France Fintech: 35% Increase in Amounts Raised in the First Half, Seed Funding Still Struggling

According to the half-yearly report produced by France Fintech, the professional association of French fintechs, insurtechs and regtechs, French fintech companies carried out 50 fundraisings during this first half of the year for an average ticket of 11.2 million euros.

The second quarter of 2024 is the best since January 1st, 2023, this average ticket registering a significant increase compared to the previous period (11.2M€ vs. 7.7M€ H2 2023) with a doubling of the average ticket of Series A (14.4M€). Seed operations registered a decrease of 26%. During the period, two new unicorns were founded: Pennylane and Pigment, making a total of 14 fintech-unicorns in the French ecosystem.

After months of hesitation, to say the least, on the investment side, the French fintech sector seems to have regained the attentive ear of investors. A recovery that required some effort.

In terms of figures, in total, French fintech companies raised 560 million euros over the first 6 months of the year through 50 operations. Even if the market is far from having returned to its record level of 2022 and the decline is insufficient, this amount could reflect a certain recovery.
It is indeed up 35% compared to the previous half-year (and represents 56% of the fundraising for the year 2023). The second quarter of 2024 is the best since January 1st, 2023.

French fintech fundraisings represent 13% of fundraisings for all start-ups in France. As a reminder, the latter decreased by 5% compared to H2 2023

France is, this semester again, the leading fundraising market in the European Union (ahead of Germany with €495 million) and the second in geographic Europe (behind the UK with €1.3 billion).

The average ticket is up significantly compared to the previous period (€11.2 million vs. €7.7 million in H2 2023) with a doubling of the average Series A ticket (€14.4 million). It is true that the fundraisings mainly concerned Series A and above, with seed operations down 26%. The main fundraisings of the period are: Pigment (€133 million), Zama (€73 million), Greenly (€49 million), Flowdesk (€46 million), Pennylane (€40 million) and Payflows
(€25 million).

Two new unicorns have emerged: Pennylane and Pigment

They are the only new deals (all sectors combined) of the half-year in France and two of the eight in Europe (including three fintechs). They are in addition to the 12 already recorded in our ecosystem (i.e. 14 in total out of the 30 French).

As in the previous period, the most significant transactions concern the business services sector, which covers financial management tools (accounting, invoicing, treasury) and HR. This vertical represents nearly two-thirds of the total, both in number and value.

The categories of risk management solutions (€70 million raised in 3 transactions) and Asset Management (€29 million, 12 transactions) are also very dynamic.

Mergers and acquisitions activity in teh French fintech sector was again very strong this half year

French fintech companies are involved in 29 M&A transactions, already accounting for 80% of the total transactions in 2023. 31% of these transactions are intra-sector, with French fintechs acquiring five French competitors and one European.

At the same time, three French fintech companies were purchased by non-French European players. The transactions mainly concern the business services category. Note the dynamism of traditional insurers, which carried out twice as many M&A transactions in H1 2024 as in the whole of 2023. These mainly concern fintechs offering asset management solutions (Alpheys, Nortia, Gedeon).

The acquisition of majority stakes by Private Equity funds continues

They concern 3 transactions in the first half of 2024 (4 in total in 2023). This formula appears attractive to many entrepreneurs because it allows support over a 4-5 year cycle with a trusted partner who gives them the means to focus on business development.

This movement reflects the continuation of a consolidation phenomenon that began two years ago, with the emergence, vertical by vertical, of French and European champions.
The share of foreign investors has grown significantly.

They are present in 40% of transactions (compared to 36% in 2023), and are particularly involved in the largest operations. There is growing involvement of American and British players (active in 19% and 10% of operations). The number of fintech companies using crowdfunding is increasing.
The first half of the year recorded as many fundraisings (5 operations for an amount of €33 million) as in the entire year 2023.

French fintech companies have continued to increase their use of debt

18% of equity fundraising was supplemented by loans, particularly bank loans.
In this respect, the fintech sector is part of a trend common to all French start-ups: across all sectors, bank debt increased by 5% in 2023 compared to the previous year and amounted to €5.4 billion2.

In addition to this non-dilutive financing aimed at meeting working capital requirements, those involved in financing models have made extensive use of the technique of dedicated legal vehicles (“SPV”) with certain transactions exceeding €50-100 million.

Largely in the acceleration phase, fintechs are increasingly financing their development through the classic range specific to companies (equity fundraising, bank debt, asset financing) and of course through the growth of their turnover and profitability.

Analysis of the activity shows a continuous increase in fintech turnover

According to the Banque de France, fintechs achieved a cumulative 2023 turnover of €1.2 billion, up 7% over one year. Overall, the growth of start-ups remains significantly higher than that of French companies.

While the ecosystem is still young (the average age of fintechs is 6 years, with 26% having existed for 2 years or less and 50% for 4 years or less), one in three players is already profitable.

The number of French fintech companies is now stable

The current rate of creation, combined with that of failures and consolidation, maintains the balance; there are just over 950 players.

The analysis of commercial distribution strategies confirms the growing proportion of mixed models (direct + via partnerships).

In 2024, the share of mixed distribution models (direct sales and partnerships with large
traditional players and/or other fintechs) is 49%, an increase of 4 percentage points compared to
the previous year.

These observations confirm overall the access to maturity of the ecosystem. In a still very difficult environment (tension on levies, economic and geopolitical uncertainties), the ecosystem shows its resilience, continues its development and consolidates. The first component of French Tech, the first battalion of unicorns, it constitutes a sector of French excellence. It already employs 57,000 employees, including more than 45,000 in France (a third occupied by women).

The challenges of the perios are nonetheless numerous and complex

• continued development in an environment that will probably remain permanently marked by more restricted access to financing,
• tension on recruitment, particularly in terms of specialists in
  data technologies, code and business development,
• upcoming regulatory shock, with the upcoming adoption of blocks of texts likely to profoundly influence the sectors concerned (DSP3/PSR package, FIDA, AMLR Directive, MICA Regulation, IA Act, etc.),
• very significant impact of current technological investments, likely to significantly broaden the spectrum of services offered by fintechs.

More than ever, the central issue is trust: Trust that fintech companies must inspire in their investors, customers, partners, suppliers, employees and regulators. Trust that they must maintain with regard to market developments, which are very difficult to read today. Operating in a heavily regulated sector, they are increasingly using technology (AI and Web3 in particular) to assert themselves as responsible, reliable and innovative players.

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(Featured image by Florian Wehde via Unsplash)

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First published in Finyear. A third-party contributor translated and adapted the article from tthe original. In case of discrepancy, the original will prevail.

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