• Paris has long lagged behind its European peers for VC investment. Now, the city is flush with unicorns.
  • Investing giants General Atlantic, Tiger Global, and Coatue all backed startups in France during a record-breaking 2021.
  • President Macron wants the country to boast 10 tech companies worth over €100 billion by 2030.

In the heart of the second arrondissement in central Paris sits The Hoxton, a hotel that has served as a meeting point for the French capital’s hottest tech founders and investors.

“I don’t know why people still bring founders here as if it’s a secret meeting,” one French investor told Insider, in a meeting at the hotel in question. “Surely they know investors will see them.”

The Hoxton, which first opened its doors in 2017, has acted as the stage for the explosive growth of the country’s tech sector. Gone are long, wine-laden lunches — investors sign funding deals for hot startups over the course of three to four days.

Around $11.9 billion was invested into French tech startups in 2021, double that of the year previous, according to data from Dealroom. France trails both the UK and Germany when it comes to tech investment. Investors pumped $37.1 billion into the UK in 2021, while German firms landed $18.9 billion.

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While the country is yet to usurp London as the epicenter of fintech, it has birthed its own unicorns — startups worth over $1 billion — in the sector in the shape of Qonto, Lydia, Swile, and Spendesk. France has had similar success in e-commerce in marketplace businesses like Ankorstore and Mirakl.

Silicon Valley funds are also upping their activity in France. One startup CEO who raised from early Apple backer Sequoia last year said there had been a rapid increase in the pace and size of deals, fuelling startups' ambitions to go global.

With a little help from the Élysée

Since 2012, France's public investment bank BPI France has been one of the largest cumulative backers of tech startups, giving the government a stake in the industry's growth.

President Emmanuel Macron, who is up for re-election on April 10, has been a major advocate of tech during his time at the Élysée.

He introduced a tech-specific visa to make it easier for international developers and engineers to come to France, and tweaked capital gains tax, which lowered the effective rate.

The French president, who was spoken of in fairly glowing terms to Insider, set out a goal of 25 unicorn startups by 2025, a target the country hit in January 2022. Now, he wants 10 companies valued at €100 billion ($113 billion) by 2030. The surge in $1 billion startups marks a seismic change in the country's tech ecosystem since 2015 when it crowned carpooling firm BlaBlaCar as its first unicorn.

The overall feeling of momentum has given entrepreneurs more confidence when negotiating with equity investors and given them to courage to shun even large, well-established funds if they appear ignorant.

"You can't turn up to a meeting unprepared as an investor anymore and say 'so tell me about your market,'" one French VC partner told Insider. "Founders are getting messages from dozens of investors so if they are in the conversation for funding they need to demonstrate they understand where things are going."

The drive to become less French-centric

While La French Tech, an organization made up of French startups, investors, and policymakers, President Macron, and many Parisians want to retain a distinctive je ne sais quoi, to benefit from increased international investment, Paris must become more international.

"For French tech to be successful we need Paris to be more international and less French-centric," said Raphael Vullierme, founder and CEO of insurance startup Luko over breakfast at The Hoxton. "Where maybe talent would have gone elsewhere in the past, London is now less attractive because of Brexit and Covid so Paris can win them over but we are still not as international as somewhere like Berlin."

Nicolas Benady, founder and CEO of Accel-backed embedded finance startup Swan, said his Paris-based company wanted to appear less French in a bid to ensure it had a broader mindset.

"We have insisted on being European from day one, with European talent, customers, and product localization," he said. "That's because the European venture scene, no longer fragmented into national ecosystems, is becoming one unified ecosystem."

La French Tech's success has lured top US investors

France's success has attracted major US investors, who are increasingly looking to Europe for returns.

General Atlantic, Tiger Global, Coatue, Bessemer, General Catalyst, and Dragoneer all made investments into French startups in 2021.

That's created a sink-or-swim dynamic for local investors, who must compete with well-funded American rivals for early-stage deals.

Some local funds have become deal flow conduits for the US funds, but in general ambitious founders looking to go international will find foreign funds more attractive. One Paris-based investor for a London fund said that conversations with ambitious founders at the early stage now involve talking up a fund's track record of helping startups grow into other countries, particularly the US.

US funds now participate in around half of deals above $20 million in France. It's a sea-change from previous US skepticism that France is riddled with high taxes and a system that prioritized worker rights over capital.

France is closing the gap with UK and Germany on tech investment. With a growing pipeline of ambitious founders, more funding, and improved access to talent, The Hoxton may need to set up a spillover lobby for meetings.