The “Great Dismissal” will allow the emergence of a new generation of French start-ups

The disruptions that have shaken the financial markets for several weeks, and therefore the level of investments, are likely to have negative repercussions on the French technological ecosystem. It also brings opportunities.

As the French tech ecosystem struggles to recover from the correction in tech sector valuations, savvy founders and investors know that there is no better time to start a tech company. Instead of being a source of pessimism, this period could represent a springboard for the French ecosystem: it would be enough for reckless founders to decide to take the opportunity to mark the beginning of a new cycle for French startups.

Many thought the start of 2022 marked the height of French technological success. Indeed, after years of broken promises, the year 2021 and the first half of 2022 suggested that the French tech ecosystem was finally expressing its potential. The success of French unicorns like Alan has shown that tech companies can achieve multibillion valuations without leaving the home market. This has strengthened investor confidence in the growth potential of French startups, and several American and European funds have settled in the territory. As a result, French start-ups have reached record levels of investment, overtaking Germany and just behind the UK.

The recession, therefore, could not have come at a worse time in France. The latest analysis suggests that investment fell in the third quarter to levels not seen since 2017. The global macroeconomic context has seen France’s tech ecosystem set back five years compared to recent years. Late-stage funding rounds have therefore become rare and major venture capital funds have announced that they want to prioritize companies in their portfolio rather than backing new start-ups. However, founders who start their entrepreneurial journey have important assets to constitute a new generation of successful startups.

Unlike the late phase, investment in the early phase did not decline in Europe. In this period of market volatility and rising inflation, long-term investment in early-stage technology companies appears to be a less risky gamble. They need less capital and will reach their rapid growth phase in three or four years, when recession is likely to lag far behind us. Investors are looking for “value” now (healthy balance sheet, good unit economy, high risk-reward ratio) and pre-seed and seed funding rounds generally offer the best potential returns in this type of economic environment. With record levels of dry dust collected by early-stage venture capital funds, the capital is there, but in search of the right entrepreneurial talent. And that is why the investment slowdown represents an opportunity for the French ecosystem.

With some of the best scientific and engineering schools in the world, France is home to some of Europe’s greatest technical talent. This is both an advantage and a weakness, particularly given the diversity of talent, experience and ideas that fuel these inherently innovative companies. A former entrepreneur, I know how difficult it can be to find the right combination of co-founders within a start-up. I had to rely on my personal connections and colleagues, and I was lucky.

For a new generation of entrepreneurs

But we are witnessing a convergence of two factors that favor the emergence of a new generation of entrepreneurs. First, the Great Dismissal radically disrupts the relative homogeneity of talent in France. After the pandemic, employees are leaving their jobs at an unprecedented rate. They want to try new things, learn new skills and achieve their ambitions. This is creating a wave of highly skilled people looking for a new challenge – many are turning to entrepreneurship. Second, this wave of talent is reinforced by the slowdown in investment in late-stage technology. Mass layoffs at Europe’s most successful startups are injecting talent into the market with exactly the skills needed to build a tech startup.

So with venture capital firms like Antler working with entrepreneurs to exploit this transformation of the French landscape to create new start-ups and ensure they have access to early-stage funding, there is potential for unprecedented growth in France.

This gives rise to a new generation of savvy founders with access to funding and plentiful human resources. By applying the lessons of the recession to create businesses with real revenues, for real customers, and generate real returns, they will undoubtedly end the doom.

So for anyone in France wondering what impact the tech recession could have on their careers, or whether the Great Layoff should inspire them to change, my message is simple: today is the best time to create a startup. up in France and the future of French technology will be defined by those who saw the opportunities in the adversity of this recession.

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