French tech wager pays off with rise in ‘unicorns’

France may have been ejected from the Euro 2020 football championships unexpectedly early last month, but “les Bleus” are still in the game — at least the fantasy version.

Sorare, a fast-growing blockchain-based fantasy football platform, is one of France’s rising number of “soon-icorns” — a start-up tipped to be valued at $1bn or more in the near future. It allows fans to collect and trade digital football cards using cryptocurrency ethereum.

If a widely rumoured fundraising goes ahead, Sorare could become France’s 11th unicorn this year, according to Dealroom, the private tech company data provider. That would bring the national total of start-ups valued at €1bn or more — either through funding rounds or exits — to 28. Not bad for a company founded less than three years ago and which now has just 17 employees. And not bad for a country that in 2018 had just nine in the stable.

French tech start-ups are on a roll. Of the main European tech hubs, France is breeding at the fastest rate. Over the past three years, the number of start-ups valued at more than €1bn has trebled in France, against a rise of just 69 per cent in the UK and 44 per cent in Germany. Sweden comes closest with a 165 per cent jump over the same period.

To be fair, France is riding a wave that has lifted the valuations of start-ups across the globe, and in Europe in particular. According to a report by CB Insights published last week, 136 new emerged globally in the second quarter of this year — almost six times higher than a year ago. 

In Europe, the number of has increased 41 per cent, according to PitchBook, yet their aggregate value more than doubled to €198.3bn by the first half of 2021. 

Europe, it seems, is the fastest-growing region for venture capital investment — faster even than the US or China, according to a study by Sifted, an FT sister publication, and Dealroom.

It is true that Germany and the UK still attract substantially more venture capital investment than France on an absolute basis. And Sweden’s battery start-up Northvolt raised $2.75bn from investors this summer, which meant the country catapulted ahead of France this year. 

But Yoram Wijngaarde, Dealroom founder, said there was something happening in France, with US tech investors such as Tiger Global Management and Dragoneer propelling local start-ups to unicorn status. “Within Europe’s big tech hubs — London, Paris, then Berlin — Paris is the fastest growing,” he added.

An executive of one of the world’s biggest investment firms agreed. “France is becoming as strategic as Germany and the UK for tech investment,” he said. 

Dealroom data show that North American investors substantially stepped up their funding of French start-ups last year from 13 per cent of the total invested there to 31 per cent — catching up on UK and Germany at just over 40 per cent. 

This will be good news for President Emmanuel Macron who has promised to make France a “nation of unicorns”. Reforms to wealth and dividend taxes and a tech visa to fast-track non-EU start-ups have all helped to encourage a more dynamic start-up scene. Funds such as Kima Ventures set up by serial entrepreneur Xavier Niel have also contributed by sowing seed capital.

And public money has been committed in a big way to support entrepreneurs. Bpifrance was one of the world’s top 10 venture investors in the first half and accounts for close to 20 per cent of French start-up funding, according to Sifted. The government also made €4bn available to see entrepreneurs through Covid-19. 

That committed public support is unusual in Europe, according to investors. “I can’t think of something similar in Germany or the UK,” said Virginie Morgon, chief executive of Eurazeo, the private equity group.

The question now is what next? Counting is not enough. Only when these businesses scale up and begin to irrigate the wider economy can the government’s policy be regarded as a sustainable success.

So while the current model of strong state support has clearly delivered, the government will have to develop a plan for longer-term growth. There are signs that this is happening, with a campaign to attract more late-stage private investment. But at the same time, if the only beneficiaries are a wealthy tech elite, there may be a risk of public backlash. This is arguably the most exciting time for French tech. Equally, it could also be the most testing. 

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