In 2025, funding for startups in France decreased by 5% amid an increase in AI concentration.

      French startups raised €6.7 billion in 2025, reflecting a 5% decrease from the previous year, while US funding saw a 38% increase and Europe overall grew by 12%. Mistral represented 25% of the total capital raised. Funding in AI accounted for 43% of the total, with defence technology witnessing a substantial rise of 148%. However, exits reached a five-year low at €5.3 billion.

      A report by Alexandre Dewez, a partner at 20VC, reveals that the French tech ecosystem is increasingly reliant on a small number of AI firms, while other sectors stagnate. In 2025, French startups secured €6.7 billion across 411 funding rounds, marking a 5% drop in capital and a 21% decrease in deal volume compared to the prior year. This trend sharply contrasts with the US’s 38% growth and a 12% increase across Europe.

      The report, which includes around 100 slides with data on funding, exits, unicorns, and industry trends, highlights France's achievement of its first decacorn but suggests it is struggling to cultivate a wider range of successful companies indicative of a mature ecosystem. Mistral's Series C raised its valuation to €11.7 billion, but the company's dominance skews the overall funding landscape – without it, the outlook appears significantly less positive.

      AI has been the primary growth driver for France, comprising 23% of funding rounds (up from 13% in 2024) and 43% of all capital raised (up from 27% the prior year). France has also seen impressive seed rounds for foundational model companies like H at €212 million, Genesis at €97 million, Gradium at €64 million, and Bioptimus at €32 million.

      However, the report notes that France lacks prominent category leaders in AI's most lucrative sectors, unlike the UK, Sweden, and Germany. Even Mistral, viewed as a flagship for France, struggles against competitors like OpenAI and Meta. Its European identity has become a key selling point in lieu of a technological edge, as it now competes in a market where top US and Chinese firms possess more capital and resources.

      Pennylane has been recognized as the standout French startup for 2025, achieving €100 million in annual recurring revenue, a 130% year-on-year growth, and raising two rounds this year with valuations of €2 billion and €3.9 billion. The company has transitioned from accounting software to an ERP and neobank catering to French SMEs, including expansion into Germany.

      The defence sector is the second-largest growth area following AI, with European defence tech startups raising $1.6 billion in venture funding in 2025, a 148% increase from the previous year. In France, 18 defence startups raised €228 million, a 25% rise from last year. The notable development was Harmattan becoming France's first defence unicorn with a $200 million Series B led by Dassault Aviation, which was celebrated by President Emmanuel Macron for contributing to national strategic autonomy.

      Geopolitical pressures are driving a broader boom in European defence tech, as countries increase spending in response to the war in Ukraine. Although Germany leads in capturing European defence tech capital, France is establishing its niche in AI-driven military technologies.

      Another key finding indicates that US investment has become predominant in the French startup funding scene, with American funds participating in rounds that accounted for 55% of total funding in 2025, focusing heavily on AI startups. Only 30% of the top 20 Series A rounds were led by French funds, while 60% were led by pan-European funds and 10% by US funds. The report highlights a shift in funding dynamics, with many pan-European firms now frequently participating in French Series A deals.

      French venture capital funds are described as being trapped in the “messy middle,” losing both top Series A deals to international funds and early seed deals to an emerging group of French micro-funds. Many French funds are facing challenges in raising their next rounds, often securing smaller amounts than previously.

      The AI surge has reaffirmed San Francisco's position as the epicenter of the global tech industry, influencing French founders who are now active in both the Bay Area and Paris. French venture firms have established offices in San Francisco, and the British accelerator Entrepreneur First closed its Paris office to shift focus to the US market, signaling the potent pull of American industry.

      The exit landscape is troubling, with French startup exits totaling €5.3 billion in 2025, marking a 65% decline year-on-year and the lowest figure in five years. The IPO market remains largely inactive for European tech firms, and trade sales have not compensated for this void. Secondary transactions have become the primary source of liquidity, but they do not provide substantial returns to attract new investments into the venture ecosystem.

      Overall, France has produced 47 unicorns