The huge slump in French Tech

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These are very complicated times for the French startup ecosystem. In addition to a struggling financing sector, many companies are being forced into legal proceedings to try to get their situation back on track… sometimes in vain.

Funding in the doldrums

According to information collected by Les Échos, seed and Series A financing is particularly limitedsince the start of the school year. Because investors are also suffering from an unfavorable economic context. Venture capital funds need liquidity while they have never had so many assets under management, after an extremely profitable period marked by much lower rates.

The trend has been increasing since 2023, a year in which financing fell by 38% to €8.3 billion, according to the 2024 France Digitale-EY barometer. Unfortunately, it is expected to continue in the negative this year. “Before, some people became entrepreneurs and could easily raise €2 million in seed funding because there was so much money. Today, there is less of this windfall effect », comments business angel Alexandre Berriche in an interview with the French daily.

A situation that is the result of multiple factors, such as financial political instability, geopolitical tensions, as well as the erosion of household purchasing power.

Bankruptcies are exploding

The situation is not only affecting the financing sector. Established companies are also suffering. In 18 months, more than 100 French Tech players have declared bankruptcy. However, the majority had managed to raise funds in the previous three years. This reality can be explained in particular by a fragile economic model, based on significant losses and excessive dependence on external financing, which is itself in difficulty.

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Luko, a specialist in 100% online home insurance, is the perfect example. In 2023, the young company found itself on the verge of compulsory liquidation, in debt to the tune of 45 million euros. It has since been bought by Allianz.

Car Entrepreneurs often leave it too late when they knock on the door of the commercial courts for recovery measures. They generally hope for the intervention of an investor who would change the situation. In many cases, it is already too late.

AI, the only positive point

This dynamic reveals the limits of a system that has developed in a context of easy financing. Founders thus find themselves helpless in the face of these complex legal procedures, with sometimes dramatic personal consequences.

In this context, it is more necessary than ever to build long-term viable businesses that can withstand market fluctuations. One bright spot, however, lies in the artificial intelligence (AI) sector, which continues to attract colossal sums.

• The financing sector is going through a difficult period, complicating startups' access to funds.
• At the same time, more and more established players are going bankrupt.
• A situation that can be explained by several factors, including geopolitical and economic.

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