French startups raised $1.4 billion in venture capital in the first quarter of 2025, marking the weakest quarter for French tech in nearly seven years, dating back to Q3 2019, according to Dealroom.
This represents a significant drop, bringing funding levels close to 2020 figures and putting France on track for its lowest annual VC total since 2018. The downturn stands in stark contrast to the broader European market, which saw deal value grow by 10.8% year-over-year to €16.7 billion in Q1 2025.
So, is the French tech ecosystem truly struggling this year? The Dealroom report delivers a clear yes — here’s why.
A funding collapse across all stages of French startups
The Dealroom report reveals a severe decline: French venture capital investment in Q1 2025 has plummeted to 2020 levels, with the downturn affecting every stage of investment. Seed-stage startups secured just $53 million, a 53% drop from the previous quarter and 59% from last year. Early-stage funding also declined sharply, with $727 million raised, representing a nearly 50% decrease from both Q4 2024 and Q1 2024.
Late-stage investment suffered the heaviest blow, raising only $30 million — an 81% decline from the previous quarter and a 91% year-over-year drop. At the breakout stage, while the number of rounds fell 25% to 27 compared to 2024, the total amount raised remained relatively strong at nearly $1 billion.
The absence of mega-rounds like Verkor’s €1.3 billion and Mistral AI’s €600 million in 2024 has exposed the underlying market decline. In Q1 2025, quantum tech startup Alice & Bob led with a $110 million Series B round. Other notable raises included Flowdesk ($102 million), Intact ($77 million), Bioptimus ($76 million), GravitHy ($66 million), 73Strings ($55 million), Nexstum ($49 million), Swan ($46 million), and Renaissance Fusion ($35 million).
Despite the downturn, France maintains its position as the eighth-largest market globally by VC investment in 2025. Eléonore Crespo, co-CEO of Pigment, emphasises that the French tech ecosystem’s maturity is evident in its 25,000 startups, 1 million jobs, and global success stories. She cites the growing pipeline of unicorns and programs like French Tech Next40 and French Tech 120 as proof of France’s standing as a leading European innovation hub.
Romain Libeau, co-founder and CEO of Pivot, adds how vital France’s VC landscape has been to their growth, crediting experienced VCs with deep B2B SaaS and scaling expertise. He highlights Paris-based Emblem’s impressive track record with companies such as Wix, Peakon, and LumApps, noting their strategic guidance and industry expertise. Regular engagement with global funds showcases France’s growing international profile while enriching the scaling strategies of local startups.
Bankruptcies outnumber new Series A rounds
2024 marked a watershed moment: startup insolvencies and restructuring procedures exceeded new Series A rounds in French tech for the first time. A study of 1,487 startups that each raised at least €5 million found that 10.4% encountered financial distress, typically just three years after funding. Even established scaleups aren’t immune, as macroeconomic pressures, tighter liquidity, and falling valuations make securing follow-on funding increasingly difficult.
Ongoing instability compounds the funding crisis. The second half of 2024 saw funding drop by half compared to the first six months, as uncertainty over government policy led some entrepreneurs to consider relocating abroad. The 2025 French budget is set to cut an estimated €3 billion in startup support, eliminate key tax incentives, and reduce spending on innovation programs — moves that tech associations warn could undermine French innovation.
Health tech leads, but challenges remain visible
Health has emerged as France’s most funded startup sector, surpassing other major European industries. Bioptimus led healthcare funding with a $41 million Series A in biotech, while fintech followed with 17 completed rounds. Climate tech, quantum computing, and biotech have become France’s most funded frontier tech segments this quarter.
The French AI ecosystem remains robust, with over 1,000 AI startups, half of which are based in Paris. For the first time, AI and machine learning overtook SaaS in European transaction value during Q1 2025.
Paris: Still a powerhouse — but for how long?
Paris continues to strengthen its position as a European tech hub. The city ranks as Europe’s second-largest tech hub by venture capital investment, securing $870 million in Q1 2025 — 62% of all French venture capital investment.
Nationally, France ranks as Europe’s third-largest tech ecosystem in terms of VC investment this quarter. However, Germany overtook France in 2024, with German startups raising over €9.5 billion compared to France’s €9 billion.
Alexandre Boulanger, co-founder and CEO of healthtech startup Metyos, describes Paris’s vibrant ecosystem, with its abundance of hospitals and patients for healthcare market research. The world’s largest hospital, APHP, creates a unique environment for startups, while investors, talent, suppliers, and corporations cluster in the city.
Boulanger also praises the benefits of PC’Up (ESPCI – PSL) and Agoranov, two major deeptech incubators offering affordable lab space and offices in central Paris while connecting startups to essential scientific networks. The proximity to government offices helps startups navigate regulations and access public funding.
Are French startups really at risk?
Despite its mature ecosystem of 25,000 startups, 1 million jobs, and a growing unicorn pipeline, France faces a crucial test: Will the past decade’s tech boom prove to be a fundamental shift or merely an illusion supported by government aid and occasional mega-deals?
Analysts suggest the current funding slowdown may be temporary rather than structural. Matthieu Baret of Eurazeo notes a shift toward profitability, with VCs becoming more selective. Experts anticipate a surge in deep tech, driven by increased entrepreneurship in labs and research centres. The absence of Q1 2025 mega-rounds may prove temporary as the ecosystem adapts to new funding conditions.
Looking ahead, analysts expect a shakeout among French unicorns and leading startups — some will successfully adapt to AI and recover, while others may fade. Although the current funding decline may be temporary, France risks losing its hard-won position at the heart of European tech unless it restores policy stability, reinvests in innovation, and addresses its exposed structural weaknesses.
