So far, they have been the exception rather than the rule. Faced with a global shortage of funding, French companies nevertheless continued to attract investors. This is no longer the case, according to the latest French Tech Barometer published by EY. The experts at AURIS Finance, a consultancy specialising in mergers and acquisitions, explain why.
In the first half of the year, French start-ups managed to raise €4.26 billion. This represents a decrease of 49% compared to the same period last year (€8.4 billion raised in the first six months of 2022).
Record fundraising increasingly rare
The start of 2022 was marked by some exceptional fundraising. Three young French start-ups stood out in the race for funding. In January 2022, fintech Qonto raised €486 million. A few days later, it was the turn of French refurbished goods specialist Black Market, which closed a €450 million funding round. In the same month, Exotec became a unicorn after raising €335 million. It is interesting to note that these three funding rounds all took place in January 2022. After that date, record fundraising became less common. Although the amounts raised decreased between the first half of 2022 and the first half of 2023, the number of deals increased by 9% during this period. In the first half of 2023, French tech companies carried out 395 fundraising operations, compared to 362 a year earlier.
Towards greater caution
Following the sharp rise in key interest rates, the outbreak of war in Ukraine (on 24 February 2022) reinforced investors’ need for caution. Risk appetite among venture capital funds has dried up considerably. According to a study by management company Speedinvest, 84% of VC experts believe that unicorns are now overvalued. As a result, their decision-making time is getting longer: European venture capital investors now spend an average of 94 hours on due diligence. Several weeks or even months can elapse between the start-up’s pitch and the moment the deal is signed. This is a significant change in the timeframe, as in 2020 and 2021 it was not uncommon for a fundraising round to be completed in a matter of days.
Cleantech is on the rise
Fundraising may have fallen sharply, but there are still plenty of reasons for French innovative companies to be hopeful. In fact, France still ranks first in Europe, closely followed by Germany. Some sectors remain particularly attractive to investors. Cleantech companies, for example, have made remarkable progress, raising €1,170 million in the first half of 2023, up from €926 million a year earlier. Other sectors are becoming less attractive, such as fintech, where investment fell by 82% over the period.
Our experts at your service
French start-ups are not immune to the downturn in funding, but there are plenty of opportunities. In the race for funding, French companies stand out for the innovative nature of their proposals. But they need to know how to meet the demands of venture capitalists. Due diligence, valuation and pricing are fundamental steps that should not be overlooked. AURIS Finance experts are specialised by sector and will support you throughout your search for funding.
