Startups raised funding in only one of Europe’s leading startup ecosystems more Money in 2022 over 2021 — France. And the French government really wants to keep things that way.
Over the past few months, the government and its startup agency, La French Tech Mission, have launched a program to promote agritech, healthtech and climate tech startups. His Bpifrance, a state-owned bank, has also put €500 million into deep tech startups. The government is also considering further financial reforms to boost entrepreneurship and investment.
At the risk of a slowdown in the number of cherished unicorns (ranging from 28 to 36, depending on which tally you believe), the government has announced a reform to list 10 unicorns on the Paris Stock Exchange by 2025. We set new goals backed by We are still deploying €1 billion to create 37,000 cybersecurity jobs and 3 security unicorns by 2025. Underlying all of this is a huge €54 billion plan called France 2030 to accelerate technologies that support the environmental transition while supporting emerging technologies such as hydrogen energy. and space tech.
This is a government mania that is unmatched in any other European startup ecosystem and is designed to further accelerate the country’s startup machine. While other regions make their defenses, France is betting that innovation and entrepreneurship will be the cornerstones of its future economy and job creation, rather than worrying about bailing out the current generation of startups.
Jean-Noël Barraud, France’s Digital Minister, said: “We are confident that our ecosystem is solid. “Our entrepreneurs have shown resilience in previous crises.. They have the experience to iterate and adapt quickly.”
Over the past decade, since the creation of the La French Tech initiative, the French government has been one of Europe’s most interventionist when it comes to developing a range of strategies to inject capital into startups and boost the innovation economy. .
It paid big dividends. The amount of funding and the number of startups created in France soared, placing the country in the top tier of the European ecosystem.
French startups raised $14.6 billion in 2022, up from $13.5 billion in 2021, according to Dealroom. This makes France the only major ecosystem in Europe to see increased funding last year. Funding he has decreased by more than 30%.
President Emmanuel Macron once set a very ambitious goal of creating 25 unicorn companies in France by 2025, but the country beat that number last year, three years ahead of schedule. rice field.
Still, the high fives are somewhat modest as the 2022 numbers were boosted by a series of mega rounds announced in January 2022 for companies like Exotec, PayFit, Ankorstore, Qonto and Back Market. The economy began to decline.
In the second half of 2022, French startups raised just $4.5 billion, up from $7.1 billion in the same period in 2021. -The stage cache in recent years suddenly dried up.
That said, there are many reasons to believe that the economic hit will not be as severe for French start-ups as elsewhere.
“In the medium term, there is no reason not to be enthusiastic about the French ecosystem.”
Eurazeo investor Alexandre Dewez pointed out in a recent State of the French Tech Ecosystem report that only a handful of high-profile French scale-ups have announced massive job cuts in recent months. bottom. His VC firm in France raised €4.3 billion in 2022, which is slightly less than his €4.4 billion he completed in 2021. Also, according to Dewez, seed and series A stage investments are still very competitive.
“In the medium term, there is no reason not to be enthusiastic about the French ecosystem,” he wrote.
Roxanne Varza, director of Paris startup campus Station F, echoes this optimism. Campus-connected companies have raised nearly €1 billion in 2022. This is almost double from the previous year.
“Many people expect the economy to pick up in the second trimester,” Varza said. “The early stages were fairly well protected throughout the year (station F numbers were fairly consistent). I think.”
Bpifrance softens the blow
Perhaps most important to this soft landing, according to Dewez, is the large role state bank Bpifrance continues to play in France’s startup economy.
Bpifrance oversees €44.5bn of investment assets and invests directly in startups through various proprietary funds, as well as in VC firms through €13.5bn of funds of funds. Bpifrance participated directly in 107 funding rounds, according to Dewez research. This represents around 16% of total transactions in France, equivalent to around 25% of all funds raised in 2022.
However, as French startups attract more international investors, the proportion of direct and indirect funding to French startups from Bpifrance has been steadily declining. One of the main goals of an organization.
That is why Bpifrance is eyeing programs like the €2 billion Deep Tech initiative, which encourages science and research-based startups to create products based on breakthrough discoveries. The bank has also worked to reform technology transfer rules, while lobbying more universities to support faculty who want to become entrepreneurs.
According to Bpifrance statistics, France has created 250 deep tech startups in 2021, up from 150 in 2019. Last October, a new program debuted called French Tech DeepNum20. A group of 20 selected deep tech startups will receive bespoke support from La French Tech to help them navigate the French bureaucracy, 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 his winners, quantum computing startup PASQAL, has raised his €100m funding, including from Bpifrance.
“Despite, or perhaps because of, the crisis, we must prepare for the future and continue to invest.”
Earlier this year, Bpifrance announced another €500 million in funding, with the goal of creating 500 deep tech startups each year. Paul-François Fournier, senior executive vice president of Bpifrance Innovation, said the state’s decision to invest in research-based startups, which need longer time frames to develop products, find markets, and become financially sustainable. Such investments remain important, he said.
“This is a long-term effort to foster a new ecosystem of more technology-focused startups,” he says. “Despite, or perhaps because of, the crisis, we must prepare for the future and continue to invest.”
Big future bets on French technology
The desire to seize the future rather than retreat in the face of economic headwinds seems to be the prevailing spirit in France.
With the 2022 startup funding gap closer than ever between France and the UK (longtime European leaders), the French government is using the momentum to seek leadership in key emerging tech markets of the future. I would like to establish a position in
French Tech DeepNum20 is just one of a dizzying array of programs supported by the generous French 2030 Framework. French Tech Green20 started in 2021. Last July, the first French Tech AGRI20 for agtech startups was held. In November, the nomination process for the new French Tech Health20 began.
And two weeks ago, Barrot reiterated its government support for a five-year plan to accelerate the French esports industry with bigger tournaments, including the 2024 Olympic Esports Week.
“This is a long-term effort to foster a new ecosystem of more technology-focused startups.”
Clara Chappaz, Director of La French Tech, also emphasized that this course of action is part of a long-term strategy, not a response to a downturn in funding. The French entrepreneur still has a lot of money in the bank from these big funding rounds, she said. They have enough runways to find their way to profitability.
Her team facilitates forums where entrepreneurs and investors can share lessons, advice, and find mutual support. One of her such discussions focused on how to finance factories and industrial processes, while another focused on her M&A. Fundraising startups believe they can take advantage of this moment and declining valuations by consolidating and expanding their markets, Chapas said.
“We are very close to entrepreneurs to get a first-hand understanding of how things are changing,” she says. “How can we help them get through this situation? We are supporting them in ways they can learn from each other.”
Yet Mr Macron is relentless in his quest to turn France into a startup nation. To that end, his prime minister recently appointed entrepreneur Paul Midi, who was elected to the National Assembly last year, to identify further reforms that could boost start-up funding in France.
Midy says he’s just started the process of interviewing founders, investors, and other economists to identify roadblocks and generate ideas. Its tasks also include online public consultations and research into strategies adopted by other governments.
For example, Midy et al. cite the UK’s Seed Enterprise Investment Scheme (SEIS) as a model and hope France will follow suit and encourage more individuals to participate in startup investment.
The goal is to present these plans in time for the next budget, which is usually submitted in September. This includes ways to offset incentives that may reduce taxes. Midy said French start-ups have made great strides over the past decade, but much more could be done to support a sector that remains a key job creation engine for the economy. He said it should be done again.
“Fundraising dynamics are in the process of changing,” says Midy. “This is another reason to find tools to support startup investments and maintain momentum. Because the most effective way to create jobs, real jobs, is for young, innovative companies to It is to help you to be born and to develop.”
Chris O’Brien is a Sifted correspondent based in France.he tweets from @O’Brien