Paris is on Track to Become the European Capital of Cleantech – are Foreign Investors Ready?

European cleantech has been thriving in the past five years. In this period, investment into start-ups has more than doubled to $5.2 billion deployed over 566 deals in 2018, representing 28% of global cleantech deals. For the first time in years, France was one of the top two EU destinations for investment, places typically held by the UK, Germany and Israel. As it benefits from a wave of innovation and capital, a friendly government and looming Brexit, France could claim the top spot in 2019 and beyond.

The city of Paris has been fostering – and surfing on – this positive wave. With a booming innovation scene, and a growing support ecosystem of incubators, accelerators and investors, Paris could surpass London as the European capital of cleantech – should it succeed in improving its scale-up game. With this in mind, a few months ago we launched a research effort to assess how the Paris Region is doing in terms of innovation, investment and foreign penetration. This article outlines the findings from this study.

Positive signals abound

According to our numbers, the Paris ecosystem is in great health. The rate of cleantech start-up creation is accelerating from 18 in 2013 to 30 in 2015. This new crop of innovators, combined with later-stage ones, have broken funding records in 2018, and raised a total of $762 million over 49 deals, quadrupling from 2017.

Venture investment in Paris


Explaining the spike

These numbers are due to a great performance in early-stage deals ($189 million over 29 deals) and a few large rounds in Series B+, which had been all but absent in previous years.

Such a spike is the result of a few years of capacity building on the support side, throughout the start-up lifecycle. A number of start-up spaces, incubators and accelerators have opened up in Paris, creating an easier path to series A than in the past. The most telling examples are Station F, a start-up space hosting various incubation and acceleration programs, and Paris & Co, the city’s incubator, which now operates three programs dedicated to the circular economy, mobility and foodtech.

Paris has strong cards to play:

  • New mobility models: with strong support from the mayor, the city is already a test-bed for electric and hydrogen-based mobility. It has also bred successful scale-ups like Blablacar and drivy.
  • Circular economy and agtech: Parisians are increasingly conscious of their lifestyle and are getting involved in circular economy and urban farming initiatives. Phenix, ReCommerce Solutions and Agricool are some of the latest examples of promising companies in these fields.

New investors have started to crop up as well, such as Daphni for first rounds, or Tikehau, which recently announced its first closing of EUR 350 million, with a goal to raise EUR 1 billion for late-stage energy transition investments. These will augment a well-established field of cleantech investment leaders such as Demeter, Idinvest or Aster Capital. For many years, investors able to take the lead on a French cleantech round could be counted on one hand.

Paris does not attract enough foreign investors

For all these positive signals, the Paris ecosystem shows a few shortcomings that could slow down its ascent:

  1. Business angel numbers are too low in France. According to France Angels, business angels completed 415 operations in France in 2016. This compares to over 2,500 operations in the UK in the 2016-17 tax year, according to the British Business Bank. This forces companies to look for professional investors sooner;
  2. On the other end of the spectrum, few French investors specialize in series B and growth equity, and follow-on rounds are often smaller than in other geographies. Even though Paris is packed with large corporates that could help, they tend to invest most of their VC money abroad, according to our research;
  3. Foreign investors are not filling this gap, as their penetration of the Paris ecosystem is too low.

On this last point, we note that close to 80% of investors in Paris-based start-ups are French. This compares to 70% of German investors in Munich, 55% of British investors in London, or even 50% of Swedish investors in Stockholm-based start-ups. Paris is one of the most closed-off European ecosystems.

Origin of investment in Paris cleantech

To become the European capital of cleantech, Paris must open up to foreign investors. We are starting to see signs of this happening. More and more foreign LPs, especially from Asia, are putting money in French cleantech funds such as Idinvest’s Smart Cities fund. Some corporate investors, like Inven Capital or AP Ventures, have recently closed deals in France. But for this trend to generalize, more bridges will need to be built from the outside in, the language barrier will need to soften, and Paris-based start-ups will have to internationalize sooner.

Cleantech Group has established a permanent presence in France to help building these bridges. If you are interested in growing your French deal-flow, attending our events here or better understanding the ecosystem, please reach out to me at