„France is the European champion in AI“, was a recent headline on the information portal „Facta.Media“. According to an analysis by venture capital fund Accel and data provider Dealroom, the country is ahead of both Europe and Israel when it comes to financing startups specialising in generative artificial intelligence. According to the analysis, French AI hopefuls raised 2.29 billion dollars between 2014 and the end of May this year. But now investors and company founders are wondering what the future holds for France.

The eurozone's second largest economy is actually ideally placed to become one of the most important AI hubs in the world. This is also thanks to President Emmanuel Macron, who pledged to turn France into a startup nation after his first election in 2017. AI is a strategic priority, he once again emphasised when he visited the start-up trade fair Vivatech in Paris at the end of May. Last year alone, 17 AI projects were established in Paris.

France has also been the frontrunner in Europe for foreign investment for some time now. AI startups are also benefiting from this. For example, Mistral, Hugging Face and H, formerly known as Holistic AI, together raised an estimated 1 billion euros in 2023. Mistral is now valued at 5.8 billion euros since a recent financing round raised 468 million euros. The European beacon of hope for generative AI, which is backed by Nvidia, Salesforce, Samsung and IBM, is just one year old. In addition to General Catalyst, Lightspeed, Andreessen Horowitz, Bpifrance, and BNP Paribas have also recently invested in Mistral. Microsoft is also involved.

Investors see a crucial locational advantage in the academic environment in particular. „France has great colleges and universities that offer cutting-edge machine learning and AI capabilities, which are currently very much in vogue,“ says Julien-David Nitlech from Iris, a European growth and venture fund. „Universities like the École Normale, Centrale Supélec, École Polytechnique and the preparatory classes put a big focus on maths, on deep maths. A lot of amazing talent comes out of them.“

The potential of this talent pool has attracted the attention of foreign tech giants. Meta kicked things off with Fair (Facebook Artificial Intelligence Research), a research laboratory specialising in AI. Google, Fujitsu, Samsung and IBM now also operate similar labs in Paris, as does Kyutai, a project supported by billionaires Xavier Niel (Iliad), Rodolphe Saadé (CMA CGM) and ex-Google CEO Eric Schmidt. They are also among the investors in Mistral.

However, the early elections have now caused unease among investors, reports Marianne Tordeux from the start-up association France Digitale. On the one hand, investors are worried about the possible election victory of the far-right Rassemblement National (RN). Behind closed doors, however, representatives of French tech are also concerned about the far-left party La France Insoumise (LFI), which is part of the left-wing alliance Nouveau Front Populaire. „US investors are waiting for 7 July to find out what will happen then – they are very worried because France must remain attractive to foreign talent,“ says Tordeux.

In fact, the country is also reliant on immigration for its tech ambitions. According to the association, one in five start-ups has already used the „French Tech Visa“, a kind of fast-track entry procedure to bring employees from non-EU countries and their families into the country without complications. The visa also applies to those who want to set up a company in France themselves or act as an investor. „Without engineers and developers from India, Morocco, Algeria, Ukraine, Syria, Uzbekistan, the Philippines or the USA, our companies would be deprived of a wealth, a source of innovation and diversity that is essential for our competitiveness,“ explained France Digitale boss Maya Noël in Les Echos, warning against nationalism and extremism.

„It makes a difference whether it takes three weeks or three months for someone from the USA or India, for example, to start working for you,“ says Tordeux. This is another reason why Paris has been able to establish itself as a strategically important region for the development of artificial intelligence. „Marine Le Pen's Rassemblement National has already made it clear that she wants to abolish the French Tech Visa – even if there is a shortage of skilled labour in the industry concerned.“

It is not the only plan of the far-right party that is giving the French tech industry – which, according to France Digital, has created more than one million jobs in the past seven years – a stomach ache. The RN also wants to impose stricter controls on foreign investment. However, these enable French companies to grow and finance their expansion, according to a recently published paper by the association. In business, you need partners wherever you want to expand with your company – for example, in the USA or Asia. The initiative is therefore „not sensible“, in the view of the association.

In the scene itself, however, despite concerns about more isolation, there are not yet any founders sitting on packed suitcases. At least none of the companies in Iris' portfolio have yet considered moving away, says Managing Partner Nitlech. „The start-ups want to keep part of their DNA in Europe, where there are also some great incentives for start-ups," he says.

Other regions, such as the USA, would pose different challenges for entrepreneurs. „In America, for example, tech companies have to be able to keep up with the horrendous salaries of rivals such as Google or OpenAI,“ Nitlech adds. The political situation there is also not much more manageable. „Ultimately, markets have to be played from everywhere.“