France’s political turmoil and a budget bill at risk of missing its deadline are weighing heavily on the country’s bustling tech sector, which says the French ship is “slowly sinking”.
It’s a rapid shift for an industry on the rise. This year, Paris overtook London as Europe’s top startup hub for the first time, according to a data platform Dealroom.
French President Emmanuel Macron’s government had pushed for innovation with schemes such as “France 2030,” a plan worth €54 billion over five years that aims to develop industrial competitiveness and technology. These types of plans seem to have paid off with its tech giants, such as Mistral AI, Ledger, and H.
But start-ups are concerned that France’s political uncertainty is spilling into the country’s hard-fought tech progress.
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“France’s current political crisis is not only institutional: it’s economic, moral, and strategic,” Homéric de Sarthe, chief executive of Craft AI, told Euronews Next.
He said that entrepreneurs create value for the country’s economy but largely feel that they have been “abandoned” by the government.
“Abandoned by political parties that block the system, let public debt spiral out of control, and watch foreign players take over our most strategic markets — AI, industry, energy, and digital technology,” de Sarthe said.
“There’s no captain at the helm anymore, no crew to steer the ship. The French ship is beautiful, full of potential — yet it’s slowly sinking while we keep debating on deck,” he added.
An absent captain means that France’s innovation funds are difficult to allocate, which startups say makes it difficult to hire workers and build their companies.
“This political instability worries us, as it places a growing burden on startups and, more broadly, on all French companies,” Maya Noël, chief executive of the lobby group France Digitale, told Euronews Next.
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“Today’s business community needs stability and visibility in order to continue investing, recruiting, and innovating. It is becoming urgent that a political agreement be reached so that our companies can continue to develop with confidence, both in France and internationally,” she added.
France’s National Assembly, its lower house of parliament, has been in flux since Macron called for a snap election in June 2024 that resulted in a divided parliament and a string of short-lived prime ministers.
Noël previously told Euronews that since the election, venture capital has refrained from investing and companies have been prevented from hiring due to financial uncertainty.
Last week also saw the change of the country’s AI and digital affairs minister, Clara Chappaz, who was well known in the country’s tech sector, to the relatively unknown Naïma Moutchou.
Explorers by nature
Start-ups are explorers by nature as they are the builders of technologies and “it is in their DNA to deal with uncertainty,” said Chengyi Lin, a professor of strategy at Insead University in France.
But he said “they run into walls when it comes to regulation and policies – startups realise they have to move mountains, which slows down development. If regulation is a known risk, political turmoil presents an unknown risk”.
That unknown risk, especially when it is difficult to predict the time of resolution, may cause startups to think twice about whether they should invest in France or other European countries, said Lin.
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“Investors always consider country risks, including political stability,” Lin said. “The ripple effects of governmental turbulence [are] beyond politics itself”.
Lin added that while short-term political turmoil will not affect big tech companies such as Mistral AI, that may not be the case for French startups that have the core engineering capability but rely on policies, regulations, and government incentives to scale up.
This becomes even more difficult as Europe’s tech scene “is no longer just following the United States, it has fallen behind China and maybe other economic bodies,” added Lin.
Nevertheless, start-ups such as Craft AI are determined not to let the ship go down.
“Our resources — human, economic, and technological — will not regenerate on their own. It’s time to go out and build again: to hunt, to invent, to take risks. It’s up to all of us to get this country moving once more,” de Sarthe said.