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In contrast to the gloomy mood in much of France these days, optimism and ambition fill the air in Paris’s cavernous Station F business incubator. Since opening in 2017, the world’s largest start-up campus has nurtured 7,000 businesses, including two unicorns: AI company Hugging Face, currently based in the US, and healthcare insurer Allan.
Talk to the founders of AI companies at Station F and it’s hard to resist their enthusiasm for the technology’s potential and France’s appeal as a place to launch a company. of the incubator 40 Best-Performing Start-ups34 have AI at the core of their business. The rapid onset of the Mistral, The Paris-based AI start-up, now valued at $6bn, has built one of the world’s most impressive foundation models, giving them plenty to cheer about.
“Europe can build competitive AI models today,” said Xavier Neal, a French investor in both Station F and Mistral. recently told the FT. “I think we can make big things with a few hundred million euros.”
France’s start-up world has a lot going right. The country’s education system trains an endless stream of talented engineers. Paris is competing with London as Europe’s top AI hotspot. France’s business culture has changed over the past two decades, making it acceptable, even fashionable, to be an entrepreneur. Venture capital is more accessible than ever. Despite his problems elsewhere, President Emmanuel Macron is an active champion of the sector.
Unlike most large US AI companies, French AI start-ups favor open-source models that encourage greater collaboration and wider access to technology. They hope that applying AI to almost every sector of the economy will give them a competitive edge.
But the question remains: Can France’s vibrant tech sector overcome the political turmoil and economic uncertainty plaguing the rest of the country?
Station F’s young start-up founders have some doubts. Historically, French entrepreneurs have been more successful in building companies in the US than in France, but that is changing now, says Thomas Le Corey, chief executive of edtech start-up Rakuno. He studied at the HEC Business School in Paris and the University of California, Berkeley. “I strongly believe in European technology,” he says.
The country’s abundant technological prowess perfectly matches the AI industry, making France a great place to build a tech business, added Joël Belafa, chief executive of Biolevate, an AI-enabled therapeutics research firm. “For a long time, France has developed a culture of engineering,” he says. Similarly qualified engineers in the white-hot US market, he reckons, can cost five to eight times more.
Still, momentum in the French tech sector slowed last year, partly as a result of political unrest Divided parliamentary elections. data from siftedThe FT’s sister publication, showed that French start-ups raised just 3 billion euros in the second half of 2024, down from 5.9 billion euros in the first six months. the latest Global Startup Ecosystem Index France ranks as the eighth most successful start-up nation in the world, up from 12th in 2020 but still behind the UK, Sweden and Germany in Europe.
No matter how advanced the French tech sector is, the United States still exercises a strong gravitational pull. The Parisian AI Start-up Pathway It was announced last month It is moving its headquarters to the US to be closer to its biggest customers. “We need to be in the room where it happens — and it happens in the Bay Area,” said Pathway co-founder Zuzana Stamirovska.
Rumors swirled around Paris that Mistral would have to sell itself to a giant US company if it wanted the resources to become globally relevant, just as it was bought by Britain’s DeepMind Google in 2014.
Unlike their competitors in the post-Brexit UK, AI start-ups in France must contend with the heightened regulatory burden of the EU’s AI laws. But some entrepreneurs argue that the law could help build trust and boost creativity. “This is not only negative for Europe. It can drive better innovation,” says Samuel Bismuth, co-founder of Korma, a software license management company.
Without such optimism and ambition, little can be achieved. But having benefited from some supportive tailwinds over the past few years, the French tech sector is now facing stiff headwinds. This year France’s entrepreneurial mettle will be tested like never before.
