France celebrates 25th unicorn in strong start to 2022 for tech sector

France triumphantly announced the country’s 25th unicorn on Monday, after the industrial company Exotec revealed that it had raised $335 million in funding to give it a valuation of $2 billion.

Lille-based warehouse robotics company Exotec helped French President Emmanuel Macron reach his target of 25 unicorns by 2025, three years ahead of schedule. To mark the occasion, Macron took to Twitter in a Steve Jobs-style turtleneck, crowing that French start-ups “change the lives of French people, create hundreds of thousands of jobs across France and are what make us sovereign!”

Exotec stands out from the rest of the software-dominated list in that it builds logistics hardware: automated, robotic arms and cranes that zip across warehouse floors to stack, sort and fetch goods – ironic, perhaps, in light of Macron’s announcement, as the company’s mission is to dispense of the need for workers on the warehouse floor.

There is some debate over which companies should actually be in the list, however. A unicorn is characterised as a start-up valued at over $1 billion that is yet to go public. The official French list includes OVHcloud, a cloud computing company that went public on the Euronext Paris stock exchange in October 2021.

Maddyness, an online media that publishes news about French companies and the country’s start-up scene, notably also lopped off photography company Meero from the list, saying that the €205 million euros it reportedly raised in 2019 was actually more like €130 million – bringing its valuation under the $1 billion threshold.

Alexandre Baradez, a market analyst at the trading platform IG France, was also sceptical about the inclusion of companies that have been around for over a decade.

“Deezer was created in 2007. By unicorn, we usually mean a young start-up that has grown rapidly, raised a lot of funds and reached a $1 billion valuation recently,” he told FRANCE 24.

France expands its stable

2021 was a record-breaking year for the sector, with French tech companies raking in €11.6 billion in funds, an increase of 115% on 2020. It was also the year that saw the largest capital ever raised in France, €586 million for NFT-based company Sorare. Just a few weeks into 2022, and the year already looks promising for French Tech, with five different start-ups raising a total of €1.7 billion.

The vast majority of this capital is coming from overseas, says Baradez. “80% of funding is capital from abroad. That’s quite remarkable. It shows that we’re no longer in a microcosm of French entrepreneurs who work among themselves. It’s a sign of how attractive the French tech scene is becoming to foreign investors.”

The apparition of these unicorns in a country that only had three in 2017 may certainly feel magical, but on a global level, it’s small fry. With 644 unicorns, the United States isn’t just tough competition; it’s in an entirely different tournament. Even closer to home, France is lagging behind Germany’s 33 unicorns and the United Kingdom’s 51. The US can even start to hold itself to a different standard altogether: Should decacorns – companies valued at more than $10 billion – be the new threshold?

Covid booster

French Tech is certainly having its moment in the sun, helped – at least in part – by the pandemic. Secondhand electronics marketplace Back Market can thank Covid-19 for a boost in demand for digital products, while the lockdown-driven buzz around online entertainment and NFTs helped push Sorare to a $4.3 billion valuation.

But what goes up must come down – and analysts are wary of too much money being pumped into solely digital-focused companies too fast.

“I fear that we’re getting to the point where the tech scene is reaching its peak: There’s a lot of innovation right now, but is it innovation that will be able to stand the test of time?” asks Baradez. The pandemic boost for digital won’t last forever, and these tech companies are likely to be buffeted by changes in interest rates.

“There is so much funding going into so many different tech values that it could become a bit like the dotcom bubble at the end of the ’90s,” says Baradez. “There’s the risk that some of these projects end up not being profitable.”

Europe’s stable of unicorns is growing, and 2022 could end up being another successful year for French technology companies. That would play out well for Macron, who is expected to run again for the presidency in April. French Tech is now firmly on the map: He can point to a flourishing start-up scene propped up by foreign investment and eight times as many unicorns as when he took office.