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In contrast to the somber mood that reigns in much of France today, optimism and ambition fill the air at the cavernous Station F business incubator in Paris. Since opening in 2017, the world’s largest startup campus has nurtured 7,000 companies, including two unicorns: AI company Hugging Face, now based in the US, and healthcare insurer Alan.
Talk to AI startup founders at Station F and it will be hard to resist their enthusiasm for the potential of the technology and the attractions of France as a place to launch a company. From the incubator 40 Best Performing Startups34 have AI at the center of their business. The rapid appearance of Mistral, The Paris-based AI startup currently valued at $6 billion, which has developed one of the most impressive foundation models in the world, has also given them plenty to celebrate.
“Europe can create competitive AI models today,” said Xavier Niel, the French investor in both Station F and Mistral. he recently told the Financial Times. “I think we can create great things with a few hundred million euros.”
Many things are going well in the startup world in France. The country’s education system forms an endless chain of talented engineers. Paris competes with London as the main access point for AI in Europe. France’s business culture has transformed over the past two decades, making becoming an entrepreneur acceptable, even fashionable. Venture capital is more available than ever. Despite its problems elsewhere, President Emmanuel Macron has been an active supporter of the sector.
Unlike most large American AI companies, French AI startups favor open source models that encourage greater collaboration and broader access to the technology. They hope this will give them a competitive advantage in applying AI to almost all sectors of the economy.
But the question remains: can France’s vibrant tech sector overcome the political chaos and economic uncertainty that are plaguing the rest of the country?
The young founders of Station F have few doubts. Historically, French entrepreneurs have been much more successful in starting companies in the United States than in France itself, but that’s changing now, says Thomas Le Corre, CEO of edtech startup Rakoono. He has studied at the HEC business school in Paris and at the University of California, Berkeley. “I firmly believe in European technology,” he says.
The country’s abundant technical skills are perfectly suited to the AI industry, making France a great place to build a tech business, adds Joel Belafa, CEO of Biolevate, an AI-based therapeutics research company. “For a long time, France has built an engineering culture,” he says. Equally qualified engineers in the red-hot U.S. market, he estimates, could cost five to eight times as much.
Still, momentum in the French tech sector slowed last year, partly as a result of political turmoil resulting from divisive parliamentary elections. Data of siftedsister publication of the Financial Times, showed that French startups raised just €3 billion in the second half of 2024, down from €5.9 billion in the first six months. the latest Global Startup Ecosystem Index ranks France as the eighth most successful startup nation in the world, up from 12th in 2020, but still behind the UK, Sweden and Germany in Europe.
No matter how much progress the French tech sector has made, the United States still exerts a powerful gravitational pull. Pathway, the Parisian AI startup announced last month that it would move its headquarters to the United States to be closer to its largest clients. “We need to be in the room where it happens, and it happens in the Bay Area,” said Zuzanna Stamirowska, co-founder of Pathway.
Rumors are circulating in Paris that Mistral will have to sell itself to a giant American company if it wants the resources to become globally relevant, just as the British DeepMind was bought by Google in 2014.
Unlike their competitors in the post-Brexit UK, French AI startups must contend with the increased regulatory burdens of the EU AI Law. But some business owners argue that legislation can help build trust and boost creativity. “This is not only negative for Europe. It can drive better innovation,” says Samuel Bismut, co-founder of Corma, a software license management company.
Little can be achieved without that optimism and ambition. But having benefited from some useful tailwinds in recent years, the French tech sector now faces stronger headwinds. This year will test France’s business mettle like never before.