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Internet of Things in Paris, Top 20 Startups
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France has long been among the most technologically advanced economies, both on a European and a global scale. Although the country hasn't been spending much on research and development (a tiny bit more than 2% of its current GDP, according to the World Bank, with a downtrend over the recent years), it is one of Europe’s leading states in buttressing of enterprises to drive internal innovation. The recent OECD report shows that France has one of the most generous tax incentive menus on the continent.

Consequently, the number of companies that are willing to create new things instead of being in a rut has been growing. It is not just corporations with tremendous balance sheets – which are actually at constant risk of being outplayed by their international counterparts – that have been allocating more human resources and capital across various R&D projects; up-and-coming growth-stage firms in a handful of tech-driven industries have also been actively participating in the race.

Aside from that, France, in many respects, is a startup-friendly country, where the corporate bureaucracy infamously starts from the point when a company’s headcount exceeds 50 employees. While this threshold is critical in fields where scalability means everything, businesses within other domains can operate smoothly in a less-than-fifty-strong team. The former type often has something to do with hardware; as for the latter, this refers mostly to software companies. This article is about an exotic hybrid of the two.

The Internet of Things (IoT), as one of the viral concepts widely projected to shake the future of pretty much everything, is, in a broader sense, the epitome of advanced technology as many know it. A peculiar portal between the physical and digital worlds, it is designed to accelerate economic growth and create additional value, optimizing processes and cutting costs wherever one looks.

Globally, the previous decade was, in many respects, a bonanza for enterprises that leverage IoT, with enormous Venture Capital (VC) deals in the tech monoliths that are the United States and China. Utterly fragmented Europe, by contrast, hasn’t seen many giant rounds and unicorns in this area. Quite logically, the same can be said about France. However, the Fifth Republic’s numbers are decent. 

Since 2014, France’s IoT startups have raised at least USD 645.22 million in 90 rounds of funding, as reported by online data aggregator Crunchbase. Among them are 13 deals of over USD 10 million and two mega-rounds – transactions of USD 100 million and larger.

Talking about geographical distribution, several agglomerations have made a dent on the country’s private equity map in the IoT domain. And it’s hardly a surprise that Paris is the largest of them. At once a cultural and economic center and a major tech hub, the megapolis accounts for nearly half of the aforementioned VC deals. It occupies 35% of the combined dollar volume of the capital raised over that period.

Let’s keep it brief. Paris is a metonym for France (and for entire Europe, in some ways). PE/VC investment activity is an accurate gauge for understanding the IoT sector development. Taking these two into account, we attempt to delineate key industry trends, digging into the city’s ex post records and crunching some related data. (Check out how we did this for India and Tel Aviv.) 

Mirroring countrywide investment trends, the capital also has some ‘special flavor’. Firstly, there has been at least one transaction each quarter over the past five years (truth be told, most of the time, only one). Secondly, the proportion of deals, the most exciting part (yes, money) of which hasn’t been disclosed, is higher: 23% against the countrywide 15% – this creates a statistical bias that is hard to overcome, as we are talking about two-digit samples.

All those secretive innovators completed seed investments – however, that isn’t likely to make their tails fatter. Meanwhile, more than half of the rounds worth USD 10 million and more that happened in France were carried out by Paris-based startups.

Significant seed- and angel-level injections contribute another distinctive characteristic of the IoT sector in the capital of France. For instance, private voice assistant developer Snips, which was acquired by American consumer electronics producer Sonos (SONO:NASDAQ) in November 2019, bagged USD 3.3 million from accelerator 500 Startups and a few other investors four years ago. Machine vision visionary Prophesee completed its angel funding at approximately the same time. Since then, it has turned into a solid late-stage upstart with Intel’s and Bosch’s VC arms, Renault and the European Investment Bank (EIB), among other backers.

A dearth of late-stage ventures has two factors to explain it. The first is that most of those bootstrapped or barely invested newbies appeared between 2015 and 2017 and are still immature – compared to the pure software builders, IoT firms usually spend more time to achieve buoyancy, with a proper scale and well-determined market niche. Besides, the global practice shows that a good many IoT startups end up acquired – just like Snips.

There is yet another point to bear in mind. Three companies on this list are seemingly representing the lion’s share of the funding pool. Here’s how it looks like if the firm-level data are considered: 

Indeed, we ought to say a couple of words about these two blue chunks of value.

Actility, an IoT network service supermarket, made a bundle in 2017; Idinvest Partners-led, its Series D saw participation from Cisco Investment, BMP Paribas Private Equity and Foxconn Technology Group, to name a few. It is currently the only growth-stage IoT entity that has reached the phase designated by the fourth letter of the English alphabet.

Prophesee, which was touched upon above, is the record-holder in terms of the number of financing events that took place within the reporting period. Five years were enough to make five deals that brought the company over USD 65 million in total.

Even though there hasn’t been much jaw-dropping IoT-related PE/VC activity occurring in Paris, the city’s startup scene is broad-ranging. To demonstrate this, we routinely place the market map with EqualOcean’s pick at the end of the article. Cheers. 

ANALYST
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