In 2025, funding for startups in France decreased by 5% due to an increase in the focus on AI.

      French startups raised €6.7 billion in 2025, marking a 5% decrease compared to the previous year, while US startups saw a 38% increase and Europe overall grew by 12%. Mistral alone accounted for 25% of the total funding raised. AI led the charge, making up 43% of the funding, and defence technology saw a dramatic 148% increase, while exits fell to a five-year low at €5.3 billion.

      A new report on France's tech landscape by Alexandre Dewez of venture firm 20VC highlights a growing reliance on a select few AI companies amidst a stagnating market. In 2025, French startups secured €6.7 billion across 411 funding rounds, reflecting a 5% drop in capital and a 21% decline in deal volume from the previous year. These figures sharply contrast with the US, which experienced a 38% increase in startup funding, and Europe, which had a 12% rise.

      The report, which comprises around 100 slides detailing funding, exits, unicorns, and industry trends, indicates that while France has created its first decacorn, it is struggling to foster a broad range of successful companies indicative of a mature ecosystem. Mistral's Series C funding round reached a valuation of €11.7 billion, making it the standout achievement in 2025, yet without it, the overall picture of French startup funding appears less robust.

      AI emerged as the primary engine of growth for the French ecosystem in 2025, representing 23% of funding rounds compared to 13% in 2024, and 43% of total capital raised, up from 27% in the previous year. Noteworthy mega seed rounds saw companies like H secure €212 million, Genesis €97 million, Gradium €64 million, and Bioptimus €32 million.

      However, the report highlights a significant gap: France lacks prominent category leaders in the most commercially valuable segments of AI, whereas countries like the UK, Sweden, and Germany boast notable companies in voice, vibe-coding, and customer success respectively. Even Mistral, considered France's flagship AI firm, is not dominating its field against competitors like OpenAI, Anthropic, Google, and Meta.

      Mistral’s appeal largely lies in its European identity, which attracts companies looking for a sovereign AI option, rather than its technical superiority. The company has lost its initial advantage in open-source technology and is now competing in a multi-modal AI market where larger US and Chinese firms have vastly greater resources.

      Fintech Pennylane has been recognized as the standout French startup of 2025, crossing €100 million in annual recurring revenue with a remarkable 130% growth year on year. The company managed to raise two rounds in a single year, valued at €2 billion and €3.9 billion. Pennylane has evolved from basic accounting software to an ERP and neobank tailored for French SMEs and has expanded its operations to Germany. It represents a rare example of a French startup achieving significant growth metrics that attract leading international investors.

      The defence sector has emerged as the second fastest-growing area after AI, with European defence tech startups raising $1.6 billion in venture funding in 2025, a 148% year-over-year jump. In France, 18 defence startups raised €228 million, a 25% increase from the previous year. A major milestone was achieved in January 2026 when Harmattan became France’s first defence unicorn after securing a $200 million Series B led by Dassault Aviation, known for its Rafale fighter jet. Harmattan specializes in autonomy and mission-system software for defence aircraft and received commendation from French president Emmanuel Macron, emphasizing the importance of this deal for the country's strategic autonomy.

      The surge in European defence tech is largely driven by geopolitical dynamics, with governments increasing military spending in reaction to the war in Ukraine and evolving transatlantic security arrangements. While Germany leads in European defence tech funding, France is carving out a niche in AI-driven military systems.

      The report also reveals that US capital now predominantly influences the French startup funding landscape, with American funds participating in rounds that accounted for 55% of total funds raised in 2025, particularly in AI firms like Mistral, Genesis, and Gradium. At the Series A stage, only 30% of the top 20 funding rounds were led by French funds, while 60% were led by pan-European funds and 10% by US funds. The report notes a substantial increase in pan-European firms participating in French Series A rounds.

      French VC funds find themselves in what the report describes as the “messy middle,” losing prime Series A opportunities to international funds while top pre-seed and seed deals are increasingly claimed by new French micro-funds managing between €5 million and €35 million. Many French funds are struggling to raise their next round and are consequently securing smaller funds than before