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.

👉 Before getting started with this week’s post I could use your help. If you have 2 minutes please answer these 2 questions to help improve French Tech Updates! 🙌

Beware of trend traps 🔮

In equities investing a value trap is a stock that looks attractive on paper but really isn’t. These stocks often appear as bargain buys with low price to earnings multiples, price to book ratios, or other key metrics investors use to determine if an investment is over or under priced. Low multiples can be the sign of an underpriced company and a potentially lucrative investment. In the value trap company these low multiples are actually a sign of underlying danger. Investors who pour money into these stocks expecting a great return end up trapped when the expected price increase never materializes and they are forced to exit—often at a loss.

For venture investors, a similar phenomenon exists: the trend trap.

A trend trap bears many similarities to a value trap. Companies in this category also bear the hallmarks of great venture investments:

• These companies are growing rapidly, often exponentially.

• They operate in a promising, often new, sector.

• The companies are riding the wave of a large, underlying trend.

• Other investors are already scrambling to get in on the deal.

In reality, trend trap companies are riding little more than hype and hope—an unstable scaffolding that threatens to crumble at the first signs of progress not going exactly as planned. And, with startups, things rarely go exactly as planned.

The history of venture investing is littered with the debris and scars from trend trap investments. Take Clubhouse, a recent example of how these stories usually play out. Launched in 2020, fueled by intense growth during the pandemic, and backed by $110m in venture capital Clubhouse looked like the next big winner in consumer social apps.

One year later, articles appeared with titles like “The Drop-In Audio App Clubhouse Is Dying. It Was Fun While It Lasted.” Three years later, Clubhouse laid off half of their staff. The struggling company may still be able to stage a comeback (never say never), but the odds are stacked against them. In the meantime, Clubhouse’s investors remain underwater after pouring money into the company at peak valuations.

With more news that BeReal may be running out of runway, we may be witnessing the next trend trap playing out as the once-hot social app struggles for survival. In some ways, this struggle isn’t surprising. BeReal is a free app whose leadership has actively shunned advertising revenue, going so far as to say “we don’t have ads…working with brands is not our priority.” 

In the first part of the trend cycle, BeReal was able to raise $90m, including a $60m Series B in 2022. Now, with usage reportedly dropping and VC money harder to come by, the trend trap may be closing on that $90m investment.

With that, let’s jump into this week’s update!

📝 Quiz: Globally, 312 early-stage deals (seed to Series A) were closed in April. Nearly 10% of these deals were funded by the three most active investors. Who were those investors?

(answer at the bottom of the newsletter)

• A.) a16z, Y Combinator, Accel

• B.) Entrepreneur First, Techstars, Sequoia

• C.) Soft Bank, SFC Capital, Kima Ventures

• D.) Y Combinator, Antler, BPIFrance

What’s new this week in 🇫🇷

• 🤖 Mistral is raising a new $600m round: The AI darling is reportedly seeking a $6 billion valuation, triple the valuation just six months ago.

• 🚀 Deel and Lab RH are launching an incubation program at Station F: The new program, focused technology for HR, is kicking off with 15 startups.

New Funding 💶

Three companies raised €296m in the last week

Exits 🚪

Events This Month 🗓

• May 14: HR Tech Morning 2024

• May 21: Women in Tech Paris - OutGeekWomen

• May 22-25: Vivatech 2024

• May 23: La French Tech Europe Gathering

• May 31: Paris Entrepreneurial Network

Interesting Jobs 👩‍💻

📲 Product Manager @ Folk

👷‍♂️ Corporate Development Project Manager @ Qonto

🤝 Partnership Manager, Europe @ Greenly

📈 Head of Growth (remote) @ Mindeo

📣 Global Director of Brand & Communications @ PayFit

What Else I’m Reading 📚

• The modern Manhattan project? (Ethan Mollick)

• The man who killed Google search (Where’s Your Ed At)

• Shadow Divers, risking everything to solve one of the last mysteries of WWII (Robert Kurson)

• SoftBank sells off Vision Fund assets as Son pivots to AI, chips (The Business Times)

• France reclaims record for the world’s longest baguette (NBC News)

• Why Sweden has so many billionaires (BBC)

• Fighting the smartphone ‘invasion’: the French village that voted to ban scrolling in public (The Guardian)

Quiz Answer: D.) Y Combinator, Antler, BPIFrance

Y Combinator closed 17 deals in April, including 2 with French companies, while Antler and BPIFrance closed 7 deals each. See below for a full breakdown of the most active early-stage funds in April.