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In contrast to the gloomy mood in much of France these days, optimism and ambition fill the air at the cavernous business incubator Station F in Paris. Since opening in 2017, the world’s largest startup campus has nurtured 7,000 businesses, including two unicorns: AI company Hugging Face, now based in the US, and healthcare insurer Alan.
Talk to the founders of AI companies at Station F and it’s hard to resist their enthusiasm for the technology’s potential and France’s attractions as a place to start a company. Of the incubator’s 40 best-performing startups, 34 have artificial intelligence at the heart of their business. The rapid emergence of Mistral, the now $6 billion Paris-based AI startup that has developed one of the world’s most impressive foundation models, has also given them plenty to cheer about.
“Europe can create competitive AI models today,” Xavier Niel, the French investor in both Station F and Mistral, recently told the FT. “I think we can create great things with a few hundred million euros.”
A lot is going right in France’s startup world. The country’s education system trains an endless chain of talented engineers. Paris is competing with London as Europe’s AI hotspot. Business culture in France has transformed over the past two decades, making it acceptable, even fashionable, to be an entrepreneur. Venture capital is more readily available than ever before. Despite his problems elsewhere, President Emmanuel Macron has been an active champion of the sector.
Unlike most large US AI companies, French AI start-ups favor open-source models that encourage greater collaboration and wider access to technology. This, they hope, will give them a competitive edge in applying AI to almost every sector of the economy.
But the question remains: Can France’s vibrant tech sector overcome the political turmoil and economic uncertainty plaguing the rest of the country?
The young founders of the Station F start-up have few doubts. Historically, French entrepreneurs have been much more successful at building companies in the US than in France itself, but that is changing now, says Thomas Le Corre, chief executive of edtech startup Rakoono. He studied at the HEC business school in Paris and at the University of California, Berkeley. “I strongly believe in European technology,” he says.
The country’s abundant technical capabilities are a perfect match for the AI industry, making France a great place to build a tech business, adds Joel Belafa, chief executive of Biolevate, an AI-enabled therapeutics research company. “For a long time, France has built a culture of engineering,” he says. Comparably qualified engineers in the hot American market, he thinks, can cost five to eight times as much.
However, momentum in the French tech sector slowed last year, partly as a result of political turmoil resulting from divisive parliamentary elections. Data from Sifted, the FT’s sister publication, showed that French start-ups 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 technology sector has made, the US still exerts a powerful gravitational pull. Paris artificial intelligence startup Pathway announced last month that it was moving its headquarters to the US to be closer to its biggest customers. “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 swirling around Paris that Mistral itself will have to be sold to a giant American company if it wants the resource to become globally relevant, just as Britain’s DeepMind was bought by Google in 2014.
Unlike their UK competitors after Brexit, France’s AI startups have to deal with the higher regulatory burden of the EU’s AI Act. But some entrepreneurs argue that legislation can help build confidence 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 such optimism and ambition. But having benefited from some headwinds over the past few years, the French tech sector is now facing stronger headwinds. This year will test France’s entrepreneurial skills like never before.
john.thornhill@ft.com
