Venture funding remains steady thanks to AI startups in France

Alex Dewesa partner 20VCjust released the highly anticipated The state of the French tech ecosystem report. This is a great sequel to Atomico State of European Technology report, with a more detailed look at French startups in particular.

Recall that the bottom line of Atomico’s report is that European startups raised $45 billion in 2024 against $47 billion in 2023. That number is only down $2 billion, but that’s a 50%+ drop from . 2022 numbers.

In France, the main themes are more or less similar. According to Dewez, with 7.1 billion euros in venture funding in 2024, this figure is slightly higher than in 2023 (6.8 billion euros). However, French startups raised up to 11.8 billion euros in 2022.

Of course, information about private companies varies from one source to another. For example, according to EY and as reported Echoesventure funding slightly decreased in 2024 compared to 2023 (8.3 billion euros vs. 7.8 billion euros).

The bottom line is similar. Venture funding is more or less stable from year to year, with AI representing a larger portion of the total.

There are two ways to look at it. A pessimistic view would be that if it weren’t for AI, we would face a slowdown in startup funding. AI now accounts for 27% of total funding in French startups. AI startups raised 82% more money in 2024 than in 2023. Non-AI funding was down 11% year-on-year.

An optimistic approach is that artificial intelligence represents the next big opportunity for startups, especially with more tech financiers choosing to focus on this vertical. It’s possible that some AI creators started a non-AI startup in a different environment. The technology industry is composed of porous verticals, with many investors taking an opportunistic approach without any particular investment vertical in mind.

As a result of these indicators, France is still the third largest tech ecosystem in Europe, behind the UK and Germany, in terms of total funding amounts. However, because Germany is a more decentralized country, Paris is the second European city ahead of Berlin and after London.

There are currently 45 unicorns in France – although some of them are unicorns only on paper and may not hold that label for long. In 2024, three new startups joined the group — accounting software startups Pennylanebusiness planning platform Pigment and a software tool powered by artificial intelligence Poolside.

2024 was also the 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 scale up periods of growth without strong financial performance to justify investment.

Besides Poolside, other promising AI startups based in France include a foundational model maker Mistral AIAI-based drug discovery companies Okin and Akemiaas well as AI applications Photoroom and dust.

Dewez believes there are several late-stage companies that may be ready to go public because they generate more than $300 million in annual revenue, grow 20-30% year-over-year, and are profitable or about to become profitable. Companies that tick all these boxes include Back Market, Dataiku, Doctolib, Gonto and Content Square.

Still, like the UK, France remains a lukewarm market when it comes to IPOs. Most French tech companies are probably considering listing their company in the US, but it sounds like a difficult task for companies that don’t have US customers (like Doctolib and Gonto).

As for exits, although the total number of exits fell by 14% year-on-year, Dewez estimates that the total amount of exits has remained stable over the past three years at around €12 billion.

One last piece of interesting news that may be worrying for the next wave of startup founders is that UK funds are investing in French startups at a lower rate. It will be interesting to see if this trend has wider implications for the overall health of French tech ecosystems in the coming years.