French aspirations to turn the European nation into a major start-up hub have been hurt by months of political gridlock.

Elected officials are engaged in intense budget talks, which are expected to last until the end of the year. It is possible that new taxes on the wealthy could be agreed, which could cut firepower for the country’s venture capital (VC) firms.

On the face of it, the combined value of French fundraising rounds above EUR 20m in the year to date (YTD) appears to be doing well despite the instability of the government operating without a parliamentary majority.

However, if Mistral AI’s record-breaking EUR 1.7bn capital hike, announced in September, is stripped out of the dataset, the picture looks more troubling, with a sharp fall from YTD24.

Arezki Yaiche, Mergermarket’s France-based bureau chief, joins Dealcast host Julie-Anna Needham to discuss the French political situation and its impact on the business community, including:

• How the political turmoil began when President Emmanuel Macron called a snap election in 2024 and why it has persisted;
• What items could be up for debate in the budget, like a possible end to an R&D tax rebate that has encouraged family offices and other investors to fund tech companies;
• How the instability is impacting France’s credit rating and foreign investor sentiment;
• Which unicorns stand out amid the chaos, like Mistral AI, and why particular industries may continue to perform well.

All this and more in this week’s Dealcast.