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A year ago, French billionaire Xavier Niel threw a blockbuster event dedicated to AI in Paris’s iconic startup campus Station F. Dubbed ai-Pulse, the show was an opportunity for Niel to gather fellow billionaires Rodolphe Saadé (CEO of shipping giant CMA CGM) and Eric Schmidt (former Google CEO) to announce a joint €300m investment in Kyutai, a brand-new non-profit AI lab based in the French capital.
The first edition of ai-Pulse carried a palpably febrile atmosphere — it came just a few months after AI darling Mistral raised a €105m seed round and US AI startup Poolside relocated to Paris. The crowd was full of excitable, enthusiastic founders and investors filled with optimism about the future of France’s tech scene. It was a high bar to set.
Yesterday ai-Pulse came back to Station F for a second edition — but with a few degrees less hype.
“We’re not Americans, we can’t get €300m every year,” one founder attending the event told me, laughing.
The event started with a five-minute intro from Niel, which no one heard because of faulty mics — a classic tech conference mishap. The five-star lineup also included speakers from high-profile companies like Dell, Nvidia and Ampere.
Even Charles Kantor, the CEO of ultra-secretive startup H — which recently saw three out of five cofounders leave three months after it raised a $220m seed — took to the stage to share teasers of the company’s product, to be released “very soon”. Spoiler: it’s a cutting-edge technology to create AI agents, with the potential to “disrupt productivity goals” and exploit “huge opportunities”.
Despite this, ai-Pulse 2.0 was undeniably tamer than last year — a mood potentially reflective of the latest trends in the French tech sector.
Sifted data for Q3 this year shows a significant dip in deal count across the country. There were fewer than 100 deals announced between July and September, a quarter-on-quarter drop of more than 45%. The €1.2bn raised across those deals put France way behind the UK (€3bn) and Germany (€2.4bn) in Q3.
“Since the start of September, seeds haven’t been closing,” one VC told me at the event. “Rounds that used to take two weeks are taking months […] people are feeling a bit morose.”
And although the quality of founders is still high, they said, there are fewer deals — while other hubs in Europe, particularly Munich, are stealing the spotlight. Sifted data found that Munich was second in Europe for funding in Q3 — behind London — with startups in the city raising €1.2bn. Berlin followed, and then Paris, with less than €700m raised.
What gives? Another investor told me it could be that founders are adopting a wait-and-see attitude following France’s recent political rollercoaster, which featured a surprise change of government following a snap election called by President Emmanuel Macron in early June.
“Or it could be that the AI bubble is starting to pop,” one VC weighed in.
After months funding AI startups left, right and centre, investors may be starting to look more closely at pitch decks, the same VC told me. “That’s probably for the best, and shows that the quality of VCs is increasing as well.”
One AI founder said this shift is real. The context is still very favourable to AI startups, they said, but whereas two years ago VCs were racing to fund every hot AI company, there is now more scrutiny of business models, commercialisation roadmaps and exit strategies.
With that prism come more questions. “It’s a complicated market,” said this founder. “[AI] companies with huge valuations are currently losing lots of money.”
VCs — I’m interested to hear from you. What questions are you asking AI companies these days? Are you confident that they have the potential to deliver high margins? And is AI a bubble ready to burst after months of euphoria? Send me your thoughts.
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Read the orginal article: https://sifted.eu/articles/is-french-tech-facing-a-lull/
