France plans to take advantage of the startup recession to emerge victorious in Europe

Only a major startup ecosystem in Europe saw startups grow more money in 2022 than in 2021 — France. And the French government is keen to keep things that way.

In recent months, the government and its start-up agency La French Tech Mission have launched programs to promote agritech, healthtech, and climatetech startups. State bank Bpifrance is pumping another 500 million euros into deep-tech startups. The government is also looking at other financial reforms that would boost entrepreneurship and investment.

With the prized unicorn count (ranging from 28 to 36 depending on which count you believe in) at risk of slowing down, the government has set new reform-backed targets to see 10 unicorns go public by 2025 on the Stock Exchange in Paris. It is still in the process of deploying €1 billion to create 37,000 cybersecurity jobs and three security unicorns by 2025. And behind it all is a sprawling €54 billion plan called France 2030 to accelerate the technologies that help with environmental transitions while supporting emerging technologies like hydrogen power. and space technology.


It’s a frenzy of government activity unmatched in any other European startup ecosystem, designed to push the nation’s startup machine into even greater speed. While other regions play defense, France is betting on innovation and entrepreneurship as the cornerstone of its future economy and job creation rather than worrying about bailing out its current generation of start-ups.

“I am convinced of the strength of our ecosystem,” says French digital minister Jean-Noël Barrot. “Our entrepreneurs have shown resilience in previous crises… They have the experience to be able to quickly iterate and adapt.”

La Boom Village

Over the past decade, since the creation of the La French Tech initiative, the French government has been one of the most interventionist in Europe in terms of injecting capital into start-ups and developing a wide range of strategies to catalyze its innovation economy.

It has paid big dividends. The amount of funds and the number of new companies created in France has skyrocketed and has put the nation in the top tier of ecosystems in Europe.

According to Dealroom, French startups raised $14.6 billion in 2022, up from $13.5 billion in 2021. That made France the only major European ecosystem to see a funding surge last year, as that the UK and Germany saw sharp drops of more than 20% while the US fundraising fell more than 30%.

President Emmanuel Macron once set himself the wildly ambitious goal of creating 25 unicorns in France by 2025, but the nation surpassed that number last year, three years ahead of schedule.

And yet, a high-five is somewhat muted because those 2022 numbers were boosted by a series of megarounds announced in January 2022, for companies like Exotec, PayFit, Ankorstore, Qonto and Back Market, most of which are likely they closed in 2021 before global. economies began to collapse.

In the second half of 2022, French startups raised just $4.5bn, up from $7.1bn during the same period in 2021. The cash-stage in recent years suddenly dried up.

And yet, there is every reason to believe that the economic hit won’t be as hard on French start-ups as it has been elsewhere.

“In the medium term, there is no reason not to be enthusiastic about the French ecosystem”

In a recent report on the state of the French tech ecosystem, Eurazeo investor Alexandre Dewez noted that only a handful of prominent French start-ups have announced big layoffs in recent months. French venture capital firms raised €4.3bn in 2022, just a hair less than the €4.4bn they closed in 2021, meaning they still have plenty of dry powder to invest. And investments in the seed and Series A stages remain highly competitive, according to Dewez.

“In the medium term, there is no reason not to get excited about the French ecosystem,” he wrote.

Roxanne Varza, director of the Station F campus in Paris, echoes this optimism. Businesses connected to the campus raised almost 1 billion euros in 2022, almost double the previous year.

“Many expect the economy to pick up in the second half,” says Varza. “The early stage was pretty well protected (F station numbers were pretty consistent) all year long. Regardless, I think the ecosystem has been pretty resilient and if H2 is strong, I think the negative impact will be pretty limited.”

Bpifrance cushions the blow

Perhaps most critical to this soft landing, according to Dewez, is the massive role that state-owned bank Bpifrance continues to play in the French startup economy.

Bpifrance oversees investment assets of €44.5bn that it invests directly in startups through a range of its own funds, while it also invests in venture capital firms through a €13.5bn fund of funds. According to Dewez’s research, Bpifrance was directly involved in 107 funding rounds, around 16% of all deals in France and representing around 25% of all money raised in 2022.

However, the percentage of both direct and indirect funding for French start-ups coming from Bpifrance has been steadily falling as French start-ups attract more international investors; one of the main objectives of the organization.

As such, Bpifrance has turned its attention to programs like its €2 billion deep tech initiative to foster science and research-based startups that create products based on breakthrough discoveries. The bank has also been working to reform technology transfer rules while encouraging more universities to support professors who want to become entrepreneurs.

According to Bpifrance statistics, France produced 250 deeptech startups in 2021, up from 150 in 2019. Last October, a new program called French Tech DeepNum20 debuted; a select group of 20 deep tech startups will receive tailored support from La French Tech to help them navigate French red tape, attract talent and expand into international markets.

The 20 companies were selected based on their potential in areas such as space technology, AI, robotics, security and semiconductors. One of the winners, the quantum computing startup PASQAL, has just raised a €100 million funding round that included money from Bpifrance.

“Despite the crisis, or perhaps even because of the crisis, we must prepare for the future and continue to invest”

Earlier this year, Bpifrance announced a further €500m in funding with the goal of creating 500 deep tech startups a year. Paul-François Fournier, senior executive vice president at Bpifrance Innovation, says such investments by the state remain essential for research-based startups that will require a longer horizon to develop products, find a market and become financially sustainable.

“This is a long-term effort to foster a new ecosystem of startups that is even more technology-focused,” he says. “Despite the crisis, or perhaps even because of the crisis, we must prepare for the future and continue to invest.”

Big bets for the future in French technology

That desire to seize the future, rather than stage a retreat in the face of economic headwinds, seems to be the prevailing spirit in France.

With the 2022 start-up fundraising gap closer than ever between France and the longtime European leader the UK, the French government wants to capitalize on its drive to establish a leadership position in critical emerging tech markets of the morning.

French Tech DeepNum20 is just one of a dizzying array of programs supported by the generous France 2030 framework. French Tech Green20 started in 2021. Last July came the first French Tech AGRI20 of agritech startups. In November, the nomination process for the new French Tech Health20 began.

And two weeks ago, Barrot reiterated the government’s support for a five-year plan to rev up France’s esports industry with bigger tournaments, including an esports Olympic Week in 2024.

“This is a long-term effort to foster a new ecosystem of startups that is even more technology-focused”

La French Tech director Clara Chappaz also stressed that this flurry of action was part of a long-term strategy rather than a reaction to falling funding. French entrepreneurs still have a lot of money in the bank from those big funding rounds, she says; they have enough clue to find a path to profitability.

His team is facilitating forums where entrepreneurs and investors can share lessons and advice and find mutual support. One of those discussions focused on how to finance factories and industrial processes, while another focused on mergers and acquisitions. Chappaz says funded startups believe they can use this moment and falling valuations to their advantage by consolidating their markets to expand.

“We stay very close to the businessmen to understand first-hand how the situation is evolving,” he says. “How can we help them navigate this situation? We are supporting them in a way that allows them to learn from each other.”

Still, Macron remains relentless in his quest to turn France into a Startup Nation. To that end, its prime minister recently appointed Paul Midy, a businessman who was elected to the National Assembly last year, to identify more reforms that could boost funding for start-ups in France.

Midy says she has just begun the process of interviewing founders, investors and other economic experts to identify obstacles and brainstorm ideas. This task will also include an online public consultation, as well as the study of strategies adopted by other governments.

For example, Midy and others cited the UK’s Seed Company Investment Scheme (SEIS) as a model they would like to see emulated in France to encourage more people to get involved in investing in start-ups.

The goal is to present these plans in time for the next budget, which is usually presented in September, including ways to offset any incentives that could lower taxes. Midy says that while French start-ups have made great strides in the last decade, more can and should be done to support a sector that remains a crucial job creation engine for the economy.

“The fundraising dynamic is in flux,” says Midy. “That is an additional reason to find the tools to support investment in startups and maintain momentum. Because the most effective way to create jobs, real jobs, is to help create and develop young and innovative companies”.

Chris O’Brien is a Sifted correspondent in France. He tweets from @obrien

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