The Digital Diplomats: Is France Still an Innovation Nation in 2025?

Intro: Each month, the Digital Diplomats cut through the clichés about the Silicon Valley and French approach to innovation to bring a clear analysis of a major tech story or trend that reveals the relative strengths and weaknesses of each ecosystem. Our goal is to give entrepreneurs the perspective they need to succeed in both markets.

The Digital Diplomats are:

Marjolaine Catil, an Investment Director at Newfund, a VC firm based in Paris and Silicon Valley. She leads Newfund’s “Road to the USA” initiative for French entrepreneurs considering U.S. expansion. 

Chris O’Brien, a Silicon Valley veteran journalist who is the founder and editor of The French Tech Journal newsletter.

The Dialogue: Is France Still an Innovation Nation in 2025?

Chris: Marjolaine, it feels like we’re at a pivotal moment for tech. Donald Trump wants to create a “Startup Nation” in the US while President Macron’s efforts to do that in France may be running out of steam. Does any of that matter to a French entrepreneur? 

Marjolaine: It’s critical for founders to understand the forces which will influence their development. But we need to look beyond stereotypes that can mislead them.

Chris: Right. There's this common perception that France is all about heavy-handed government intervention, while the U.S. is the epitome of laissez-faire capitalism. But, as we know, it's more complicated than that. 

Cliché: The French expect the government to play a strong role in the economy

Marjolaine: France's state-directed economic planning has been a defining feature since the 17th century. But I think the French government has struggled to adapt to a modern privatized and global economy. This has resulted in a paradoxical approach to innovation.

France is aggressively funding innovation, trying to foster the next generation of global players. The €54 billion France 2030 plan, Bpifrance’s €4.5 billion investment in tech, and the CIR tax credit program (€7 billion annually) are meant to drive entrepreneurship.

Yet at the same time, France positions itself as a regulatory counterweight to U.S. tech dominance, imposing strict measures on GAFAM that also creates barriers for homegrown startups, making it difficult to scale at the same pace as their American counterparts.

Chris: Those innovation programs have made a significant impact. But has the government been so supportive that it lowered the perceived risk of starting a company? There was a record high of 65,000 startup bankruptcies in France in 2024. Now the government is considering budget cuts by doing away with tax breaks for early-stage innovative companies. 

Marjolaine: The government has merely postponed the inevitable failure of some startups through the Covid loans, the “PGE.” Launching a startup is inherently risky; true government support lies in enabling rapid recovery, not in artificially sustaining businesses that lack product-market fit. 

The French government still has progress to make in defining the right regulations to truly support startups. However, we should acknowledge one positive cultural shift fostered by Macron’s startup initiatives: the French are now more willing to take risks. The data is striking—25% of engineering students now aspire to join startups rather than pursue traditional careers. New institutions like the Albert School are also emerging, offering an innovative blend of business and data science skills. Despite the recent downturn in startup funding, France's tech ecosystem has reached a certain level of maturity. We now have 15,000 startups with many coming from deep research centers (INRIA, CNRS, CEA), a large community of serial entrepreneurs and investors.

The key question is no longer about the sustainability of French startup culture, but rather: will our most ambitious entrepreneurs choose to launch their startups in France or directly head to the US?

Cliché: Americans are anti-government and view it as a barrier to the economy

Marjolaine: America seems to be more appealing than ever to tech entrepreneurs, particularly in AI. Trump's Davos speech outlined a clear strategy: massive deregulation, dedicated AI infrastructure (doubling US energy capacity), increased tariffs, and significant private sector commitments like the Stargate plan.

Chris: What’s fascinating to me is that while this tech government lovefest in the U.S. feels new, it’s not. Having spent 15 years in Silicon Valley, I would agree that it’s a place like no other. Its ability to adapt is unmatched anywhere. Whether it was the internet, social media, mobile, and now AI, Silicon Valley has found a way to dominate. Of course, VCs and founders believe this is entirely due to their entrepreneurial talent, and that fosters the belief that they just wanted the government to leave them alone and let them do their thing.

But the reality is that the U.S. tech sector has always had a relationship with the government, particularly through the military. I recommend reading Steve Blank’s “Secret History of Silicon Valley” for anyone unfamiliar with this history. Now, with emerging technologies like AI, we're seeing an even bigger shift toward rethinking this relationship with the government.

Marjolaine: How do you see that relationship evolving in the U.S.?

Chris: Despite Trump’s criticism of the CHIPS Act, he is likely to push funding out faster and reduce the red tape around these infrastructure projects. The DOGE program being led by Elon Musk wants to accelerate the digital transformation of government, which would be a huge windfall for Silicon Valley. We're also seeing that some of the biggest tech players are now actively trying to shape government policies in areas like crypto. Silicon Valley wants the government to play a stronger role in tech – but what they see to be the right role.  

Marjolaine: You’re right. A striking example is the campaign against Katie Porter, a Democratic candidate perceived as anti-crypto, who was targeted by a massive media offensive by Fairshake, leading to her defeat in the California Senate primary last year. In his article "Silicon Valley, the New Lobbying Monster," Charles Duhigg portrayed how the tech industry is a dominant political powerhouse with internal cultural battles. Marc Andreessen, the co-founder of Andreessen Horowitz, has been outspoken about how Silicon Valley has shifted from its traditional Democratic leanings to a radical ideology where “capitalism is evil.” That triggered his vow to “work against candidates who defied tech.” 

This brings me back to our main questions: Is it better to be in an ecosystem with strong government support, or one where pure market forces are at play? And are the political trends in the U.S. and France shifting where these two countries sit along the spectrum between these two extremes?

An entrepreneur's perspective: how to build a global champion today?

Chris: If I were a young, French entrepreneur, here are a few things that I’d be considering. 

First, there is huge very early-stage startup support in France through places like Bpifrance, which provides research grants, advising, and other softer forms of support like networking, market research, etc. These programs are relatively easy to access and when new ones are developed for sectors like Deep Tech, AI, Energy, Quantum Computing, or Aerospace -  they become clear priorities that help orient entrepreneurs toward various support mechanisms. 

In the US, unless you graduate from a major university like Stanford, Berkeley, MIT, or Harvard, or you’re already well-connected, then you’re still pretty much on your own for those first steps. 

Marjolaine: Agreed. In addition to research programs, startups in France have access to a deep talent pool at an affordable cost, which is a key issue in the US. That said, beyond Series A, financing and scaling in France is significantly tougher. Companies are still conservative about adopting new tech. The government’s "Je Choisis La French Tech" initiative aims to change this, but its impact remains uncertain. 

In contrast, founders in the US have access to a market with ten times more potential customers, making it easier to sell and scale their solutions. They can also unlock greater fundraising opportunities, but timing is crucial. I encourage you to explore the data-driven analysis by our American General Partner, Henri Deshays, which shows that French scaleups entering the US early raise significantly larger rounds—5x more than their domestic-only peers—and attract US investors much faster.

Chris: Ultimately, for me, it comes down to the specific needs of each company and their sector. 

For instance, given the backlash against climate change policies in the U.S., I suspect it’s going to be tough for anyone working on Climate Tech in the U.S. On the other hand, if you’re focused on AI or crypto, then scaling up might be even easier once regulations are in place. Still, I would add a few notes of caution here. Rewriting rules around data, climate, and finance will be tremendously complex in the U.S. There will be fights between the political parties, between the states and federal government, and then likely lots of lawsuits. If the success of your startup could be impacted by government policies, I would consider very carefully whether you have sufficient visibility into the future. And if not, is the risk of that uncertainty outweighed by the many other advantages of the US, like late-stage funding and the exit market?

Marjolaine: That’s true. Just last week, startups were thrown into confusion when the Trump administration ordered a pause on all federal assistance—including, but not limited to, grants related to diversity, foreign aid, and so-called "woke gender ideology." Although this decision was later revoked, many startups suddenly found themselves unable to access their grant funding, leaving them in a state of uncertainty.

Rather than asking whether to stay in France or go to the U.S., the real question for founders should be: How do I use the different ecosystems to serve my strategy? Entrepreneurs can structure their startups across multiple countries. Base their R&D and technical teams in France while setting up commercial and marketing operations in the U.S. This approach maximizes access to talent and capital while maintaining cost advantages and lowering regulatory risks. Such a setup can be particularly advantageous if future U.S. policies, like potential import tax increases under the Trump administration, introduce new financial hurdles. However, startups need to be prepared to manage the complexity of issues like stock options, accounting, and financial regulations that come with being multinational.

It is crucial for founders to identify which factors are most favorable for their company's growth and not just rely on broad stereotypes of each market. 

Chris: And that’s what we’ll continue to explore in the coming months.

Marjolaine: Looking forward to it, Chris.