FRANCE Trends and Developments Contributed by: Nicolas Karmin and Anthony Magagnin, Sullivan & Cromwell LLP
Challenging Times for the French Venture Capital Market The French venture capital (VC) market contin - ues to face the same issues as those observed over the past year, including more limited access to funding, fewer exit opportunities and a high - er number of distressed situations. However, despite overall negative trends, there are rea - sons to be cautiously optimistic that the French VC space will not be affected further by these challenges to any large degree in the coming months. Depressed VC Fundraising Activity in France While the European VC fundraising market proved fairly resilient in 2024, the French VC fundraising environment was very depressed. Across Europe, the number of VC funds raised in 2024 declined by about 21% against 2023, whereas, in France, the number of VC funds raised over the same period fell by about 37%. In terms of the amount of funds raised, the gap between France and Europe is even wider, with the European VC fundraising market very stable (down roughly 1% year-on-year) compared to a massive drop in France of about 57% year- on-year. This gap may be explained by various factors, including the highly unstable political environment in France since summer 2024. Following this massive decline in VC fundraising activity, available VC dry powder stands at its lowest since 2017. Weaker Deal Activity VC deal value remained fairly robust in France in 2024, despite a year-on-year drop of some 13%, with a total volume ranging below 2021, 2022 and 2023 levels, but above that of 2020. Europe outperformed France, with total VC deal value down just 8% roughly year-on-year. For many market observers, the drop in VC deal value not
only constitutes a sound normalisation of the VC market, where assets have been overvalued for some years, but also reflects a more selective approach among sponsors to acquisition tar - gets, with a particular focus on profitability. In terms of deal count, France was down about 24% year-on-year, its lowest level over the past five years at least, and compared with a decline of roughly 16% for Europe versus 2023. As equity funding has become scarcer over the past few months and investors more selective about targets, start-ups have had to find other means to address cash-shortage issues, such as cost-cutting, follow-on rounds from exist - ing investors, or new sources of financing (such as venture debt). The decline in the volume of standard equity fundraising transactions result - ed in no small part from this diversification of funding sources. Government Support for French VCs and Start-Ups Compared to other European jurisdictions, the French government is very supportive of the VC community. Government-backed bank Bpifrance has con - tinued to play a major role in the growth and stability of the French VC market. Over the past five years, Bpifrance has become the first VC investor in France in terms of deal count and the second limited partner in VC funds in France in terms of number of commitments. Bpifrance is heavily committed across the entire French VC segment, and also supports certain targeted initiatives to specifically pro - mote sub-sectors or positioning within the tech environment. For instance, in February 2025, it
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