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.

Budget bouleversé, business blessé 🤕

I had planned to start this week with a breakdown of venture funding in France and the dichotomous split developing between late and early-stage VC deals. If you’d like to see that piece you can still find it here. But, the announcement of the planned 2025 budget in France threw a wrench into that plan. In fact, the 2025 budget is having that effect on many plans this week.

If you, like me, weren’t closely following this story, here’s the 30 second recap.

• Part of the governing rules of The European Union state that no member country should have a deficit ratio higher than 3% of GDP or a debt ratio greater than 60% of GDP.

• Countries in excess of these ratios can face corrective actions in the form of excessive deficit procedures. These procedures lay out a plan to bring deficits back below the maximum allowed levels and give countries six months to start taking actions or face fines up to 0.05% of their previous year’s GDP.

• In June, the European Commission announced their intention to open excessive deficit procedures against France and six other member-states. With a deficit-to-GDP ratio of 5.5%, France’s deficit is the 4th highest on the list and has been in excess of the 3% maximum since 2020. For comparison, Italy ran the highest deficit-to-GDP ratio in the EU at 7.4%. (The US ran a deficit-to-GDP ratio of 6.1% in 2023)

• To bring the budget back into alignment, Michel Barnier has announced a plan to cut the deficit to 5% in 2025 with further reductions intended to reduce the deficit below 3% by 2027.

Included in the budget bill’s €60 billion of proposed cuts are €3 billion in budget reductions projected to affect French startups according to France Digitale. Sifted has an excellent summary here of the specific areas impacted by the cuts—including reductions or eliminations of R&D tax credits and a 20% reduction in funding from the France 2030 plan.

While I agree, in the long term, that French startups should be able to stand on their own with minimal government support, the reality is we’re just not there yet. And that doesn’t have to be a bad thing. When VC investment took a major hit in 2023, French startups were slightly insulated thanks to government support and initiatives like France 2030. To steal a line from Amazon, it’s still day 1 for French startups, and now is not the time to reduce support.

Another important reality facing French entrepreneurs is the long-standing funding gap between investors in Europe and the United States. As Speedinvest Partner Daniel Keiper-Knorr noted here, the assets of American funds are nearly 14X greater than funds managed by European investors. In short, European startups rely on foreign investment to compete with well-funded international rivals. A budget that makes the environment less friendly for French entrepreneurs certainly won’t help here either.

Fortunately, the 2025 budget bill is not yet final, and will go through several reviews which could still soften the measures impacting French tech. If not, it would be a great mistake to mortgage the future of French tech to pay for the present.

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

📝 Quiz: According to Carta data, what % of total capital raised went to Series A and Seed rounds in 2023?

(answer at the bottom of the newsletter)

• A.) 27%

• B.) 35%

• C.) 42%

• D.) 51%

What’s new this week in 🇫🇷

• 🛫 OpenAI to open Paris office: The new office, the company’s first in continental Europe, is expected to open later this year. OpenAI also announced intentions to open new offices in Brussels, New York City, Singapore, and Seattle.

• 🖥 Huawei launches sustainable development incubation program at Station F: interested companies can apply until October 31 to participate in the first batch of the program, which will focus on use cases for industrial, retail, and new-energy vehicle technology.

🌍 Headlines from around the world

• 👨‍🔬 AI pioneers win this year’s Nobel prizes in Physics and Chemistry (The Guardian)

• 📉 X’s (formerly Twitter) valuation is down 80% according to Fidelity (CNN)

• ✂️ Another 0.25% rate cut is expected from the European Central Bank this week (Morningstar)

New Funding Announcements 💶

12 companies announced €44M in equity funding the last week including €1.1M by Bloom Alternance (recruiting) and €1.1M by Kelkun (services marketplace). This week’s total excludes a €225 million debt round raised by Knave (fintech).

Upcoming Events 🗓

• Startups & Investors Networking à Paris – October 15

• VC Office Hours w/Alice Groth from Sista Capital – October 15

• AI Tinkerers Paris Meetup – October 15

• Greentech Meetup – October 15-16

• No Code Summit – October 16-17

• DotAI – October 17-18

• 11th Global Entrepreneurship Bootcamp – October 21-24

• French Tech Leaders EP03 - Jonathan Anguelov (live recording) – October 23

• Unleashing Europe's next scientific revolution (request an invite) – October 25

• Femmes & Numérique 2024 – November 14

• AI for Health – November 21

Interesting Jobs 👩‍💻

• 👩‍🎨 Creative Director @ Back Market

• 👩‍💻 Senior Product Manager - Circularity (B2B) @ Back Market

• 📈 Senior Marketing Manager France @ Payfit

• 📣 Head of Communication @ Quandela

• 🤗 Machine Learning Optimization Evangelist - EMEA remote @ Hugging Face

• 🤩 Internship program - Quantum computing: Theory, algorithms & systems @ Quandela

• 🌱 ESG Manager @ Electra

• ♟ Strategy & Operations Intern @ sunday

What Else I’m Reading 📚

• When luxuries become necessities (A Wealth of Common Sense)

• Harvard’s not-so-smart money: two decades of poor returns and rich pay (Bloomberg) – to this I add, maybe managing $40+ billion is just hard. While Yale, the other behemoth in this space, has seen much better returns over the last decade, Yale’s investments also produced negative returns in the past year.

• How AI Is transforming the future of retail (French Tech Journal)

• The elite college students who can’t read books (The Atlantic)

• Pandemic startups are thriving and helping fuel the economy (NYT)

• Deep dive: European data insights (Carta)

• Generative AI’s act o1 (Sequoia)

• If you’re so smart, why aren’t you rich? (MIT Technology Review) – interesting implications for investing.

New – Newsletter Recommendations 🫶

Quiz Answer: C.) 42%

Interestingly, while mega-rounds sized €100M or more have decreased in Carta’s US-focused dataset, they have actually picked up in France compared to last year. Read more about this phenomenon here.