Sifted’s ranking of France’s top 50 fastest-growing companies has arrived and B2B SaaS, climate and fintech companies dominate.
it’s been a catchup story for France, which not so long ago many were tempted to write off as a tech backwater. Here’s how the startup scene grew from modest beginnings and closed the gap with Germany and the UK.
A decade of growth
Fleur Pellerin, France’s former minister for innovation, SMBs and the digital economy recalls a standout moment when she realised something big was happening in French-tech.
It was January 2014, and she and a delegation of 90 French startups landed at the Consumer Electronics Show (CES) in Las Vegas. It was the largest French delegation to attend CES — and the first time a French minister made an appearance there.
“People noticed that we came with a big delegation,” Pellerin tells Sifted. “We were used to a lot of French-bashing in the press, but this time we had positive coverage about France’s business environment, even in English-speaking media.”
“It really made an impression.”
We were used to a lot of French-bashing in the press, but this time we had positive coverage
Since that CES debut, France’s tech sector has grown at an unprecedented rate. In 2023, French startups raised €9.5bn in VC funding — nearly 10 times the amount raised in 2013. While still behind the UK, which leads Europe with £16.3bn raised in 2023, France has held the second spot in Europe for two years, surpassing Germany’s €7.3bn last year.
The country now boasts dozens of billion-dollar companies like fintech Qonto, healthtech Alan and ridesharing app Blablacar. In the past two years it’s also seen the launch of high-profile AI startups, such as Mistral, as France strives to establish itself as a European leader in the sector.
“Things are radically different now [compared to 2012-13],” says Pellerin. “When you see examples like Mistral… it shows that it’s possible for very talented people, backed by the best investors in the world, to stay in France.”
it’s possible for very talented people, backed by the best investors in the world, to stay in France.
Building the “Startup Nation”
In 2013, Pellerin launched the French Tech Mission, marking the first time the ecosystem had a distinct brand. French tech was still small and mostly local, but the government soon implemented reforms to encourage growth — including a more attractive taxation system for capital gains when selling company shares, and extending the scope of existing tax breaks for R&D-intensive small businesses.
The next big shift came in 2017 when Emmanuel Macron was elected President. This was a “turning point,” says Jérémy Uzan, the cofounder of Paris-based VC Singular. Within months, Macron set out to make France the next “startup nation” and began to introduce pro-business reforms to reduce barriers and encourage tech investment.
Macron’s key changes included a reformed wealth tax in 2018 to boost investment in French companies, and a reduction of corporate tax from 33% to 25% between 2017 and 2022.
He also created the French Tech Visa to attract international tech talent and launched the €54bn France 2030 program, aimed at funding the climate and technology transitions — with much of this investment supporting innovative startups.
The Bpifrance powerhouse
No coverage of France’s startup evolution would be complete without a nod to the public bank Bpifrance, created at the end of 2012. The organisation — which is considered a key pillar of pro-startup government action — was given the mission to fund and develop French businesses with a focus on innovation.
The strategy? “Volume,” says Paul François Fournier, Bpifrance’s executive director of innovation.
For the past ten years, Bpifrance has been pumping money into thousands of French startups. Throughout 2023, the bank made €677m of equity investments — about 10% of total VC funding for French startups that year. But the monster share of capital deployed comes from loans and subsidies, which in 2023 amounted to nearly €4bn.
Bpifrance combines this with selective investments in VC funds. And Fournier says the strategy is paying off: “We are building our ecosystem,” he says.
“It took some time, but we’ve started to see in the past few years that it is working. The number of startups we fund has multiplied by four or five [since 2013].”
The number of startups we fund has multiplied by four or five [since 2013].
Fournier says that the bank’s focus on volume doesn’t necessarily mean that it overlooks the quality of the companies it backs — a criticism often voiced by some, especially international investors. “I think volume enables the system to progress,” he says.
Creating an attractive ecosystem
In the last decade, France has built up a network of support to make startups feel at home. A major landmark was the opening of Station F in Paris in 2017. Funded by billionaire Xavier Niel, the 35k sq m space is the world’s largest startup hub — a powerful symbol of the country’s tech ambitions.
With a more favourable environment for startups, building a tech company in the country has become an appealing choice.
Shivani Shah, founder of deeptech startup Samp, chose to start her business in Paris after four years of study in the city. Originally from India, Shah says that the smooth process of securing a French Tech Visa and strong government support were key reasons she stayed.
Shah points to a government programme called “Jeune Docteur” (young doctor), that enables startups recruiting PhD researchers for R&D to recover the cost of employment for up to two years thanks to tax credits.
“I thought a lot about whether to stay in France or go to the US,” she says. “But things kicked off here, we had a good team and clients, so it made sense to pursue the opportunities we had.”
This shift is bringing talent back to France, too. AI healthtech Nabla was founded in 2018 in Paris by Alexandre Lebrun, who previously worked for Meta in the US; in 2022, Gabriel Hubert and Stanislas Polu launched Gen AI company Dust in the French capital, after spending five years working for Stripe in Silicon Valley.
Today, France counts 15k startups — a 60% increase since 2016.
And foreign investors have noticed. Over the past few years, international VCs like Balderton, Atomico, and Lightspeed have expanded their teams in Paris.
Austrian VC Speedinvest opened a Paris office in 2022, growing its French portfolio from just three companies in 2017 to 30 today, making France one of its largest markets alongside the UK and Germany.
“Five years ago, we were not really active in Paris,” says Speedinvest Partner Andreas Schwarzenbrunner. “That has changed massively for us… We can see that Paris is now the number one spot for US investors to go to in Europe — even more so than Germany at the moment.”
Paris is now the number one spot for US investors to go to in Europe — even more so than Germany
An inspired generation
Alongside government policy and startup networks, a cultural change is underway in France — one which is shifting talent towards entrepreneurship.
“When I went to [French business school] ESSEC in 1991-94, no one in my class was saying ‘I’m going to launch my own company’,” says Pellerin. “People wanted to get into banking or audit.”
“There’s been a real change of mentality.”
The entrepreneurial renaissance was kicked into gear by the first generation of successful tech startups that have emerged in the last decade, including AI unicorn Dataiku, founded in 2013, and search platform Algolia, which launched in 2012.
These success stories have shown that French startups can not only succeed locally but also scale globally
“These success stories have shown that French startups can not only succeed locally but also scale globally, inspiring and showing the way to a new generation of entrepreneurs,” says Singular’s Uzan.
This has been especially visible in the last two years, with the launch of a number of buzzy Gen AI startups in France. They include Mistral, which was created in 2023 in Paris and raised more than €1bn in less than a year; and H, another Paris-HQed AI company, which closed a €220m seed round this year.
Growth challenges ahead
The French tech ecosystem has come a long way since 201 but it still has a number of obstacles to overcome, including access to growth funding from French investors.
In a 2019 government report, French economist Philippe Midy identified the lack of large-scale growth funds in France as one of the main obstacles to the development of startups in the country.
The situation has improved since, with VCs like Eurazeo raising a €1.6bn growth fund in 2021, and Partech announcing a €650m fund that same year — but these remain exceptions.
Capital-intensive scaleups like Mistral have to turn to international investors in order to close larger rounds. The AI company’s €468m Series B, which it raised earlier this year, was led by US VC General Catalyst.
Pellerin, who launched growth fund Korelya in 2016, says that compared to 2012 — “where most French VCs could not follow on rounds of more than €30m” — the situation has improved.
“We were coming from so far behind, that even though we aren’t there yet, at least we’re going in the right direction,” she says.
The local capital markets are still catching up in terms of supporting large tech IPOs
Even so, Pellerin says a lack of exit opportunities is a bigger challenge for French startups.
“We don’t have Googles and Microsofts with deep pockets that can acquire companies that are valued at €1bn, €10bn or €20bn,” she says.
And European public markets do not offer a viable alternative solution to the lack of M&A opportunities.
“The local capital markets are still catching up in terms of supporting large tech IPOs, so many French companies look to international stock exchanges to go public,” says Singular’s Uzan.
Pellerin says that, as a growth investor, this is a major issue.
“At growth, we’re supposed to invest with a liquidity horizon,” she says. “Without that, we can’t invest.”
“The fact that liquidity is so hard when companies are very mature and valued at more than €1bn is very problematic.”
Read the orginal article: https://sifted.eu/articles/french-tech-boom-origin/
