Crypto: French start-ups losing momentum

© Unsplash/Art Rachen

In France, French start-ups specializing in Blockchain technologies are raising less funding than before. This trend is explained by several factors, and has the potential to be reversed.

Less fundraising funds for crypto start-ups

These are the results of a study commissioned by Les Échosto Invyo, a data analytics specialist: in the first half of 2024, 19 French cryptocurrency startups raised funds. This is a decrease of 35% compared to the same period last year when there were 29.

The total amount raised was higher than that of 2023. It reached 178 million euros compared to 134 million euros. However, this figure is explained by the performance of two young shoots, and does not reflect the overall state of the market. Zama, which develops software to encrypt and protect blockchain data, has raised 67 million euros, one of the most impressive operations carried out by a fintech this year.

For its part, Flowdesk, a specialist in financial technologies for crypto-assets, recorded a €50 million funding round. These two fundraisings helped increase the average ticket for operations during the half-year, from nearly €2 million to €2.6 million.

Despite everything, the situation for crypto start-ups is not looking good. Tainted by the FTX scandal, they have suffered a significant decline since 2022. As a reminder, the second largest cryptocurrency exchange platform in the world collapsed following revelations about its questionable financial management.

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Hope remains

But this is not the only explanation. Investors seem more inclined to spend in the artificial intelligence sector, which has been disrupted by the rise of generative AI. The most recent fundraising by Mistral AI, the French champion in the field, is a perfect example. The young company completed a funding round of €468 million, bringing its valuation to €6 billion.

Furthermore, the cryptocurrency sector remains closely linked to the price of bitcoin, which makes it unstable and less attractive to investors. Added to this is a lack of concrete use cases. While blockchain is proving promising in several industries, the sector is still struggling to demonstrate large-scale applications. The global context must also be taken into account: rising interest rates and inflation have slowed down venture capital investments overall.

Be careful though. While this study is evidence of the current difficulties of the market, it is not synonymous with disaster for blockchain either. For example, the new Digital Product Passport (DPP) regulation, which is expected to come into force in 2027, will require every product sold in the EU to have a unique digital identity. This electronic identity card for objects will be based on blockchain technology, potentially offering many additional opportunities to start-ups operating in this field.

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