Project funding remains stable in France thanks to AI startups

Alex DeWeesepartner in 20VCwas just released which was highly anticipated The state of the French technology ecosystem a report. This is a nice follow up to Atomico State of European technology report, with a more detailed look at 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. This number is only down by $2 billion, but it represents a 50%+ decline compared to $2 billion. 2022 numbers.

In France, the overarching themes are somewhat similar. According to DeWeese, with €7.1 billion of venture funding in 2024, this metric is slightly high compared to 2023 (€6.8 billion). However, in 2022, French startups raised as much as 11.8 billion euros.

Of course, data on private companies varies from one source to another. For example, as reported by EY and as reported Why Echo?project financing decreased slightly in 2024 compared to 2023 (€7.8 billion versus €8.3 billion).

The bottom line is similar. Project funding is fairly stable year-on-year, with AI accounting for a larger portion of the total amount.

There are two ways to look at it. The pessimistic view would be that without AI, we would be in a slowdown in startup funding. AI now represents 27% of the total amount of funding in French startups. AI startups raised 82% more money in 2024 than in 2023. Non-AI funding fell 11% year over year.

The optimistic view is that A.I represents The next big opportunity for startups, as more technology financiers choose to focus on this sector in particular. Some AI founders may have started a non-AI startup in a different environment. The technology industry consists of vertical sectors that are easy to penetrate, with many investors adopting an opportunistic approach without any specific investment vertical in mind.

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

There are now 45 rhinos in France – although some are just unicorns on paper and may not hold that designation for long. Three new startups joined the group in 2024 – accounting software startups PenyleneBusiness planning platform Pigment And an AI-powered software development tool Next to the pool.

2024 was also a year of widespread bankruptcies. Some of the companies that have been in trouble include Ynsect, Cubyn, Masteos, Luko and Cityscoot. The changing macroeconomic landscape has made it difficult to ramp up growth rounds without strong financial performance to justify the investment.

In addition to Poolside, there are other promising AI startups based in France, including the basic model maker Mistral AIAI-based drug discovery companies OKIN and AkmeyaIn addition to artificial intelligence applications Photo room and soil.

DeWeese believes there are a 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% year over year, and are profitable or about to become profitable. Companies that check all of these boxes include Back Market, Dataiku, Doctolib, Qonto, and Content Square.

However, as in the UK, France remains a tepid market when it comes to IPOs. Most French tech companies would likely consider listing their companies in the US, but this seems a difficult task for companies that do not already have US clients (Doctolib and Qonto, for example).

When it comes to exits, while the total number of exits is down 14% year-on-year, DeWeese believes the total amount of exits has remained stable over the past three years, hovering around €12 billion.

One final interesting piece of information, which may be worrying for the next wave of startup founders, is that British funds are investing less frequently in French startups. It will be interesting to see whether this trend will have broader implications for the overall health of French tech ecosystems in the coming years.