In a world where the amount of venture capital dedicated to start ups appears to be dwindling, France appears to be bucking the trend.
In 2022, about €13.5 billion (£11.5 billion) of venture capital was raised for French startups, an increase of 17% compared to the year before, according to EY.
It’s true that venture capital raised in other territories dwarfs this sum: the US raised around $240bn (£190bn) in 2022, while the UK – the second most capital-intensive venture capital market in the world – raised £22bn. But these sums were around 30% to 40% down on the previous year.
France has 25,000 start-ups, creating 1.1 million jobs overall, and it has exceeded its own goals — While President Macron set a target of 25 tech unicorns by 2025; it has already created 30.
The publicly-funded initiative, La French Tech, which launched over a decade ago, is supporting this ecosystem by promoting and hosting French startups both within its campus in Paris, and internationally.
Since 2019, its programme, ‘French Tech Next 40/ 120’ has done as it says – taking on 120 of the most promising French tech startups of the year which are then whittled down to the ‘Next 40’.
According to La French Tech in 2022 the combined revenue of the companies in this programme is €11.3 billion.
“We did studies to understand how they impact the economy,” explains Clara Chappaz, director of La French Tech, “and for every job they created, about five indirect jobs were [also] created.”
According to the org’s stats, three out of five French people use a service provided by a French Tech Next40/120 startup at least once a month, including firms such as Lydia, a digital banking app, and carpooling platform BlaBlaCar.
Lowering tax rates
While Chappaz says that the French government has been very committed to the startup ecosystem, it took pressure from the industry to support it.
In 2013, the then-French President, Francois Hollande, controversially decided to tax capital gain at 75% above €1 million, to which entrepreneurs and investors challenged.
Since then, Chappaz details the French government’s plans to cater to its “entrepreneurial DNA,” and has taken steps to build the startup ecosystem and support innovators.
For example, the state-backed bank BPI France announced last year that it is investing €50 million into accelerating the launch of startups in generative AI. Plus, more broadly, the bank injected €67 billion into the country’s economy in 2022, through investments, loans, and more, and has financed over 15,700 new businesses.
The government also lowered corporate tax from 33.3% to 25%, making steps to attract new talent to the country.
“There was this idea that we can’t create an ecosystem that is going to be as big as we’d wish if we’re focused mostly on France, because [while] France is a big market, it’s 60 million people, it’s not big enough to create tech giants.”
So, France created a helpdesk called “Welcome to France” to support those who want to join the ecosystem settle in, and also issued a French Tech Visa to welcome international investors and founders, that is valid for four years.
Bonjour la technologie
According to Chappaz the government wants to ensure that it is as attractive for tech startups as it can be, creating a French Tech Mission in 2013. The idea: to join entrepreneurs, investors, and the state as one community to boost the country’s tech startup ecosystem.
While reporting to France’s directorate-general for enterprise, La French Tech works out of a campus in Paris. This campus, ‘Station F’, hosts startups, investors, researchers, public services and international visitors, all under one roof.
Clara Chappaz, director of La French Tech
Backed by BPI France, the startups within the campus can receive on-site support such as assistance in taxation policies, regulations, and visa procedures as well as other administrative tasks through meetings and weekly masterclasses.
And, for La French Tech, the proximity to the startups allows them to understand what hurdles are holding up the startups and where it can help them.
As we speak in Lisbon, at Web Summit, La French Tech also supports startups from around the world and helps with international growth, too.
Unicorns galore
Ten years on from its launch, La French Tech now boasts 6,000 startups from over 50 countries.
Startups that are now valued at more than $1 billion include Ecovadis, an ESG ratings platform and PayFit, a SaaS payroll and human resource management tool.
Other startups of note include Innovafeed, which specialises in insect breeding for animal and plant feed, and Playplay which describes itself as ‘Canva for video creation in business’.
La French Tech is currently focused on deep tech, according to Chappaz. Currently, nine out of the 30 unicorns in France are deeptech startups, and the future is looking to only increase in this space, she adds.
Its ‘future technology’ initiative, French Tech 2030 includes startup Pasqal, which designs quantum computer and U-Space, which aims to provide customers with a turnkey service based on next-generation modular nanosatellites.
It’s also supporting agritech startup Agridor which claims to be working on a technology to replace insecticides and reduce crop damage, and, Kiro – a startup focused on developing AI solutions “to fasten the development of drugs.”
The next ten
Three-quarters of CEOs in France will now say that it is easy to create a business in their country, according to a study conducted by La French Tech.
“I think we are way beyond the stage where entrepreneurs were like: we want to start a company, but we’re European so we need to go to the US,” says Chappaz. “A lot of entrepreneurs now are saying it’s easier for them to stay and launch their business in Europe.”
The same survey also found that 82% of startup respondents saw AI as an opportunity, and about 24% were starting to explore opportunities in quantum.
“Paris has become kind of the centre of AI,” Chappaz adds, with US big tech firms opening research labs in the capital, too.
For La French Tech, keeping the momentum of gaining more public funding is their next challenge – which they are tackling through initiatives that encourage private and public firms to double their purchases.
