June 15, 2024

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Today's Smart Brevity™ count is 766 words — a 2.9-minute read.

1 big thing: AI à la française

Illustration: Natalie Peeples/Axios

Mistral AI captures most of the French AI headlines and just raised €600 million at a reported €5.8 billion valuation this week, but it's far from the only AI startup in Paris.

Why it matters: Investors from Silicon Valley and beyond have definitely noticed AI's growing taste for croissants.

By the numbers: In the first five months of this year, French AI and machine learning startups have raised a total of $1.14 billion in funding across 19 deals that include U.S. investor participation, per PitchBook.

  • Overall, French AI startups have raised $1.27 billion in funding across 52 deals in that same period.

The big picture: Beyond Mistral, H (formerly Holistic AI) and Poolside have raised big rounds in the past year, with a growing number of smaller AI startups cropping up in France as well.

Zoom in: French AI insiders attribute the current moment to a few things:

  • Education: French universities have strong math and engineering programs, churning out graduates well-suited to working on advanced AI tech. "Math expertise was not that important on the world stage until now," Algolia co-founder and Y Combinator partner Nicolas Dessaigne tells me.
  • AI research: Companies like Meta and Google have set up key AI research labs in Paris, helping the local AI talent flywheel go even faster in recent years. Most recently, Google opened a new lab in Paris, while billionaires Xavier Niel, Eric Schmidt, Rodolphe Saadé and others have funded Kyutai, a nonprofit research organization.
  • Government: The French government, especially under President Emmanuel Macron, has been supportive — even proactive — about growing the country's tech and startup industry. Bpifrance, the country's public investment bank, has also been instrumental in financially supporting French startups.
  • Mindset: More French technologists are taking the entrepreneurial plunge as the local startup industry grows, culture evolves, and some government unemployment benefits provide aspiring founders a safety net.

What they're saying: "It feels like a bunch of folks had this 'Oh, shit!' moment with the Mistral round — the U.S. doesn't have a monopoly on monster rounds and now I have pay attention to France," says Antoine Moyroud, a partner at Lightspeed Venture Partners.

  • But: "To almost anyone who has been in the French ecosystem, it's been in the making," explains tech entrepreneur Liam Boogar-Azoulay, who also co-founded Rude Baguette, an early French startup tech blog.

Between the lines: This is a big change from the previous era, when virtually all tech entrepreneurs would set out for the U.S. to build their companies.

  • "We could never have raised money in France with this kind of consumer project, with no monetization, saying we were creating a virtual friend for teenagers," Hugging Face co-founder Julien Chaumond recently told Sifted about the company's initial focus as a chatbot.
  • The company set up shop in New York City after getting some seed funding from Betaworks, but today it has a large office in Paris.

Yes, but: As in the rest of the world, there is the question of how to best finance the compute resources AI companies inevitably need, says Atomico partner Laura Connell.

The bottom line: Those American VC firms that set up European offices a couple of years ago are surely glad they did.

2. Yes, but...

Illustration: Sarah Grillo/Axios

France may be a hotbed for AI startups now, but the U.S. remains king in some (French) folks' opinion.

What they're saying: "[Any] group of French founders, who doesn't have a reason to be in France, then I'd encourage them to come here," Algolia's Dessaigne tells Axios.

  • Algolia moved to San Francisco in 2014 when Dessaigne and his co-founders attended Y Combinator's startup accelerator program, where he's now a partner.

Moreover: France-based companies "need to go to the U.S. to find customers and early adopters," notes tech entrepreneur Liam Boogar-Azoulay.

The bottom line: "Silicon Valley is still 10 times faster to adopt AI," he adds.

  • "What Silicon Valley VCs know is how to see the next wave of innovation, and what's more important is to put in your chips, not to optimize your bets" the way European VCs tend to do.

📚 Due Diligence

  • There's something going on with AI startups in France (TechCrunch)
  • How Mistral became French for AI (Axios)
  • France is an AI hub, but a wrinkle in tax policy is holding it back (Semafor)

🧩 Trivia

In lieu of trivia this week, tell me who are your favorite French tech companies that have made an impact on the country's startup ecosystem!

🧮 Final Numbers

A line chart that displays the annual French AI&ML VC deal activity with US investors from 2014 to 2024. The deal value increased dramatically from $1.9 million in 2014 to a peak of $1.35 billion in 2021, then dipped to $733 million in 2023, and rose again to $1.14 billion in 2024. The deal count also increased from 2 in 2014, to a peak of 58 in 2022.
Data: PitchBook; Chart: Axios Visuals
  • Note: The above data doesn't include Mistral's latest funding round from this week (data is as of May 29).

🙏 Thanks for reading! And to George Moriarty and Jay Bennett for editing. See you Monday for Pro Rata's weekday programming, and please ask your friends, colleagues and French techies to sign up.