the second European city, ahead of Berlin and behind London.

France now has 45 unicorns – although some of them are unicorns only on paper and may not hold that label for long. Three new startups joined the group in 2024 – accounting software startups PennylaneBusiness planning platform pigment and AI-powered software dev tools By the pool.

2024 has also been a year of large-scale bankruptcies. Some of the companies in trouble include Ynsect, Cubyn, Masteos, Luko and Cityscoot. The changing macroeconomic landscape has made it difficult to extend growth rounds without a strong financial performance to justify investment.

Besides Poolside, other promising AI startups based in France include Foundation Model Maker Mistral AIAI-based drug discovery company okin And Akemiaas well as AI applications photo room And the 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 20 to 30% a year and are profitable or on track to be profitable. Companies that tick all these boxes include Back Market, DataEqu, DocLib, Conto and Content Square.

And yet, like the UK, France remains a weak market for IPOs. Most French technology companies may consider listing their companies in the US, but this seems to be a difficult task for companies that do not already have customers in the US (for example Doctolib and Conto).

When it comes to exits, although the total number of exits is down 14% year-on-year, Dewez believes that the total amount of exits has remained stable over the past three years, at around 12 billion euros.

One last interesting tidbit that may be of concern to the next wave of startup founders, is that UK funds are investing at a slower pace in French startups. It will be interesting to see if this trend has wider implications for the overall health of the French tech ecosystem in the coming years.