The start-up ecosystem is affected by the drying up of funding. In France, as in the United States, the number of companies going out of business in 2024 has risen sharply over the past year. Here are some explanations and analyses from the experts at AURIS Finance, a consultancy specialising in mergers and acquisitions.
The figures are not good. According to the Banque de France, 5.6% of mature start-ups in France went bankrupt between January 2023 and May 2024. According to French newspaper La Tribune, 128 innovative companies have gone bankrupt in the last eighteen months. In 2023 alone, 76 start-ups went out of business. All sectors have been affected, from biotech with Bioserenity and its 300 or so employees (saved from bankruptcy at the last minute by Jolt Capital) to mobility solutions with Cityscoot and temporary employment with specialist Iziwork. Across the Atlantic, start-ups are also suffering. According to data compiled by Carta and reported by the Financial Times, the number of start-up failures rose by 60% year-on-year in the first quarter of 2024. Between January and March, 254 innovative companies went out of business, compared with 161 a year earlier.
Mature companies
The downturn has mainly affected mature companies, i.e. those that have raised funds and are now entering the industrialisation phase. The youngest start-ups, on the other hand, are proving to be particularly dynamic: according to France Digitale, there are currently 13,000 start-ups in France. A huge ecosystem, but one that is struggling to move to the next level due to a lack of funding. The rise in interest rates has had a significant impact on the number of potential financial partners. Fewer projects are being funded, and investors are much more cautious about a technology’s ability to capture a market. In 2023, French start-ups managed to raise €8.3 billion, compared to €13.5 billion the previous year, a 38% drop year-on-year. The end of 2024 also promises to be difficult: the year is likely to end at the same level, with €4.3 billion raised in the first half of the year, half the amount raised in the first half of 2022.
Political uncertainties
In France, the uncertain political climate is prompting caution. The possibility of a reduction in public funding for French Tech companies is now widely anticipated by industry experts, leading to a particularly cautious and wait-and-see attitude.
AI Gen is leading the way in fundraising
Nevertheless, some companies continue to capture the imagination of investors. In 2024, French company Mistral AI raised a record amount of capital. Other companies also successfully completed their funding rounds: Docent raised €5 million for its AI solution for contemporary art, while DEEMEA raised €4 million in June 2024 for its image creating artificial intelligence.
Our experts at your service
Despite a downturn in 2024, young French start-ups are managing to find funding. But only if they focus on innovative solutions, particularly those based on artificial intelligence and offering real added value. AURIS Finance has experts specialising in different industries. We work with you in your search for financial partners and support you in the development of your business.
