👋 We begin 2024 with a look back at 2023, which may be best remembered in French Techland as the Year That Could Have Sucked Worse. But suck it did.
French startups raised €8.3 billion in 2023, down 38% from 2022 as the number of deals fell 3%, according to the annual EY barometer. Yes, every ecosystem is being punched in the face. 🥊 But for France – which was the rare country to see an increase in startup funding in 2022 – this is the first annual drop since at least 2018. A belated dose of reality for an ecosystem that seemed to only know ever-greater heights of euphoria.
Bankruptcies soared. Startups unable to raise their next round of capital were sold at firesale prices. Fintech funding plunged 80%, a brutal comedown for this once beloved sector. So many startups are in such a precarious state that a group of startup financial advisors called on the government late last year to take more urgent action to support them. When it comes to the outlook for 2024, let us turn to startup oracle Mr. T:
There were some reasons for hope amid the wreckage. GreenTech received the most funding (€2.7 billion) in 2023, primed by the €850 million bagged by lithium-battery startup Verkor.
And you may have heard that it was a gonzo year for GenAI, where France had a fair bit to boast about. That included a stupefying €385 million early-stage round for Mistral AI, France's great GenAI hope. There was also the new AI institute backed with €300 million from Xavier Niel, among others.
On the VC side of the ledger, France was one of just two European countries that had more fund closings in 2023 than 2022, and one of only 3 that had more fund value closed last year.
So, there are some legit reasons for optimism, even as there is still plenty of, ahem, stuff to be flushed through the system. Between the two extremes, France's innovation economy is likely to experience serious recalibration and come out the other side of this year transformed.
Meanwhile, in our first newsletter of 2024:
- Deep Dive: French VC firm Elaia announced a surprising new partnership with financial global giant Lazard to create a new Growth Equity fund. We look at how the deal came together and the implications.
- Spotlight Interview: Diversidays CEO Anthony Babkine talks about his association's fight for greater diversity and inclusion in the French tech ecosystem.
- The Big Deals: Electra, Scalinx, Enyo Pharma, Nabla & more.
🤝 ⬆️ If startup funding was down compared to last year, exits were up with a 7% increase in French Tech mergers and acquisitions. Large corporations accounted for the majority of buyouts, far ahead of investment firms, whereas IPOs only accounted for 4 of the 405 recorded deals.
🤑 ↔️ It's good to be the king, or at least a former Digital Minister. The previous holder of that position is Cédric O who joined the scorching-hot Mistral AI with a €176 investment last year. With that big fundraising noted above, he recently confirmed selling shares worth just shy of €1m, according to Bloomberg. It was a strategic move to accommodate new investors while staying actively involved with the latest French unicorn. Estimated value of his remaining shares: €23m. 🦄 🇫🇷
✈️ ↔️ French President Emmanuel Macron took 10 top tech startups to this week's World Economic Forum in Davos (15-19 January). Among them are Mistral AI, Dust, Giskard, Verkor, Pasqal, and Qubit Pharmaceuticals. Les Echos notes that since the start of his second term, there has been a notable increase in the President being accompanied by the French Tech during his travels. Who said chickens (or, in the case of French Tech, roosters) can't fly? 🐓
📱 ⬇️ CES Attendance by French startups was down from 200 to 135 this year, reports Maddyness. A noteworthy decline given that CES actively courts French Tech startups, even organizing an annual CES night in Paris and sponsoring an event at last year's France Digitale Day. 💅
🧑💻 🙅 ⬇️ Over the past 18 months, French startups have been scaling back through workforce reductions – Back Market (-13%), Payfit (-20%), OpenClassrooms (-25%) etc. Managers and Excom members included. According to data from Figures, the number of directors and vice-presidents decreased by 5% in 2023 in the French Tech. 🧳
🥷 ⬇️ Despite facing significant internal challenges, cloud computing startup Shadow still plans to compete with Google Workspace and Microsoft Office365 with the launch of Synfonium - the result of Shadow's integration with Qwant. A few key recruitments will be needed first after the General Director responsible for implementing the strategy exited the company alongside its Coms and HR directors and other employees following a year marked by disappointing financial results, according to L'Informé. 📉
The Deep Dive: Can Elaia And Lazard Build A Growth Equity Giant?
While most people in the tech sector were quietly winding down in mid-December for the holidays, Elaia decided to uncork one last seismic news bomb. One of France's OG VC funds announced a surprising partnership with global financial giant Lazard to create a Growth Equity Fund of "several hundreds of millions."
While the deal has not been finalized, the new Lazard-Elaia fund will represent an ambitious attempt to address the Growth Equity Gap that stands as one of Europe's major weaknesses.
"We have a lot of ambition," said François-Marc Durand, CEO of the company's Lazard Frères Gestion. "It cannot be a small fund. We need to target something big. I mean hundreds of millions of euros. To do that, we need two things. We need the know-how of investing and the contacts in the industry. Elaia has that. And we need investor networking and marketing, which is what Lazard brings."
Spotlight Interview: Diversidays CEO Anthony Babkine
Diversidays is a non-profit that focuses on promoting diversity and opportunity across the French tech ecosystem. Since its founding, Diversidays has become an influential force in a nation that struggles to address issues of representation. The association takes a broad view of its mission, addressing discrimination by age, gender, race, disabilities, social status, and educational background.
“We will have a big problem because by 2030 the tech ecosystem will be the first employer in France and Europe,” Babkine said. “Tech companies have a huge responsibility to change the way they behave and recruit."
International Investor Spotlight
Who: RTP Global
What: A global investment firm, very active in Europe
Where: New York, Bangalore, Dubai, London and Paris
Founder: Canadian entrepreneur, Leonid Boguslavsky
Investor type: VC, Seed to Series B
N° of funds: 5
Amount under management: $3 billion
N° of portfolio companies: 115
Sectors of interest: SaaS & fintech
Notable French investments: Datadog, Qonto & Prima
Pitch the French team here: Louis Dussart
The Big Deals
🔥 The €304 million Mega Deal: Electra
What: Paris-based manufacturer of fast-charging EV stations.
Why: To remove all barriers to the adoption of electric cars by deploying the most efficient network of fast-charging stations in Europe and making charging EVs as easy as filling up the petrol tank.
Funding: €304 million
Investors: PGGM (Dutch pension fund), Bpifrance, Eurazeo Infrastructure, Serena, Rive Private Investment, 574 Invest (investment branch of the national rail company SNCF).
What's next: This staggering Series B round will go to consolidating Electra's position by deploying 2,200 stations across the 8 European countries in which they are present— representing 15k charging points — by 2030.
What: Scalinx, a manufacturer of signal conversion and processing chips for antennas.
Why: To enable analog-to-digital and digital-to-analog conversion of wide-band signals with low power consumption for wired and wireless communications, test and measurement equipment, and radars.
Funding: €34 million
Who: Founder & CEO, Hussein Fakhoury
Investors: Thales, Go Capital, Bpifrance, WaterStart Capital, Normandie Participations, BNP Paribas Développement, Unexo
What's next: This new round of funding will enable the company to develop cutting-edge system-on-chip (SoC) solutions and expand its customer base.
What: Vulkam, a Deeptech company that develops amorphous metals (metallic glasses) known as "Vulkalloys®".
Why: To create unparalleled micro-mechanical parts, for use in industrial and medical equipment
Funding: €34 million (of which €14 m equity)
Who: Founder & President, Sébastien Gravier
Investors: SEB industrial group & Bpifrance
What's Next: Vulkam will use the fresh funds to finance the 2025 operational launch of its first factory located in Isère and dedicated to the production of its new metals.
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