The French tech ecosystem is experiencing an unprecedented period of financial turbulence. 2024 marks a turning point, with a sharp increase in bankruptcies among post-Series A startups. For the first time, the number of insolvencies and restructuring procedures has exceeded new Series A rounds, highlighting a significant market shift. Faced with deteriorating macroeconomic conditions, many startups are struggling to secure additional funding, leading to a notable rise in financial distress across the tech sector.
Our latest white paper provides an in-depth analysis of the trends behind startup failures and the financial vulnerabilities that investors need to anticipate. This article outlines the key takeaways and explains how ScaleX Invest’s scoring models help investors and financial institutions mitigate these risks more effectively.
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A data-driven approach to understanding financial distress
Our study examines 1,487 French startups and scaleups that have each raised at least €5 million in equity funding. The majority of these companies were founded between 2014 and 2020, a period of high entrepreneurial activity. Despite raising a total of €3.3 billion, 10.4% of these startups have encountered financial difficulties.
To uncover the root causes behind these failures, ScaleX Invest’s study analyses:
- The correlation between company age and financial difficulties
- The impact of funding cycles on insolvency risks
- The key financial indicators that predict financial distress
- The role of investor backing in ensuring business survival
This approach allows us to detect early warning signs and assess the resilience of startups in an increasingly challenging market.
Key insights from the quantitative analysis
Our research highlights several structural and economic factors driving the rise in bankruptcies across the French tech sector:
Increased macroeconomic pressures
The long-term effects of the post-COVID crisis, geopolitical tensions, and inflation have deeply transformed the venture capital market. Liquidity has tightened, valuations have declined, and startups are finding it increasingly difficult to secure follow-on funding.
A sharp market shift in 2024
For the first time, the net balance of funded startups has turned negative, with more bankruptcies and restructuring procedures than new Series A rounds. This reversal marks a major shift in investment dynamics, reinforcing the urgent need for systematic risk management tools.
Scaleups are not immune to failure
Startups aged 6 to 8 years have been the most affected by financial difficulties, highlighting the challenges of scaling after the hypergrowth phase. Even among companies aged 9 to 12 years, some remain fragile, proving that longevity alone does not guarantee resilience.
Fundraising no longer guarantees survival
Bankruptcies most often occur three years after a funding round, exposing underlying weaknesses in profitability and market adaptation. Startups that fail to achieve financial stability post-funding are particularly vulnerable.
Profitability and scalability indicators are crucial
Companies with low revenue per full-time equivalent (FTE) and persistently negative margins are at higher risk of bankruptcy. This highlights the importance of balanced growth, where scalability must be accompanied by a clear path to profitability, rather than relying solely on expansion and external funding.
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Mitigating risk with ScaleX Invest
ScaleX Invest’s SaaS platform provides investors with a data-driven risk management solution, integrating both financial and extra-financial data. In a market where 61.5% of startups have never published financial statements, our platform bridges this gap by securely collecting and analysing private financial data, ensuring reliable and up-to-date insights.
Our predictive models assess key financial indicators to identify early warning signs of distress. With over 10 years of backtesting, our scoring models have proven their effectiveness, reducing the average annual bankruptcy risk from 11.9% to just 2.7% for top-scoring companies.
By integrating sector-specific risk models, ScaleX Invest enables investors to compare companies against their peers, refine risk assessments, and anticipate portfolio risks with greater precision.
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Conclusion
The French tech ecosystem is facing a period of tightened funding conditions, making risk anticipation more critical than ever.
ScaleX Invest’s 2025 white paper underscores the need for a rigorous analytical approach to risk management. By leveraging our advanced predictive models, investors can reduce insolvency risk by over four times and make more informed, rational investment decisions in an increasingly uncertain market.
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