After a decade of sustained growth, French venture capital faces a structuring reversal, many institutional investors, LPS, slow down their reign in the Tech funds. Not by disinterest, but by saturation, for part of them, the lines of exposure to French Tech are full, tangible yields are long overdue, and allowances are now conditioned on a liquidity requirement. The message is that without real distribution, future commitments will remain frozen.
This phenomenon is part of a cycle change started since 2023. While previous years had been marked by records and a widespread craze for tricolor innovation, the climate was considerably hardened. The slowdown in valuations, the scarcity of industrial or scholarships and the difficulties of refinancing certain participations weaken the implicit performance promise. For LPS, whose allowances in unlisted assets are by definition illiquid, the issue becomes that of concrete return to capital. Actors in venture capital can no longer only tell a story of creation of long-term value and must demonstrate their ability to make money.
In this new deal, the performance indicators are evolving, the DPI, which measures the amounts really returned to investors, takes precedence over the multiple theoretical valuation. Paper performance attracts less than the evidence, in cash, of the capacity of funds to get out of their positions. This affects the lifting dynamics, including for established vehicles. Re-ups, these re-engages on a new generation of funds, become more selective, more diluted, sometimes delayed. And for emerging funds, the bar is all the highest since LPS now favor caution for novelty.
This withdrawal is also explained by a structural reality, the small number of significant outings in French tech. If the scene has managed to generate solid SMEs and even efficient ETIs, the real great exits, capable of sustainably feeding the cycle of venture capital, remain the exception. In this environment, certain investment strategies very oriented on high valuations, at the entrance and at the exit, are struggling to convince. The tension between ambition and discipline becomes central.
Faced with this pressure, the funds adapt, the time is for the rationalization of portfolios, a more rigorous management of table towers, and active research of outings, even intermediaries. Profitable companies or close to the Break-Even, with a moderate but visible replacement, arouse growing interest on the part of private consolidation platforms. The Private Equity thus becomes a natural relay for part of the holdings, provided that the entry valuations were controlled.
Far from being a crisis, this tightening marks a phase of maturity, it imposes a new discipline on the French ecosystem, which can no longer be content to capitalize on its momentum. He must prove that he knows how to distribute, and not only invest. This requirement, if it slows down certain dynamics, could also consolidate the basics of a healthier market, and better aligned with the expectations of its funders.
