TL;DR
French startups raised 6.7 billion euros in 2025, down 5% year-on-year, despite US growth of 38% and Europe’s 12%. Mistral accounted for 25% of the total capital raised. AI accounted for 43% of funding, defense technology grew 148%, and outflows hit a five-year low of €5.3 billion.
A new report By Alexandre Dewez, partner at venture firm 20VC, paints a picture of a startup scene in the French tech ecosystem that is increasingly dependent on a handful of AI companies while the rest of the market stagnates. French startups raised 6.7 billion euros in 411 funding rounds in 2025, which is a 5% decrease in capital and a 21% decrease in deal volume compared to the previous year. The figures are in stark contrast to the US, where startup funding grew by 38% year-on-year, and Europe as a whole, which grew by 12%.
The report, based on nearly 100 slides of data covering funding, exits, unicorns and sector trends, claims France has minted its first decacorn but is struggling to create the breadth of winners that would signal a maturing ecosystem. Mistral’s Series C is worth 11.7 billion euros 2025 was the main achievement, but the artificial intelligence laboratory accounted for 25% of all capital raised by French startups that year. Take out the Mistral and the picture looks considerably weaker.
AI dominates, but there are no category leaders in France
AI was the main growth engine of the French ecosystem in 2025, accounting for 23% of funding rounds and 43% of all capital raised, up from 13% in 2024 (up from 27% a year ago). Produced several mega seed rounds for foundation model companies, including France H – 212 million eurosGenesis 97 million euros, Gradium 64 million euros and Bioptimus 32 million euros.
But there is one striking observation in the report: unlike other European countries, France does not have clear category leaders in the most commercially valuable segments of artificial intelligence. England has ElevenLabs sound. Sweden is a favorite in vibe-coding. Germany has Parloa in customer success and n8n in AI automation. Even French AI pioneer Mistral is does not dominate its category Against OpenAI, Anthropic, Google and Meta.
Enabling companies looking for a sovereign AI option, Mistral’s European citizenship has become its key differentiator rather than a technical advantage. The company has lost its early open-source advantage and is competing in a multimodal AI market where the biggest US and Chinese players have significantly more capital and compute.
Pennylane was an outstanding performer
In the report, fintech Pennylane was selected as the French startup for 2025. The accounting software company has surpassed €100 million in annual recurring revenue. 130% annual growthand raised two rounds of €2 billion and €3.9 billion respectively within a year.
Pennylane has expanded from pure accounting software to ERP and neobank for French small and medium businesses and opened operations in Germany. This is a rare example of a French start-up executing at a scale of growth with the kind of metrics that attract high-level international investors.
Defense is the second hottest sector after AI
Europe boosted defense tech startups $1.6 billion in venture funding by 2025148% year-over-year growth, making defense the second largest growth category after AI. 18 defense startups across France raised €228 million, a 25% increase over the previous year.
The biggest signal came in January 2026, when Harmattan became France’s first defensive unicorn after breeding an animal. $200 million Series B led by Dassault AviationManufacturer of the Rafale fighter jet. Harmattan builds autonomy and mission system software for defense aircraft, and French President Emmanuel Macron publicly hailed the deal as a victory for the country’s strategic autonomy.
A wider European defense technology boom It is driven by geopolitical pressure, with governments on the continent increasing spending in response to the war in Ukraine and changing transatlantic security dynamics. Germany has captured the largest share of Europe’s defense technology capitalbut France is gaining ground in military systems equipped with artificial intelligence.
US funds take over French venture capital
One of the report’s most surprising findings is the extent to which US capital dominates French startup funding. American funds attracted 55% of the total amount raised in 2025 rounds, and their capital is concentrated in AI companies, especially foundational model builders such as Mistral, Genesis and Gradium.
At the Series A level, only 30% of the top 20 rounds in 2025 were led by French funds. Pan-European funds led by 60%, and US funds by 10%. While Index Ventures, Accel and Balderton have historically been the only pan-European firms to consistently lead one or two French Series A per year, at least 15 pan-European funds are now doing the same, the report notes.
French VC funds are caught in what the report calls a “mixed middle”, losing the best Series A deals to international funds and the best seed and seed deals to the growing crop of French micro-funds managed from €5m to €35m. Several French funds are scrambling to raise their next vintage, and when they do, they’re raising smaller funds than before. Great talent going.
San Francisco draws French founders westward
The AI boom has reasserted San Francisco’s dominance as the center of the global tech industry, and French founders are responding. Many 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, British Accelerator, It closed its Paris office in October 2025 Focusing on the US program. Since its launch in Paris in 2018, nearly 700 entrepreneurs have gone through the program and helped build more than 100 startups. His departure is a sign that even institutions designed to train European founders are finding the pull of the United States too strong to resist.
Outputs hit a five-year low
The output image is dark. France’s startup exits in 2025 totaled €5.3 billion, a 65% year-on-year drop and the lowest in five years. The IPO market remains largely closed to European technology companies, and trade sales have not filled the gap.
Second-tier companies have become the dominant source of liquidity, with VC-led deals like Descartes with Battery Ventures and PE-led deals like Brevo with General Atlantic providing key exits. This is not a sign of a healthy ecosystem. Secondary sales provide partial liquidity for early investors, but do not generate large-scale returns that attract new capital to the venture system.
France has so far produced 47 unicorns, which are defined as startups worth at least $1 billion at one point. The report estimates that 36, about 77%, are still valued at $1 billion or more based on recent financing, revenue or headcount growth. The remaining 11 likely fell below the threshold, a reminder that unicorn status is not permanent and that the French ecosystem still has a maturity issue when it comes to building sustainable, large-scale companies.
