TL;DR
French startups raised €6.7 billion in 2025, down 5% year on year, even as the US grew 38% and Europe 12%. Mistral accounted for 25% of all capital raised. AI drove 43% of funding, defence tech surged 148%, and exits hit a five-year low at €5.3 billion.
A new report on the French tech ecosystem by Alexandre Dewez, a partner at venture firm 20VC, paints a picture of a startup scene that is growing more dependent on a handful of AI companies while the rest of the market stalls. French startups raised €6.7 billion across 411 funding rounds in 2025, a 5% decline in capital and a 21% drop in deal volume compared with the previous year. The numbers stand in sharp contrast to the US, where startup funding grew 38% year on year, and Europe as a whole, which saw a 12% increase.
The report, based on roughly 100 slides of data covering funding, exits, unicorns, and sector trends, argues that France minted its first decacorn but is struggling to build the breadth of winners that would signal a maturing ecosystem. Mistral’s Series C at an €11.7 billion valuation was the headline achievement of 2025, but the AI lab accounted for 25% of all capital raised by French startups that year. Strip out Mistral and the picture looks considerably weaker.
AI dominates, but France lacks category leaders
AI was the main growth engine of the French ecosystem in 2025, accounting for 23% of funding rounds, up from 13% in 2024, and 43% of all capital raised, up from 27% the year before. France also produced several mega seed rounds for foundation model companies, including H at €212 million, Genesis at €97 million, Gradium at €64 million, and Bioptimus at €32 million.
But the report makes a pointed observation: unlike other European countries, France lacks clear category leaders in AI’s most commercially valuable segments. The UK has ElevenLabs in voice. Sweden has Lovable in vibe-coding. Germany has Parloa in customer success and n8n in AI automations. Even Mistral, France’s flagship AI company, is not dominating its category against OpenAI, Anthropic, Google, and Meta.
Mistral’s European nationality, which enables companies seeking a sovereign AI option, has become its main differentiation point rather than technical superiority. The company has lost its early open-source edge and is competing in a multi-modal AI market where the largest US and Chinese players have significantly more capital and compute.
Pennylane was the standout performer
The report names fintech Pennylane as the French startup of the year for 2025. The accounting software company crossed €100 million in annual recurring revenue, growing 130% year on year, and raised two rounds in a single year at valuations of €2 billion and €3.9 billion respectively.
Pennylane has expanded from pure accounting software into an ERP and neobank for French small and medium-sized businesses, and opened operations in Germany. It is a rare example of a French startup executing at growth scale with the kind of metrics that attract top-tier international investors.
Defence is the second hottest sector after AI
European defence tech startups raised $1.6 billion in venture funding in 2025, a 148% increase year on year, making defence the second-largest growth category after AI. Within France, 18 defence startups raised €228 million, a 25% increase on the previous year.
The biggest signal came in January 2026, when Harmattan became France’s first defence unicorn after raising a $200 million Series B led by Dassault Aviation, the maker of the Rafale fighter jet. Harmattan builds autonomy and mission-system software for defence aircraft, and French president Emmanuel Macron publicly praised the deal as a win for the country’s strategic autonomy.
The broader European defence tech boom is being driven by geopolitical pressure, with governments across the continent increasing spending in response to the war in Ukraine and shifting transatlantic security dynamics. Germany has captured the largest share of European defence tech capital, but France is carving out a position in AI-enabled military systems.
US funds are taking over French venture capital
One of the report’s most striking findings is the degree to which US capital now dominates French startup funding. American funds were involved in rounds accounting for 55% of the total amount raised in 2025, and their capital has been concentrated in AI companies, particularly foundation model builders like Mistral, Genesis, and Gradium.
At the Series A level, only 30% of the 20 best rounds in 2025 were led by French funds. Pan-European funds led 60% and US funds led 10%. The report notes that where Index Ventures, Accel, and Balderton were historically the only pan-European firms consistently leading one or two French Series A rounds per year, at least 15 pan-European funds now do the same.
French VC funds are caught in what the report calls the “messy middle,” losing top Series A deals to international funds and top pre-seed and seed deals to a growing crop of French micro-funds with €5 million to €35 million under management. Several French funds are struggling to raise their next vintage, and when they do, they are raising smaller funds than before. Top talent is leaving.
San Francisco is pulling French founders westward
The AI boom has reasserted San Francisco’s dominance as the centre of the global tech industry, and French founders are responding. Multiple early-stage founders are actively building between the Bay Area and Paris, including the teams behind Poolside, Genesis, Zero Entropy, and Anyshift. French venture firms Founders Future, Frst, and Hexa have opened offices in San Francisco.
Entrepreneur First, the British accelerator, closed its Paris office in October 2025 to focus on its US programme. Since launching in Paris in 2018, roughly 700 entrepreneurs had passed through the programme and helped build more than 100 startups. Its departure is a signal that even institutions designed to nurture European founders see the gravitational pull of the US as too strong to resist.
Exits hit a five-year low
The exit picture is bleak. French startup exits totalled €5.3 billion in 2025, a 65% decline year on year and the lowest figure in five years. The IPO market remains largely closed to European tech companies, and trade sales have not filled the gap.
Secondaries have become the dominant source of liquidity, with both VC-led transactions, such as Descartes with Battery Ventures, and PE-led deals, such as Brevo with General Atlantic, providing the main exit routes. This is not a sign of a healthy ecosystem. Secondary sales provide partial liquidity for early investors but do not generate the kind of large-scale returns that attract new capital into the venture system.
France has produced 47 unicorns to date, defined as startups that have been worth at least $1 billion at some point. The report estimates that 36, roughly 77%, are still likely worth $1 billion or more based on recent fundraising, revenue, or headcount growth. The remaining 11 have likely fallen below the threshold, a reminder that unicorn status is not permanent and that the French ecosystem still has a maturity problem when it comes to building durable, large-scale companies.
