The Next Tech Battle: France & the Global AI Race

December 14, 2023

Cathay Innovation’s FrenchTech AI Initiative

By: Denis Barrier, Cathay Innovation

In the 1990’s France was at the top of R&D and products in areas like telecom, ATM, high speed fiber or network research. Then came the digital and data economy era when most of Europe fell behind as Silicon Valley and tech giants like Google or Facebook rose.

This was not from a lack of talent — billion-dollar companies like Snowflake, Eventbrite, Tenable and Moderna are all founded by French entrepreneurs in the US. However, over the last 10 years, we’ve seen the FrenchTech ecosystem flourish thanks to public support (via government and Bpifrance), collaborative startup, investor and corporate communities and nurturing talent through world-class education and research institutions.

Now, France has a real opportunity in the next technology battle (as Cedric O says) by securing a top 3 position in the global AI race. Today, we find ourselves at a singular point in history when AI can drastically transform businesses, industries, society and day to day lives. This is the 3rd industrial revolution and the countries that lead in AI will also lead the global economy in the coming century.

At Cathay Innovation, while we invest globally, we are a French-founded multi-stage venture capital fund that has been investing in AI-driven startups since launching in 2015 (including many local players e.g., Owkin, Descartes, Inato or Kayrros). But FrenchTech is at a crossroads — navigating a simultaneous global downturn and AI boom (see our recent Les Echos article) which has created an urgent need for capital, ecosystem and experience to support the new revolution. But it will take a village — from founders and researchers to investors, government officials and corporations — to stimulate a French AI ecosystem capable of innovating, commercializing and thriving on a global scale.

All members of the FrenchTech ecosystem have an important role to play, but we’d like to do our part by dedicating venture capital (via our latest €1B fund) along with global resources (via our network of CAC40 & F500 corporations and teams across Europe, North America, Asia, Africa and Latin America) to support the new generation of FrenchTech founders building in AI. More on our AI Initiative below.

Why Now?

AI is deeptech on the shelves, definitively ramping up as a tech boom with a rapid impact larger than any before. The underlying technologies, computing power and infrastructure have been under development over the last 20 years — but now, everything is converging and accelerating.

This can partly be attributed to 10xing coding productivity unblocking one of the biggest innovation bottlenecks given the global shortage of ~40M software engineers (US Labor Department).

The alignment between deeptech research, infrastructure and people has led us to faster deployment in a market with a unique AI thirst. Beyond the OpenAI’s and Anthropics of the world, we’re seeing AI startups fine-tuning open-source models to improve existing use cases (e.g., customer support chatbots) or unlock new ones (e.g., Nabla’s co-pilot for healthcare or PhotoRoom’s “Magic” studio) or creating foundational models, proprietary or open-source (e.g., Mistral AI or LightOn), to train and advance the field of AI.

And Why France?

France has become a burgeoning technology hub — boasting a highly skilled workforce in technical fields like mathematics, engineering and computer science. Specifically, its homegrown expertise in fundamental mathematics is world leading — critical to AI and creating powerful algorithms — with top-rated universities (e.g., Paris-Saclay, Pierre and Marie Curie and PSL University Paris) and among the highest number of Fields Medal winners (Nobel Prize equivalent for math).

Over 1300 AI startups call France home including unicorns like Dataiku, Shift Technology, Hugging Face, Alan and Criteo. Given the high quality talent pool, it’s also gained prominence as an HQ for big tech AI labs (e.g., Meta FAIR or Google Deepmind) which has bred France’s very own AI mafias.

France ranks…

  • 4th globally in AI research publications (Scimago Journal & Country Rank)

  • 5th in AI patents (La French Fab)

  • and 6th in number of AI startups funded between 2013 and 2022 with 338 companies (Stanford AI index)

Source: Visual Capitalist

The CI FrenchTech AI Initiative     

Cathay Innovation started in Paris 8 years ago at a time when VCs backed startups focused on “disrupting” large groups or incumbents — but we envisioned a different model that:

  • Emphasizes collaboration over competition, recognizing that big industry players and startups need each other to innovate.
  • Invests across major global innovation hubs, connecting Europe, the US and Asia (and now Africa, Latin America and Southeast Asia) and catalyzes business development and expansion opportunities for all stakeholders.

Last year, we launched Fund III, targeting €1B, dedicated to transforming industries with consumer to enterprise and AI solutions in commerce and fintech to digital health and mobility / energy. Industry transformation is baked into our model through our corporate ecosystem, who are both investors in our funds and active partners to portfolio companies (like Sanofi’s collaboration with Owkin). Today, we manage over €2.5B in capital and are ranked among the top 50 venture funds globally (Venture Capital Journal) — alongside the biggest names in our industry.

In the midst of a global downturn, we’re fortunate to be able to continue supporting founders across the world — particularly in our home market of France. Seeing the opportunity that lies ahead, our AI initiative’s goal is to provide value and be a useful member of the FrenchTech ecosystem. As a venture capital firm, we want to help French founders, wherever they are, who not only need to progress at incredible speed, but require access to large amounts of funding and a value-added framework to gain global traction and leadership.

So how can we help?

  • We’re carving out capital from our €1B fund, €50M to €100M dedicated to early-stage projects, providing AI startups with a dynamic funding mechanism that follows the trajectory of growth and needs.

Given the rapid pace of change, the pace and volume of funding for AI startups needs to accelerate. As large international VC players have withdrawn from the local French market, and fundraising via various EU funds tends to drag, 99% of AI entrepreneurs are blocked from capital at critical stages. With access to a large fund, we can shift the funding dynamic and fill this gap — supporting founders at all stages so they can focus on what they do best — building.

  • We’re organizing our global ecosystem into an “AI First Platform,” offering unique insights and access to AI connections across Europe, the US, Asia, Africa and Latin America with our local teams helping French founders go to market wherever they are.

This includes operational support from the entire Cathay Capital Group —encompassing both our venture capital and private equity practices which counts over 150 people worldwide and more than €5B AUM. The team is well accustomed to helping entrepreneurs establish themselves and turning ambitions into commercial achievements. This is key as technical and commercial advances in AI increases rapidly, along with partnerships forged amongst global players.

  • Thanks to our strategic corporate partner network, we’ve built deep sector expertise to support vertical AI applications in the real world. And our corporate ecosystem is keen to work with AI startups — giving early-stage companies unique business development opportunities to build solutions tailor-made for industries.

Experience has taught us that innovation needs an ecosystem— no one can do it alone. We’ve found that solutions designed from the ground up in symbiosis with the customer or end-user will be more successful than those built in a vacuum. The value is clear for startups and industry players — shaping the future of AI together and being at the forefront of the 3rd industrial revolution.

In summary, we aim to contribute a holistic approach to financing and supporting France’s AI revolution and entrepreneurs at all stages — with the capital, ecosystem and resources to take AI from research to vertical application, go to market, first contract and global scale.

Parting Thoughts — Let’s Build, Together.

Thanks to the ecosystem built in the last 10 years, France has all the right components to secure a leading position in the next tech battle. But the new generation of  AI startups need support with access to experience, efficient and significant volumes of venture capital funding along with industry partnerships for AI innovation to scale. Only together, as a nation of mathematicians, researchers, founders, investors, public servants and executives, will we be able to turn the collective passion of entrepreneurs into a French reality.

Are you a French founder building in AI? Let’s get in touch!


About Cathay Innovation:

​Cathay Innovation is a multistage venture capital firm, affiliated to Cathay Capital, investing in founders building transformative businesses across Europe, North America, Asia, Latin America and Africa. Its platform connects founders with investors and its ecosystem of leading Fortune500 corporations to help startups scale and transform industries with consumer to enterprise and AI solutions in commerce, fintech, digital health and mobility / energy. Founded in Paris in 2015, Cathay Innovation now manages over €2.5B AUM with local offices in Berlin, San Francisco, Shanghai and Singapore and has invested in over 100 startups including Chime, Pinduoduo (NASDAQ: PDD), Glovo, Wallbox (NYSE: WBX), Owkin, Getaround, Ledger, ZenBusiness, Alma, Descartes Underwriting and more. To learn more, visit us at or follow us on LinkedIn or Twitter @cathayinnov.