• France aims for US expansion coupled with local HQ – Consul
• New York and Boston top new French tech destinations
• Vantiva remains active with a large, recent deal in the US

French tech companies continue to follow the American dream despite a downturn in valuations, with deals likely to follow in the wake of companies opening offices in New York and further afield.

“We are particularly excited to see more and more French Tech companies expanding to the US while maintaining a strong presence in France”, French Consul in New York City Jérémie Robert told Mergermarket.

Food-composition analysis app Yuka is the most recent example of French tech expanding to the US while keeping a presence in France, with co-founder Julie Chapon opening a new office in New York, as reported by French media.

France currently has 29 unicorns, which are tech companies with a valuation above EUR 1bn, according to data published by the French government this month. A total of 52% of these tech leaders have offices in the US, according to Mergermarket research.

M&A often follows in the wake of cross-border initiatives. For example, French tech unicorn Contentsquare was founded in 2012 and opened offices in New York and San Francisco in 2017. It recently bought a company in San Francisco and is also preparing a listing.

“In the US, the competition is international, which is not the case in France,” USA Director at French state-owned investment firm Bpifrance Romain Serman said. “The companies which succeed in America have the potential to become global players.”

NYC, Boston at the forefront

New York City (NYC) has particularly attracted French tech entrepreneurs over the last few years. The city “has become, de facto, a very strong platform for them to develop their business”, Partner at GP Bullhound Guillaume Bonneton said. The fact that the city has only a six-hour time difference with France is a significant benefit.

New York also invested a lot over the last few years in its Silicon Alley, a tech hub in the Flatiron district in southern Manhattan, Caroline Faucher-Winter, senior strategic advisor at public relations agency Kalamari and president of the French Tech New York, said.

The city has “greatly strengthened” its ecosystem since 2008 after it decided that it did not want to leave tech to Silicon Valley, and “there was a real effort from the local authorities to attract both tech companies and talent”, Consul Robert agreed.

Boston is the second-largest hub on the East Coast and another point of attraction for French entrepreneurs, sector players agreed. The city is known for its ecosystem in biotech, with companies such as Mirakl implanted locally, Réza Malekzadeh, general partner at venture capital firm Partech and member of the French Silicon Valley tech community, said.

Strong support for tech

Although France has provided strong support for its tech companies in recent years, war in Ukraine, the energy crisis, inflation and rising debt costs have hurt sentiment. In the first half of 2023, 395 French tech companies raised a total of EUR 4.3bn, a decrease of 49% in aggregate volumes compared to 1H22, according to a recent study from EY.

Despite the tough fundraising environment, the long-term trend of French companies and entrepreneurs trying to conquer the Americas remains firmly in place.

French successes in the New World include Dataiku, which was founded in Paris in 2013, established itself in NYC in 2015 and flipped its headquarters in 2017. It is one of many companies with roots in France that are attacking the artificial intelligence market, as reported.

EcoVadis is another French company to watch. The provider of sustainability ratings has already begun preparing a US IPO, as reported. At the time of publication, it has a score of 57 out of 100, according to Mergermarket‘s Likely to Exit (LTE) predictive algorithm, with market intelligence weighting the score.*

Despite these plans, there are still question marks over the exit paths for French players in the US. French companies in the American market have not yet completed large exits in the US, Faucher-Winter said, adding that exits will test the strength of the ecosystem.

“An IPO and more exits are the next steps that French Tech is missing; they have to happen in the next few years, otherwise the investment life cycle is broken and key players will not bet on French companies anymore,” Malekzadeh said.

Living in the US long-term

Before reaching the IPO stage, French tech companies looking to expand have to navigate several pitfalls, a major one of them being recruiting, key players said.

The most talented members of the workforce tend to work for Big Tech and local start-ups. “In order to attract the best American workers when you are foreign, you need to differentiate from the competition on aspects such as sustainability and social impact, on which Europe is leading the race,” co-founder and CEO at OpenClassrooms, Pierre Dubuc said. OpenClassrooms is thinking about deals in the US and further afield.

Tech unicorns from Paris want to conquer the US, and there are a number of precedents for the trend. For example, Vantiva [EPA:VANTI], a France-based company engaged in the development of broadcasting technology formerly known as Technicolor, is an example with a long history of cross-Atlantic activity.

Vantiva’s predecessor was founded in France in 1893 as a sister company to General Electric [NYSE:GE], but it was eventually nationalised in 1980. Technicolour was privatised in the 1990s, then Thomson Multimedia bought it in 2000, and it continued to be active in M&A and restructuring activities in the subsequent years, rebranding as Vantiva last year.

At the beginning of October, Vantiva entered a call option agreement with North Carolina-based communications group CommScope [NASDAQ:COMM], to acquire its Home Networks division in exchange for a 25% stake in Vantiva. In the 12 months to June 2023, CommScope Home Networks and Vantiva’s Connected Home generated USD 1.5bn and EUR 2bn in sales, respectively, making this one of the most significant French acquisitions in the US in recent years.

Although there will be bumps in the road, expect increasing numbers French companies and entrepreneurs to follow the trail blazed by Vantiva and others.

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.