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Compared to the morose mood in much of France these days, hope and ambition fill the air in the cavernous Station F business incubator in Paris. Since opening in 2017, the world's first major campus has grown 7,000 businesses including two unicorns: the AI company Hugging Face, now in the US, and health insurance company 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. In the incubator's The first 40 are doing well34 have AI at the core of their business. The rapid rise of the Mistral, A Paris-based AI startup now valued at $6 billion that has developed an impressive global foundation model, it also has a lot to be excited about.
“Europe can create a competitive AI model today,” Xavier Niel, a French investor in both Channel F and Mistral, he recently told the FT. “I think we can do great things with a few hundred million euros.”
There's a lot going on in the French startup world. The country's education system is training an endless chain of talented engineers. Paris rivals London as Europe's top AI destination. French business culture has been transformed over the past two decades, making it acceptable, even fashionable, to be an entrepreneur. Venture Capital is more readily available than ever. Despite his problems elsewhere, President Emmanuel Macron has been an active champion of the sector.
Unlike many US AI companies, French AI startups favor open-source models that encourage greater collaboration and wider access to technology. That, they hope, will give them a competitive advantage in using AI in almost every sector of the economy.
But the question remains: can France's powerful technology sector overcome the political turmoil and economic uncertainty that is plaguing the rest of the country?
The fledgling founders of Station F have a few doubts. Historically, French entrepreneurs have been more successful in building companies in the US than in France itself, but that is changing now, said Thomas Le Corre, chief executive of edtech start-up Rakoono. He attended the HEC business school in Paris and the University of California, Berkeley. “I'm a big believer in European technology,” he said.
The abundance of technical skills of the country is perfectly compatible with the AI industry, which makes France a great place to build a technical industry, adds Joel Belafa, chief executive of Biolevate, a research company for AI-enabled therapeutic research. “For a long time, France built a culture of engineering,” he said. Similarly qualified engineers in the US white hot market, he thinks, can cost five to eight times more.
Meanwhile, growth in France's tech sector has slowed over the past year, partly due to political turmoil caused by divisive parliamentary elections. Data from FilteredA sister publication of the FT, showed that French start-ups raised just 3bn billion in the second half of 2024, down from 5.9bn in the first six months. The latest Index of the Global Startup Ecosystem it places France as the eighth most successful country in the world, up from 12 in 2020 but behind the UK, Sweden and Germany in Europe.
Regardless of the progress made by the French technology sector, the US still exerts a strong influence. The Parisian AI Startup Road announced last month that it is moving its headquarters to the US to be closer to its biggest customers. “We need to be in the room where it's happening — and it's happening in the Bay Area,” Zuzanna Stamirowska, founder of Pathway, said.
Rumors are swirling in Paris that Mistral will have to sell to a major US company if it wants its resources to operate globally, just as Britain's DeepMind was bought by Google in 2014.
Unlike their competitors in the post-Brexit UK, French AI startups have to contend with the high regulatory burden of the EU's AI Act. But some entrepreneurs argue that the law can help build trust and foster creativity. “This is not just good for Europe. It can better drive innovation, says Samuel Bismut, founder of Corma, a software license management company.
Little can be achieved without such hope and ambition. But after benefiting from favorable tailwinds over the past few years, France's tech sector is now facing strong headwinds. This year will test the state of French business like never before.