It’s a time that couldn’t be more complicated for the French startup ecosystem. In addition to a financing sector in dire straits, many companies find themselves forced into safeguard legal procedures to try to redress their situation… sometimes in vain.
Financing at half mast
According to information collected by The Echoes, Seed and Series A funding is particularly limited since the start of the school year. Because investors are also suffering from an unfavorable economic context. Venture capital funds need liquidity at a time when they have never had so many assets under management, after an extremely successful period marked by much lower rates.
The trend has been accentuated since 2023, a year during which funding fell by 38% to stand at 8.3 billion euros, according to the 2024 France Digitale-EY barometer. It should, unfortunately, continue in the negative this year. “ Before, some people became entrepreneurs and could easily raise 2 million in seed because there was so much money. Today, there is less of this windfall effect », comments business angel Alexandre Berriche in an interview with the French daily.
A situation which is the result of multiple factors, such as financial political instability, geopolitical tensions, as well as the erosion of household purchasing power.
Bankruptcies are exploding
The situation does not only affect the financing sector. Established companies also suffer. In 18 months, more than 100 French Tech players have declared bankruptcy. However, the majority had managed to raise funds in the previous three years. This reality is explained in particular by a fragile economic model, based on significant losses and excessive dependence on external financing, itself in difficulty.
Luko, a 100% online home insurance specialist, is the perfect example. In 2023, the young company found itself on the verge of liquidation, in debt to the tune of 45 million euros. It has since been bought by Allianz.
Because entrepreneurs often act too late when they knock on the doors of commercial courts for remedial measures. They generally hope for the intervention of an investor who would change the situation. In many cases, it is already too late.
AI, the only positive point
This dynamic reveals the limits of a system which developed in a context of easy financing. The founders thus find themselves helpless in the face of these complex legal procedures, with sometimes dramatic personal consequences.
In this context, it is more necessary than ever to build businesses that are viable in the long term and capable of withstanding market fluctuations. A point of hope, all the same, lies in the artificial intelligence (AI) sector, which continues to attract colossal sums of money.
- The financing sector is going through a difficult period, making it more difficult for startups to access funds.
- At the same time, more and more established players are going bankrupt.
- A situation which can be explained by several factors, notably geopolitical and economic.