Written by Etienne Arsac, Associate at BGV
France’s venture capital ecosystem has entered a period of recalibration in 2025, following years of rapid growth and record-breaking investments. As the third-largest startup hub in Europe, the French tech landscape is demonstrating remarkable resilience despite experiencing its first significant market correction since the emergence of “La French Tech” movement. Total funding in Q1 2025 reached just $1.2 billion, marking a 39% decline from Q1 2024 and positioning 2025 to potentially close at around $4.8 billion—a stark contrast to the peak of $16 billion achieved in 2022. Yet beneath these headline figures lies a maturing ecosystem that’s becoming more disciplined, strategic, and focused on sustainable growth rather than the exuberant valuations of previous years.
This evolution arrives at a pivotal moment for France’s technological aspirations. As the country fortifies its position as a European leader in artificial intelligence, climate technology, and DeepTech, the current funding environment is being shaped by three interconnected forces: the normalization after the 2021-2022 investment bubble, heightened focus on profitability, and the increasing influence of government co-investment strategies that have helped stabilize the market during this downturn.
Market Dynamics and Investment Trends
The French venture capital market has undergone a significant shift in 2025, with the absence of mega-rounds that previously inflated overall investment figures. Unlike 2024, which saw massive fundraises like Verkor’s €1.3 billion and Mistral AI’s €600 million buoy the statistics, Q1 2025 lacked these headline-grabbing deals. This has exposed the underlying correction that many industry insiders consider a necessary rebalancing after the frenzied pace of 2021-2022.
Artificial Intelligence (AI) remains the flagship sector of the French tech ecosystem, backed by bold public and private investment. The €109 billion national AI plan and landmark events like the AI Action Summit in Paris (February 2025) underscore France’s global ambitions. Initiatives such as Kyutai, the open science AI lab, and breakout successes like Mistral AI – which raised €105M in 2023 and is valued at €5.8B in 2024 – reflect a thriving ecosystem. In 2024 alone, French startups raised €7.1 billion, with AI leading the charge. Building on this foundation, the ecosystem is now shifting from a focus on foundational models to more specialized applications. A new wave of startups is now focusing on vertical AI, in specific industries such as FinTech & InsurTech, logistics & supply chains, Sales & Marketing, HealthTech or Energy; unlocking tangible productivity gains in sectors long resistant to digital transformation. Simultaneously, AI agents are gaining traction as enterprises seek scalable, cost-efficient automation, deeply integrated into existing workflows, offering a glimpse into the next frontier of enterprise software.
While AI continues to dominate headlines, other sectors in France are also drawing strong interest. Climate tech stands out, fueled by France’s decarbonization agenda and its leadership in Europe’s green transition, with activity spanning renewable energy, carbon accounting, sustainable agriculture, and clean industrial processes. Momentum is also building in DevOps, HealthTech, CFO tooling, robotics, and quantum computing, where French startups are beginning to make their mark across the continent.
BGV’s role
With its office in Paris and the presence of Sarah Benhamou and Etienne Arsac, BGV is uniquely positioned within the French tech ecosystem as a cross-border venture capital platform focused on Enterprise 5.0 and Human-Centric Enterprise AI. BGV’s investment thesis is built on the belief that the future of enterprise innovation lies in AI systems that augment and empower human capabilities, rather than replacing them. This approach is reflected in BGV’s French portfolio, which includes Kardinal (AI-powered logistics optimization), MadKudu (AI-driven revenue operations), DialOnce (customer engagement automation), WeWeb (low-code web development), Greenly (climate and carbon management), The Forecasting Company (AI for retail and demand forecasting), and platform.sh (cloud-native web application platform).
BGV invests from pre-seed to Series B+, providing much more than capital: the fund offers hands-on operational support and leverages its strong presence in both Paris and Silicon Valley to help French entrepreneurs scale globally. As immigrant entrepreneurs-turned-investors, BGV’s team understands the challenges French founders face when expanding internationally and provides direct access to U.S. customers, talent, and networks. The recently published AI Native Startup Playbook further demonstrates BGV’s commitment to guiding founders in building scalable, responsible AI businesses.
By combining deep expertise in enterprise software and AI with a proven cross-border model, BGV directly addresses the key challenges of French entrepreneurs: accessing global markets, navigating scale-up hurdles, and building category-defining companies with international impact.
Future outlook
Despite current headwinds, the long-term trajectory for French venture capital remains positive. The French tech ecosystem has established ambitious targets through the France 2030 initiative, while many leading startups – such as Doctolib and Alan – are now prioritizing profitability and operational efficiency over aggressive fundraising, reflecting a broader market shift in a less exuberant funding environment.
Several structural strengths make France one of the most attractive places to build an AI company today:
- AI Leadership Potential: France is rapidly establishing itself as the leading hub for AI in Europe, backed by strong public investment, a growing base of frontier research labs (e.g. Inria, Paris-Saclay Center for Data Science, Kyutai), and the ability to attract international capital and talent.
- Deep Technical Talent Pool: Home to world-class engineering schools and research institutions (e.g. Polytechnique, Centrale, ENS), France produces a steady pipeline of highly skilled graduates in AI, data science, and machine learning—while also retaining senior talent that once left for the US or UK. AI engineer salaries in France are significantly lower than in the U.S. (€78,867 vs. $160,000), giving startups a cost advantage without compromising on talent.
- Maturing Founder Generation: the ecosystem is entering a second generation, as alumni of first-wave unicorns (e.g., BlaBlaCar, Doctolib, Algolia) return as founders, early employees, or angel investors – bringing operational maturity and mentorship to the next cohort of AI startups.
In this evolving landscape, BGV stands as a bridge between Silicon Valley’s enterprise expertise and France’s technological capabilities. By fostering deep connections between these ecosystems, BGV is helping create a new category of companies that are built in France but poised for global impact.
For BGV, this represents more than an investment opportunity – it’s a chance to architect a future where technology enhances human potential, revolutionizing how businesses operate worldwide.
