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In contrast to the gloomy atmosphere in much of France these days, optimism and ambition permeate the air at Paris’ cavernous business incubator Station F. Since opening in 2017, the world’s largest startup campus has incubated 7,000 companies, including two current unicorns: U.S.-based AI company Hugging Face and health insurance company Alan.
When you talk to the founders of AI companies at Station F, it’s hard to contain their enthusiasm for the potential of the technology and the appeal of France as a place to start a company. Of the incubator’s 40 best-performing startups, 34 have AI at the core of their business. The rapid rise of Mistral, a Paris-based AI startup currently valued at $6 billion that has developed one of the best foundational models in the world today, is also giving them plenty to cheer about.
“Europe can produce competitive AI models today,” Xavier Niel, a French investor in both Station F and Mistral, recently told the FT. “I think you can build something big with a few hundred million euros.”
A lot is going well in the French startup world. This country’s education system produces an endless supply of talented engineers. Paris is competing with London as Europe’s biggest AI hotspot. French business culture has changed over the past 20 years, making it acceptable and even fashionable to be an entrepreneur. Venture capital is more easily available than ever before. President Emmanuel Macron remains an active champion in this area, despite problems elsewhere.
Unlike many large US AI companies, French AI startups favor an open source model that fosters greater collaboration and broader access to technology. They hope this will give them a competitive edge in applying AI to almost every sector of the economy.
But questions remain. Can France’s vibrant tech sector overcome the political turmoil and economic uncertainty plaguing the rest of the country?
Station F’s young startup founders have few doubts. Historically, French entrepreneurs have been much more successful by founding companies in the United States than in France, but that is now changing, said Thomas Le Collet, CEO of edtech startup Lacuno. he says. He studied at HEC Business School in Paris and the University of California, Berkeley. “I’m a big believer in European technology,” he says.
The country’s wealth of technical skills is a perfect fit for the AI industry, making France the perfect place to build a technology business, adds Joel Belafa, CEO of AI-enabled therapeutics research company Biolevate. Masu. “France has long had an engineering culture,” he says. He calculates that similarly qualified engineers in the competitive U.S. market could cost five to eight times more.
Still, momentum in France’s technology sector slowed last year, in part due to political turmoil resulting from a divided parliamentary election. French startups raised just €3 billion in funding in the second half of 2024, down from €5.9 billion in the first half, according to data from the FT’s sister publication Sifted. The latest Global Startup Ecosystem Index ranks France as the 8th most successful startup country in the world, up from 12th place in 2020, but still ahead of the UK, Sweden and Germany in Europe. It’s a situation that is out of reach.
No matter how advanced France’s technology sector is, the United States still exerts a powerful gravitational pull. Parisian AI startup Pathway announced last month that it would move its headquarters to the United States to be closer to its largest customer. “We need to be in the room where it happens, and it happens in the Bay Area,” Pathway co-founder Zuzanna Stamilovska said.
There are rumors in Paris that Mistral itself may have to sell itself to a giant American company if it wants to make its resources globally available, similar to how Britain’s DeepMind was acquired by Google in 2014. It’s flying around.
Unlike their UK competitors post-Brexit, French AI startups will have to contend with the regulatory burden of EU AI law. But some entrepreneurs say the bill will help build trust and boost creativity. “This is not only negative for Europe; it can drive better innovation,” says Samuel Bismut, co-founder of software license management company Corma.
Without such optimism and ambition almost nothing can be achieved. However, while the French technology industry has benefited from some beneficial tailwinds over the past few years, it now faces even stronger headwinds. This year will test France’s entrepreneurial mettle like never before.
john.thornhill@ft.com
