🇫🇷 The State of The French Tech Ecosystem

Overlooked #51

Jan 8

Hi, it’s Alexandre from Idinvest. Overlooked is a weekly newsletter about underrated trends in the European tech industry. Today, I’m sharing an annual review of the French tech ecosystem. I tried to be as exhaustive as possible and to go beyond the usual 2020 funding rounds analysis.

During the Christmas holidays, I worked on a 50-slide deck on the state of the French tech ecosystem in 2020. I did an analysis of 2020 French funding rounds. I covered noteworthy investment trends. I shared an update of my work on French mafias. I also looked at key investors in the ecosystem. I did my best to be as extensive as possible. I hope that you will enjoy reading the presentation.

You can access the presentation and download it by clicking on the below button. As a teaser, I will just share my 10 favourite slides in this newsletter. As always, I'm open to feedback. Let me know what were your learnings in 2020 on the French ecosystem. Let me know what I should have done differently in the presentation.

Access the Presentation

I shared the presentation with Gonz from Seedtable. He wrote a great post on the French ecosystem digging into the French tech flywheel. It’s a great complementary read and you should definitely subscribe to his newsletter.

#1 - The French ecosystem has been more resilient than most of its counterparts. In 2020, French startups raised €4.35bn (+9% YoY) in 476 rounds (+3% YoY) compared to €4.00bn in 462 rounds in 2019. In comparison, the amount invested into European startup in 2020 only increased by 2%. Same for the U.K. and Sweden. In Germany (-7%) and in Spain (-34%), it was even a decreasing year in terms of amount raised.

#2 - Paris is now the 1st tech hub in the European Union. The U.K. is now officially out of the European Union. It will be interesting to see whether London manages to remain the centre of gravity of the European tech in the coming years. Moreover, Paris raised more funding in 2020 than Berlin. It had already happened in 2018 but this time is more definite and I don't see Paris being caught up again by another city in the European Union.

#3 - Mega rounds drive the growth of the French tech ecosystem. The 15 largest transactions raised €1.9bn in funding (49% of the amount raised in France in 2020). French startups raised less series A (€5-20m) and series B (€20-50m) rounds in 2020 compared to 2019. More specifically, Series B is also becoming the hardest round to raise in France for two reasons: (i) there is a lack of European growth funding and (ii) international growth investors are only backing the top decile without any sensitivity to valuation.

#4 - I'm still working on a directory of French startup mafias. I have now identified 112 startups coming from 21 different mafias. When I reach 200 startups, I will publish another specific post on the topic.

#5 - Idinvest/Eurazeo remains the most active non-public venture fund in France with 19 transactions in 2020.

#6 - We have business angels who have been incredibly successful at backing startups in France and abroad. Kima Ventures (backed by Xavier Niel), Thibaud Elzière and Fabrice Grinda are all displaying an internal rate of return above 50% on their realized investments. It proves that venture as an asset class is working - even in France.

#7 - Foreign VCs have noticed that the French ecosystem is booming. Foreign investors have always been quite active at backing the best French companies at a growth stage but they are now also investing earlier in seed and series A. In 2020, 23 different foreign funds have done at least 2 deals in France. This is just the beginning as American funds like Sequoia and Bessemer are aggressively entering the European tech market and numerous tier-one European funds are trying to position themselves as pan-European with an active presence in France.

#8 - Sustainability, D2C brands, insurance were the most common investment themes in 2020. In the presentation, I covered in more detail 20 themes that have shaped 2020.