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In stark contrast to the melancholy in much of France today, optimism and ambition are in the air at Paris’ spacious Station F business incubator. Since its opening in 2017, the world’s largest startup campus has nurtured 7,000 companies, including two unicorns: US-based artificial intelligence company Hugging Face and health insurance company Alan.
When talking to the founders of artificial intelligence companies at Station F, it was hard to resist their enthusiasm for the potential of the technology and the attractiveness of France as a place to start a company. Of the incubator’s 40 top-performing startups, 34 have artificial intelligence at the core of their business. They’re also delighted by the meteoric rise of Paris-based AI startup Mistral, which is now valued at $6 billion and has developed one of the world’s most impressive foundational models.
“Today, Europe can create competitive AI models,” Xavier Niel, a French investor in Station F and Mistral, recently told the Financial Times. “I think we can create big things with a few hundred million euros.”
Things are going well for the French startup scene. The country’s education system produces an endless stream of talented engineers. Paris is competing with London as Europe’s top artificial intelligence hotspot. French business culture has transformed over the past two decades, making it acceptable and even fashionable to be an entrepreneur. Venture capital is more accessible than ever. Despite troubles elsewhere, President Macron has been a vocal advocate for the industry.
Unlike most large U.S. AI companies, French AI startups favor an open-source model that encourages greater collaboration and wider access to technology. They hope this will give them a competitive advantage in applying artificial intelligence to nearly every sector of the economy.
But the question remains: Can France’s vibrant tech industry overcome the political chaos and economic uncertainty plaguing the rest of the country?
The young startup founders at Station F have no doubts. Thomas Le Corre, CEO of education technology start-up Rakoono, said that historically, French entrepreneurs have had a much higher success rate in starting companies in the United States than in France, but this is changing now. He studied at HEC Paris and the University of California, Berkeley. “I firmly believe in European technology,” he said.
Joel Belafa, chief executive of Biolevate, an artificial intelligence therapeutics research company, added that the country’s rich technical skills are a perfect match for the artificial intelligence industry, making France an ideal place to establish technology companies. “France has long established an engineering culture,” he said. He believes that in the white-hot U.S. market, the cost of the same qualified engineer may be five to eight times higher.
Still, France’s tech sector’s growth slowed last year, partly due to political turmoil caused by divisive parliamentary elections. Data from Sifted, a sister publication of the Financial Times, shows that French startups raised just 3 billion euros in the second half of 2024, down from 5.9 billion euros in the previous six months. The latest Global Startup Ecosystem Index ranks France as the eighth most successful startup country in the world, up from 12th in 2020, but still behind the UK, Sweden and Germany in Europe.
No matter how far France’s tech industry advances, the United States still exerts a strong gravitational pull. Paris-based artificial intelligence startup Pathway announced last month that it would move its headquarters to the United States to be closer to its largest customers. “We need to be in the rooms where this is happening, and it’s happening in the Bay Area,” said Pathway co-founder Zuzanna Stamirowska.
There are rumors in Paris that if Mistral wants its resources to have a global impact, it will have to be sold to a US giant, much like the UK’s DeepMind was acquired by Google in 2014.
Unlike their post-Brexit rivals, French AI startups must contend with the higher regulatory burden of the EU’s AI bill. But some entrepreneurs believe the legislation will help build trust and boost creativity. “This is not only bad for Europe. It can drive better innovation.
Without this optimism and ambition, nothing would be possible. But after benefiting from some helpful tailwinds over the past few years, the French tech sector now faces tougher headwinds. This year will put France’s entrepreneurial mettle to an unprecedented test.
john.thornhill@ft.com
