by Just one main startup ecosystem in Europe noticed startups elevate extra cash in 2022 than in 2021 — France. And the French authorities very a lot needs to maintain issues that approach.
Over the previous few months, the authorities and its startup company La French Tech Mission have launched programmes to promote agritech, healthtech and local weather tech startups. The state financial institution Bpifrance is pumping another €500m into deeptech startups. The authorities can also be wanting into additional monetary reforms that will enhance entrepreneurship and funding.
With the cherished unicorn rely (ranging from 28 to 36 relying on whose tally you consider) susceptible to slowing, the authorities has set new targets backed by reforms to see 10 unicorns go public by 2025 on the Paris Stock Exchange. It’s nonetheless in the means of deploying €1bn to create 37k cybersecurity jobs and three safety unicorns by 2025. And underlying all of this can be a sprawling €54bn plan dubbed France 2030 to speed up applied sciences that assist with environmental transitions whereas supporting rising applied sciences like hydrogen energy and spacetech.
Phew.
It’s a frenzy of presidency exercise unmatched in some other European startup ecosystem, designed to kick the nation’s startup machine into an excellent greater gear. As different areas play defence, France is betting on innovation and entrepreneurship to be the cornerstone of its future financial system and job creation moderately than worrying about bailing out its present technology of startups.
“I’m satisfied of the solidity of our ecosystem,” says French digital minister Jean-Noël Barrot. “Our entrepreneurs have proven resilience in earlier crises… They have the expertise to have the ability to iterate rapidly and adapt.”
La Boom Town
Over the previous decade, since the creation of La French Tech initiative, the French authorities has been considered one of the most interventionist in Europe in phrases of injecting capital into startups and creating a variety of methods to catalyse its innovation financial system.
It’s paid large dividends. The quantity of funding and the variety of startups created in France has soared and positioned the nation in Europe’s top tier of ecosystems.
According to Dealroom, French startups raised $14.6bn in 2022, up from $13.5bn in 2021. That made France the solely main European ecosystem to see a funding enhance final 12 months, as the UK and Germany noticed sharp drops of greater than 20% whereas US fundraising fell more than 30%.
President Emmanuel Macron had as soon as set a wildly formidable purpose of making 25 unicorns in France by 2025, however the nation raced previous that quantity final 12 months — three years forward of schedule.
And but, the excessive fives are considerably muted as a result of these 2022 figures have been juiced by a string of megarounds announced in January 2022 — for companies like Exotec, PayFit, Ankorstore, Qonto, and Back Market — most of which have been doubtless closed in 2021 earlier than world economies started to tank.
In the second half of 2022, French startups raised solely $4.5bn, down from $7.1bn throughout the identical interval in 2021. As was the case throughout the globe, non-traditional buyers reminiscent of PE corporations that had flooded startups with huge quantities of late-stage money in latest years all of a sudden dried up.
And but, there are many causes to consider that the financial blow won’t fall as arduous on French startups because it has elsewhere.
“In the mid-term, there isn’t any purpose not to be obsessed with the French ecosystem”
In a latest State of the French Tech Ecosystem report, Eurazeo investor Alexandre Dewez famous that solely a handful of outstanding French scaleups have introduced giant layoffs in latest months. French VC corporations raised €4.3bn in 2022, only a hair lower than the €4.4bn closed in 2021, which means they nonetheless have a number of dry powder to make investments. And investments at the seed and Series A levels stay extremely aggressive, in accordance to Dewez.
“In the mid-term, there isn’t any purpose not to be obsessed with the French ecosystem,” he wrote.
Roxanne Varza, director of Parisian startup campus Station F, echoes this optimism. Companies linked to the campus raised nearly €1bn in 2022 — about double the earlier 12 months.
“Many expect the financial system to bounce again in the second semester,” Varza says. “Early stage was fairly nicely protected (Station F numbers have been fairly constant) all through the 12 months. Regardless, I believe the ecosystem has been fairly resistant and if H2 is robust, I believe the unfavorable influence shall be fairly restricted.”
Bpifrance cushions the blow
Perhaps most crucial to this gentle touchdown, in accordance to Dewez, is the huge function that state financial institution Bpifrance continues to play in the French startup financial system.
Bpifrance oversees funding belongings of €44.5bn that it instantly invests in startups by means of a spread of its personal funds, whereas additionally investing in VC corporations by means of a €13.5bn fund of funds. According to Dewez’s analysis, Bpifrance instantly participated in 107 funding rounds — about 16% of the whole offers in France and representing about 25% of all cash raised in 2022.
The proportion of each direct and oblique funding for French startups that comes from Bpifrance has, nevertheless, been steadily falling as French startups entice extra worldwide buyers; considered one of the organisation’s main targets.
As such, Bpifrance has been turning its consideration to programmes like its €2bn deeptech initiative to encourage science and research-based startups that create merchandise primarily based on breakthrough discoveries. The financial institution has additionally been working to reform tech switch guidelines whereas encouraging extra universities to assist college members who need to turn into entrepreneurs.
According to Bpifrance’s statistics, France produced 250 deeptech startups in 2021, up from 150 in 2019. Last October, a brand new programme known as French Tech DeepNum20 debuted; a choose group of 20 deeptech startups will obtain bespoke assist from La French Tech to assist them navigate French forms, entice expertise and increase into worldwide markets.
The 20 corporations have been chosen primarily based on their potential in areas reminiscent of spacetech, AI, robotics, safety and semiconductors. One of the laureates, quantum computing startup PASQAL, just raised a €100m round of funding that included cash from Bpifrance.
“Despite the disaster, or even perhaps due to the disaster, we should put together for the future and proceed to make investments”
Earlier this 12 months, Bpifrance introduced one other €500m in funding with a purpose of making 500 deeptech startups yearly. Paul-François Fournier, senior govt vp for Bpifrance Innovation, says such investments by the state stay important for research-based startups that may require an extended horizon to develop merchandise, discover a market and turn into financially sustainable.
“This is a long-term effort to encourage a brand new ecosystem of startups that’s much more tech-focused,” he says. “Despite the disaster, or even perhaps due to the disaster, we should put together for the future and proceed to make investments.”
Big future bets on French tech
That need to seize the future, moderately than stage a retreat in the face of financial headwinds, appears to be the prevailing spirit in France.
With the startup fundraising hole in 2022 nearer than ever between France and the UK — the longtime European chief — the French authorities needs to capitalise on its momentum to set up a management place in the important rising tech markets of tomorrow.
The French Tech DeepNum20 is only one of a dizzying array of programmes supported by the beneficiant France 2030 framework. French Tech Green20 started in 2021. Last July got here the first French Tech AGRI20 of agritech startups. In November, the nomination course of started for the new French Tech Health20.
And two weeks in the past, Barrot reiterated the government’s support for a five-year plan to speed up France’s esports business with larger tournaments, together with an Olympic Esports Week in 2024.
“This is a long-term effort to encourage a brand new ecosystem of startups that’s much more tech-focused”
La French Tech director Clara Chappaz additionally emphasised that this flurry of motion was a part of a long-term technique moderately than a response to the funding downturn. French entrepreneurs nonetheless have some huge cash in the financial institution from these large funding rounds, she says; they’ve enough runway to discover a path to profitability.
Her staff is facilitating boards the place entrepreneurs and buyers can share classes and recommendation and discover mutual assist. One such dialogue targeted on how to finance factories and industrial processes, whereas one other targeted on M&A. Chappaz says startups with financing consider they’ll use this second and the drop in valuations to their benefit by consolidating their markets to increase.
“We’re staying very shut to the entrepreneurs to perceive firsthand how the scenario is evolving,” she says. “How can we assist them navigate this case? We’re supporting them in a approach that allows them to study from one another.”
Still, Macron stays relentless in his pursuit of turning France right into a Startup Nation. To that finish, his prime minister just lately appointed Paul Midy, an entrepreneur who was elected to the National Assembly final 12 months, to determine additional reforms that would enhance startup funding in France.
Midy says he has simply begun the means of interviewing founders, buyers and different financial specialists to determine roadblocks and generate concepts. That activity may even embody a public on-line session in addition to finding out methods adopted by different governments.
For occasion, Midy and others cited the UK’s Seed Enterprise Investment Scheme (SEIS) as a mannequin they want to see France emulate to encourage extra people to take part in startup funding.
The purpose is to current these plans in time for the subsequent price range, which is usually submitted in September, together with methods to offset any incentives which may scale back taxes. Midy says that regardless that French startups have made large strides over the previous decade, extra can and ought to be performed to assist a sector that is still an important job creation engine for the financial system.
“The fundraising dynamic is in the course of of fixing,” Midy says. “That’s an extra purpose to discover the instruments to assist funding in startups and to sustain the momentum. Because the handiest approach to create jobs, actual jobs, is to assist younger, progressive corporations to be created and to develop.”
Chris O’Brien is a Sifted correspondent primarily based in France. He tweets from @obrien
