In the wake of the broader venture capital slowdown, deeptech startups—long seen as engines of breakthrough innovation—are feeling the pinch. For now, this strategic sector is staying afloat thanks to public support.
Is the venture capital downturn spilling over into the deeptech ecosystem? In France, recent figures seem to support that view. After five years of continuous growth, during which deeptech helped pull the entire venture market forward, investments in the sector fell by 23% in 2024, totaling €3.2 billion, according to Bpifrance data.
And the slump appears likely to persist: in the first five months of 2025, startups in the sector raised only €882 million. “Deeptech has been more resilient than the rest of venture capital, but it’s now being hit by the same challenges,” says Pascale Ribon, director of deeptech at Bpifrance. “After years of strong momentum, investors are now much more cautious,” she adds.
Bpifrance to the Rescue
What’s more, funding is becoming increasingly concentrated among a shrinking number of companies. Bpifrance has recorded only 65 venture capital deals in the deeptech segment so far in 2025, compared to 270 in the previous year and 357 in 2023. “We’re seeing a concentration effect where capital is flowing into select projects—particularly in artificial intelligence—at the expense of other segments like climate tech and industrial ventures,” explains Philippe Rodriguez, founding partner in charge of deeptech at Avolta Partners.
Indeed, in 2024, funding fell by 63% in greentech and 61% in industrial tech. This negative trend can partly be attributed to the political and economic instability across Europe. “Greentech is a segment with high entry barriers that depends on regulatory progress. At the same time, industrial startups require large investments and a stable economic context,” says Ribon.
Compounding the issue is a highly strained fundraising environment. “2024 was a very tough year for venture capital in terms of fundraising—several funds saw their closings delayed or failed to reach their target sizes altogether,” acknowledges Anne-Sophie Carrese, managing partner at Elaia. In this context of scarce private capital, public support remains critical for the future of the deeptech sector.
As with the rest of the VC ecosystem, Bpifrance remains the primary engine behind French deeptech. In 2024, the public investment bank deployed €400 million in direct investments and €474 million through fund-of-funds. According to several observers, the institution accounts for between one-third and half of the capital raised by deeptech venture funds. “Today, the sector simply cannot survive without state support,” concludes Philippe Rodriguez.
In its most recent report on deeptech, the French Ministry of the Economy (Bercy) estimates that the sector will require €30 billion in public and private funding by 2030. “Public authorities and institutional investors have understood that deeptech is a sector that must be supported, as it addresses major challenges such as decarbonization, the future of agriculture, the ecological transition, and technological and industrial sovereignty,” argues Pierre-Emmanuel Struyven, Managing Partner at Supernova Invest. Today, the sector simply cannot survive without government backing.
Crossing the growth barrier
These funds must also support the move upmarket of the French deeptech sector. While it currently ranks fourth globally—behind the United States, the United Kingdom, and China, all of which benefit from strong public support—it still lags in maturity compared to its rivals, particularly those in the U.S.
Bpifrance estimates that around 40% of capital raised by French deeptech companies comes from seed or Series A rounds, compared to just 20% in the United States. “The early-stage segment remains largely untouched by the current deeptech hype. Startups developing breakthrough innovations at the seed stage are valued more reasonably, making them less risky for investors,” explains Anne-Sophie Carrese. These early rounds are still predominantly financed by French investors, including VCs, family offices, and business angels.
However, scaling up requires international investors. Mistral AI has largely benefited from this dynamic in its recent mega-fundraises. Its €385 million round in December 2023 was led by American firm Andreessen Horowitz, while its subsequent €600 million round, closed in June, was co-led by U.S. investors General Catalyst and DST Global. The same applies to its competitor H (The “H” Company), which raised €203 million in May 2024 from U.S. VC Accel, alongside Bpifrance’s Large Venture fund and a roster of corporates such as Amazon and Samsung.
This dependence on American investors is primarily …due to the shortage of growth capital in the French venture ecosystem. “Seed funding is plentiful, but we lack investors capable of writing checks of up to €50 million or more,” says Olivier Tonneau, partner at Quantonation. “Among certain French institutional investors, there’s still a perception that deeptech is an immature and therefore riskier segment,” adds Anne-Sophie Carrese.
Initiatives like Tibi 1 and 2—which aim to channel billions from institutional investors into tech-focused funds—can help support this scale-up phase. But the needs remain substantial. “Redirecting the savings of large institutional investors toward deeptech is one of our core priorities,” confirms Pascale Ribon. “There is currently a joint reflection involving public authorities and all private sector stakeholders, which should lead to concrete proposals by the end of summer,” she reveals.
Toward European consolidation
One way to attract LPs is to multiply exit events, reassuring them about future distributions. In 2024, most exits occurred via sales to corporates. More importantly, the sale prices are significantly higher: while the average exit value stood at €39 million between 2015 and 2019, it reached €118 million over the past five years.
“Given the drying up of IPOs, the dominant exit model is now sales to corporates,” confirms Pierre-Emmanuel Struyven. “This is especially true in healthcare, where large incumbents have outsourced a portion of their innovation to startups.” A telling example is Amolyt Pharma: backed since 2015 by major names like Sofinnova, ICG, Andera, and Kurma Partners, the endocrine disease-focused biotech was acquired by AstraZeneca for $1.05 billion in March 2024.
But such sizable exits—like that of Preligens, bought by Safran at a €220 million valuation—remain the exception rather than the rule. In addition to the still-limited maturity of startups, which keeps them off the radar of corporates, the sector also suffers from a lack of European tech giants. “We’re missing major players like Google, Amazon, or Nvidia, capable not only of investing billions into the ecosystem, but also of acquiring the most promising startups,” laments Olivier Tonneau.
Can such tech giants emerge through sector consolidation? “We’re not quite there yet,” the fund manager qualifies. According to him, “in sectors like artificial intelligence or quantum technologies, we already see four or five potential consolidators across the continent. If consolidation is to happen, it will necessarily occur at the European level.” So be it.
Exceptional Fundraisings
Despite the overall gloom in the venture capital space, some French gems continue to stand out. In 2024, for instance, Mistral AI secured a €468 million Series B round led by Lightspeed Venture Partners, while Poolside raised $500 million from Adams Street Partners, eBay, and Stepstone. However, since the beginning of the year, only the spacetech firm Loft Orbital ($170 million) and the quantum computing specialist Alice & Bob (€100 million) have managed to close funding rounds exceeding €100 million.
To read the full article: https://capitalfinance.lesechos.fr/analyses/dossiers/la-deeptech-francaise-cherche-son-second-souffle-2169038
