Welcome to French Tech Updates! Your weekly source of startup, VC, and tech news and insights. I’m James, a startup-obsessed American living in Paris.

Where can European startups win? 🏆

At the end of this week’s newsletter is an article from the Financial Times about French AI unicorn Mistral. It’s well worth a read in full, but the gist of the story does not paint a rosy picture for the company. The FT describes Mistral, “Europe’s great hope for AI” as a company stuck in an impossible position. After raising over €1 billion at a most recent valuation of €5.8 billion, Mistral is firmly established as the largest and best-funded company creating AI foundation models in Europe…but, the FT questions for how long this can last?

While it sounds like a lot, compared to Mistral’s rivals in the US, €1 billion of funding is almost nothing. With almost $11 billion in total funding to date (including debt), San Francisco-based Anthropic is apparently in talks to raise another $2 billion this year. Not to be outdone, OpenAI, with $17 billion (including debt) raised to date, is rumored to have a new $40 billion round in the works. From this perspective, Mistral appears woefully underfunded to compete globally.

But then DeepSeek released their R1 model and, in a mater of days, reduced tech stock valuations by an astronomical $1 trillion as the market wrestled with the possibility of best-in-class AI models trained at a cost measured in millions instead of billions of dollars. Suddenly, companies with $1 billion plus in funding to build foundational models appeared woefully overfunded.

Neither of these scenarios helps Mistral, especially not the first one where US competitors can simply spend their way to market domination. Scenario two opens the door for Mistral to prove they can achieve more with less, but keeping up with Asian competitors would require the company to move with levels of speed and aggression that have so far been absent in their short history.

That’s not to say that Mistral is giving up, especially not with co-founder Arthur Mensch talking about a future IPO in an interview just days ago, but it does appear Mistral is currently in a race against reality. Either the company needs to change their circumstances and drastically increase their pace or they need to drastically increase their funding.

In the example of Mistral I see a reflection of the entire playing field for European startups—out-funded by US rivals and outpaced by scrappy upstarts in developing markets. While it may be enough for some companies to build their business solely in Europe, insulated from global rivals, in any industry where external competition can enter the European market there is a massive threat of being outcompeted.

To reduce this threat will require cooperation across the entire European startup ecosystem—from governments to governing bodies, investors, and founders. As a starting point, I encourage you reading this to ask yourself “where and how can European startups win?”

How can Europe leverage its strengths (prioritization of responsible growth, focus on environmental protection, research and development hubs, and government programs to name a few), to build a stronger environment for its startups? If the key players in Europe cannot answer these questions together then the reality of a place stuck in an impossible position, like that of Mistral, will not change.

With that, let’s jump into the rest of this week’s update.

📝 Quiz: A recent study from France Digitale found that France has the most AI startups in continental Europe. How many French AI startups did the study list?

(answer at the bottom of the newsletter)

• A.) 492

• B.) 751

• C.) 843

• D.) 1,217

What’s new this week in 🇫🇷

• 🤗 Hugging Face plans to open source DeepSeek’s R1 model: In response to the Chinese upstart’s market shaking model released last month, Hugging Face researchers are now working to fully recreate an open sourced version.

• 😰 Agronutris holding company EAP group enters safeguard proceedings: The 14-year-old insect protein company, which creates food for fish farms and pets, had been struggling to raise funds prior to the announcement.

• 📉 France’s GDP shrank 0.1% in Q4 of 2024: this negative shift, the steepest since Q1, 2022, was partially driven by a return to normal after higher than average growth of 0.4% in Q3 during the Olympic Games. However, 2025 doesn’t look much better with growth projected to lag behind peers and lingering uncertainty over the national budget still hanging over parliament.

🌍 Headlines from around the world

• Boom goes supersonic (CNN)

• Microsoft and Perplexity consider buying TikTok in the US (CNBC)

• DeepSeek under investigation(s) (Reuters)

• Sam Altman admits OpenAI was ‘on the wrong side of history’ in open source debate (VentureBeat)

• Apple asks court to halt Google search monopoly case (The Verge)

• Meta’s Reality Labs posted a $5 billion loss in the fourth quarter (CNBC)

• ‘Building blocks of life’ found on alien asteroid, scientists say (The Independent)

• China’s Alibaba joins AI battle, says new model superior to ChatGPT, DeepSeek, Llama (Interesting Engineering)

New Funding 💶

14 companies announced €249.4M in new funding over the last week including €2M by HappyVore (alternative meat) and €1.5M by OFFROAD (road and public space management).

Events This Month 🗓

• Digital Trust Day at Station F – February 6

• Backlash ESG : Quel avenir pour la finance durable ? – February 6

• IA et Énergie : quand vos données passent au vert ! – February 12

• Early Builders, From early employees to C-levels: Story of Partoo – February 13

• Techstars Climate Coffee in Paris – February 13

• AI Agent Day at NFT Paris – February 15

• Community Apero at Climate House – February 26

Interesting Jobs 👩‍💻

• 👩‍💼 VC Analyst (internship) @Breega

• 🔨 Product Manager @ Craft AI

• ⚙️ Growth Operations (remote) @ Hugging Face

• 🛠️ Senior Product Manager @ Pigment

• 🫡 Chief of Staff @ Pennylane

• 📊 Director of Product Marketing @ Mirakl

• 📈 Head of Acquisition & Performance Marketing @ ManoMano

• 👨‍💻 Staff Platform Engineer @ Swan

What Else I’m Reading 📚

• The AI Dividend: Why 2025 Will Be The Year of Killer Apps (Jeffrey Bussgang)

• John Long’s Marketing Decks (John Long)

• Video: State of Startups 2024 (Peter Walker)

• Has Europe’s great hope for AI missed its moment? (Financial Times)

• Julie Huguet’s plan for French tech (Decideurs Magazine)

Quiz Answer: B.) 751

These startups collectively employ 36,000 people with an average team size of under 10 employees with 92% planning to hire additional team members in the next 12 months.

Interestingly, the largest barriers identified by these startups are both related to funding accessibility followed by the size of the French market and recruiting talenrt.