🇫🇷 The State of the French Tech Ecosystem 2022

Overlooked #135

Hi, it’s Alexandre from Eurazeo. I’m investing in seed & series A consumer and consumer enablers startups all over Europe. Overlooked is a weekly newsletter about venture capital and underrated consumer trends. Today, I’m sharing the 2022 edition of the State of the French Tech Ecosystem.

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I'm delighted to share my 2022 report on the French tech ecosystem with 140 slides covering everything: general metrics, tech trends, general market update, funds investing in France, angels, unicorns, startup mafias, exits and an outlook for 2023!

In the coming weeks, I’ll release 3 additional posts on the report digging further into: (i) angels, (ii) French unicorns and (iii) startup mafias. This week, as a teaser, I’m sharing 10 insights extracted from the report!

The report reflects my views and do not necessarily reflect the views of my employer. If you have any feedback or if you spot any mistake in the report, please do send me an email at alexandre.dewez@gmail.com. 

#1 - In 2022, French startups raised over €11.5bn (6% YoY growth) across 689 funding rounds (17% YoY growth) showing more resilience than its European peers. The ecosystem had its best quarter ever in Q1 mainly driven by growth rounds done in 2021 before seeing a real slowdown in Q3 and Q4.

#2 - The top 15 rounds raised €4.2bn (37% of total) with (i) Eurazeo omnipresent involved in 8 rounds, (ii) Tiger involved in 2 rounds (actually closed in 2021), (iii) tier-1 US growth funds investing in France (GA, Insight, Bond) and (iv) PE funds remaining active as growth stage investors in the ecosystem (Astorg, Andera).

#3 - There is high competition to invest in France with several trends: (i) seed becoming the most competitive stage to invest, (ii) US funds building their European footprint, (iii) growth scene rebuilt around pan-European growth funds, sovereign funds, tier-1 US growth funds and private equity funds.

#4 - Angel investing is maturing in France with 3 categories of stakeholders: (i) structured family offices (Kima, Financière Saint-James), (ii) super-angels (Thibaud Elzière, Eduardo Ronzano) and (iii) emerging angels (Roxanne Varza, Jérémy Goillot).

#5 - To become a unicorn, startups tend to raise a funding round every 12-20 months and to 2-3x the amount they raise round after round between Seed and Series C (with a median amount €1.6m for seed round, €9.0m for series A, €40.0m in series B and €70m in series C). Newer startups (created after 2014) tend to raise rounds at a greater velocity.

#6 - Updating my work on French startup mafias, I divided them into 3 categories (i) grandmas (Exalead, Hexa, Otium), (ii) established mafias (Criteo, Blablacar) and (iii) emerging mafias (Pricematch, Zenly).

#7 - The global tech market is under meltdown. Private funding rounds are also impacted with extreme cases like bankruptcies (Fast, FTX, Airlift), self-repricing (Instacart, Stripe, Checkout) or down-rounds (Klarna, Snyk).

#8 - France is not an exception: (i) only 5 layoffs (Jellysmack, Luko, Meero, Sunday, Backmarket) have been reported publicly but many more are currently happening, (ii) bankruptcies are happening with Made.com being the most impressive going from an IPO at a £775m market cap. to filing for insolvency in 16 months, (iii) cross-over & exotic growth investors are also gone with no new deal for Softbank in France in 2022 and (iv) funding is slowing down drastically at series A & beyond.

#9 - A new paradigm is coming. Every stakeholder in the ecosystem should adapt quickly and vigorously to this new reality (profitable growth, proven unit economics, asset light models, experienced teams, etc.). We should also destigmatise (i) layoffs, (ii) down-rounds, (iii) founders & CEOs stepping back. These actions happen when the wind is turning and are not synonymous with poorly performing startups

#10 - I remain enthusiastic about the coming years for the French tech ecosystem: (i) the upcoming cohort of French entrepreneurs will be the strongest we will have ever seen, (ii) a paradigm rewarding capital efficiency over growth at all cost is sounder for the ecosystem in the long run, (iii) fund deployment cycles may be slower but top performing startups will always have access to capital.

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I’d like to thank everyone who contributed to the report both interviewees and sparring partners providing me with ideas and feedback. More specifically and as always thanks to Julia (🦒).