France's AI push propels it to the forefront in Europe's tech hubs.

• In the second episode of our European tech hubs mini-series for CNBC Tech's "Beyond the Valley," we visited Station F to discuss the expansion of the French tech industry with its director, Roxanne Varza.
• Europe's leading artificial intelligence hub is France, with companies like Mistral AI and H receiving significant funding.
• European countries have raised the most money for French generative AI companies, with a total of $2.29 billion, according to Accel and Dealroom.

The world's largest startup campus is located in the 13th arrondissement of Paris, which was previously an old rail freight station.

The massive complex known as Station F, capable of housing 1,000 startups and boasting corporate partners including U.S. tech giants like Google and Facebook, highlights France's recent efforts to transform itself into a leading global tech hub.

In the second episode of our European tech hubs mini-series for CNBC Tech's "Beyond the Valley," Tom Chitty and I visited Station F to discuss the growth of the French tech industry with its director, Roxanne Varza.

In 2015, taxi drivers in France demonstrated against the increase in ride-hailing services, while startup founders criticized the country's strict labor laws that hindered the growth of young tech companies. From an external perspective, France was perceived as being unfriendly to technology and innovation.

To foster the growth of its technology industry, various governments have supported programs like Station F and implemented laws to aid startups. Currently, with the AI industry experiencing rapid growth, France aims to establish itself as a leading AI hub.

The most European country has raised $2.29 billion for French generative AI companies, as per data from Accel and Dealroom, with significant investments in startups like Mistral AI and H.

At the Viva Tech event last month, France's finance minister, Bruno Le Maire, stated that France is the leader on artificial intelligence in Europe.

Rewritten sentence: Please provide your thoughts on this or previous episodes by emailing us at [email address].

You can subscribe to 'Beyond the Valley' by clicking the links below to your chosen platform.

The "Beyond the Valley" episode, released on June 20, 2024, has been edited for clarity and brevity.

Tom Chitty

The 13th Arrondissement in Paris is known for its vibrant nightlife scene and is home to the city's largest Asian community. If you enjoy Chinese or Vietnamese cuisine, you'll love it here. Additionally, Station F, the world's largest startup campus, is located in this district. With over 1,000 startup companies and a bustling community of entrepreneurs, it represents France's thriving tech industry. In our next exploration of Europe's top tech hubs, we'll visit Paris to speak with the head of Station F about how the country has overcome its negative reputation towards technology, the success of its AI companies, and the political and regulatory challenges it may face. Have you ever been to Station F, Arjun?

Arjun Kharpal

I've been wanting to visit for so many years, and now I'm finally here. It's amazing.

Tom Chitty

Roxanne Varza, Director of Station F, welcomes us to the oasis-like space that looks like a huge aircraft hangar with glass-fronted shipping containers serving as meeting rooms. To truly understand the work and companies located here, we must speak with Roxanne. Thank you for joining us on Beyond the Valley.

Roxanne Varza

Thanks so much for having me.

Tom Chitty

Can you provide some background information about this location? What is its objective, and how did it come into existence?

Roxanne Varza

Since our inception in 2017, following President Macron's first election, the idea for Station F had been brewing for a few years. We recognized that while London was known for its thriving tech scene and abundant funding, Berlin was also gaining recognition. However, France was often overlooked, despite its burgeoning ecosystem. Our goal was to create a prominent space that would bring together the European tech community and facilitate the launch of businesses. Thus, Station F was born to address the challenge of getting startups off the ground.

Tom Chitty

Can you tell us a bit about yourself, as you have been referred to as the queen of tech in some French media? Additionally, as a scout investor for Sequoia Capital, we would like to learn more about your qualifications for the director role. How did you earn this position?

Roxanne Varza

I am often asked about my background and what was going through our founder's mind when he chose me. I grew up in the U.S. in Silicon Valley and was born and raised in Palo Alto. I moved to Europe about 15 years ago to pursue a master's degree and fell in love with the ecosystem. The opportunity to build and make an impact was so much greater here than in the Bay Area. So, what makes me the right fit for this role? I believe it is my connection to the startup ecosystem, particularly the international startup ecosystem. Our founder, Xavier Niel, has a big telecoms company in France and has launched numerous projects that have powered this ecosystem. However, he tends to gravitate towards less structured, young individuals who are not too influenced by a large corporate career. This was true for me when I came into this role, and my international female profile may also be appealing to today's ecosystem that values diversity.

Tom Chitty

Before we proceed, we must first discuss the stat of the week. Have you heard about it?

Roxanne Varza

I have not. Should I be nervous?

Tom Chitty

I get nervous every week to play the game where Arjun gives us a stat and we go head-to-head to determine who gets it right or closest to what it refers to. However, I have a quick question that I've asked all of our guests on this mini series. If you could rank Europe's tech hubs, what would be your top three?

Roxanne Varza

I've lived in both Paris and London, so I feel confident in starting with those two. However, the third one, I believe, is quite challenging. Every summer, I take my entire team to a new ecosystem. We've visited Amsterdam and Berlin, and this year we're heading to Lisbon. While I'm excited about Lisbon, I feel like I don't know enough about the ecosystems to have a fair perspective. Nevertheless, I'm looking forward to Lisbon, as I know the Mayor of Lisbon and have heard positive things about the city. Additionally, the French entrepreneur expat community in Lisbon is growing, making it an interesting ecosystem to explore.

Tom Chitty

Okay, but just to push you, which would be number one?

Roxanne Varza

Paris, what do you mean, you're pushing me?

Tom Chitty

Arjun, I'll let you take it away.

Arjun Kharpal

Stat of the week. $2.29 billion dollars.

Tom Chitty

Arjun, you had a question.

Arjun Kharpal

The concept of Station F is to create a single, large hub where startups and investors can gather, eliminating the need for disparate parts of cities. This idea is based on the observation that many cities have pockets where these groups gather, but some of them are still large and take time to traverse.

Roxanne Varza

At the time, we believed that Station F, with its 1,000 companies, would be the entire ecosystem. However, we now realize that it is not as big as we initially thought, given the size of the entire ecosystem. Therefore, for early-stage and starting companies, Station F is the ideal location. There are also specific pockets within Paris for later-stage and growth-stage companies.

Arjun Kharpal

And Roxanne, what year did you take? 2017?

Roxanne Varza

Was the launch in the summer.

Arjun Kharpal

And is that when you took over the role here?

Roxanne Varza

I started two years before.

Arjun Kharpal

Since then, in France and Paris specifically, around technology, there have been significant changes.

Roxanne Varza

The transformation of Station F from a running joke to a leading ecosystem in Europe has been a significant change. The government has played an active role in this transformation, taking the right steps to support the growth of the ecosystem. Culturally, we have undergone a huge transformation, which has made entrepreneurship cool and made it possible for people to start businesses. However, we are not the only players in this space, and there are other players working towards similar goals.

Arjun Kharpal

What are the core strengths of the French technology scene?

Roxanne Varza

In terms of infrastructure, Paris is on par with leading tech ecosystems, with resources and university programs available to build a company. However, the talent has been the missing piece, which has been addressed with the French government making visas easier to obtain. Additionally, with the global geopolitical shift, people are looking less towards traditional ecosystems and are now coming to Paris. This has played a significant role in attracting tier one funding to Paris.

Tom Chitty

Is France, Paris, Station F considered the same as any European tech hub? Are there any other notable ones?

Roxanne Varza

While I agree that Paris is not an English-speaking market, I believe that if you compare working in Paris to working in London, people who are looking for bilingual schools or doctors who are comfortable in English will find it more challenging in Paris. However, from a business perspective, I think working in Paris is as good as any other ecosystem, if not better.

Arjun Kharpal

Did the teething issues with labor laws that startup founders faced in France a few years ago persist in the early stages of founding startups in France?

Roxanne Varza

The labor law is no longer the topic of headlines as it was 10 years ago, with the ease of hiring and firing varying greatly between countries.

Tom Chitty

The challenge of U.S. big tech companies entering European markets and exerting their dominance is a common concern among European businesses. Do you worry about this issue, and does it keep you up at night?

Roxanne Varza

Big tech coming here?

Tom Chitty

U.S. Big Tech.

Roxanne Varza

The entrepreneurs at Station F want to collaborate with international leaders, regardless of their nationality. The logos of their partners can be seen behind me. The U.S. leaders have been present for a long time.

Arjun Kharpal

In the tech industry, it's hard to have a conversation without mentioning artificial intelligence. However, France has been making headlines with companies like Mistral and H, raising large sums of money. Europe, in general, has struggled to compete with big U.S. tech giants in areas like social media and search. With the rise of AI, what opportunities does this present for French and European companies to compete globally?

Roxanne Varza

I agree with you. You've hit the nail on the head. There was a sense of missing out among the first generation of internet users, despite the presence of many successful companies. Today, there is a race to be competitive on that level. When Mistral raised its mega first round, everyone was impressed, but it was just one round and one company. Now, Poolside has also joined the scene, and people are starting to wonder if this is a trend that can be sustained in the long term. I believe the answer is yes, potentially.

Arjun Kharpal

As Tom mentioned, the influence of U.S. tech giants on the growth of European homegrown technology companies, particularly in the field of AI, is a concern. Companies like Mistral have received support from Microsoft and other large tech giants. At Viva Tech, French Finance Minister Bruno Le Maire acknowledged the need for a balanced approach, acknowledging the importance of having U.S. tech giants present while also championing homegrown companies. As the industry continues to develop, striking the right balance will be crucial.

Roxanne Varza

The upcoming AI summit in France in February 2025 will likely focus on key topics related to the balance of power between countries and the need to avoid dictating tomorrow's innovations. However, there is also a clear sovereignty angle that governments should be concerned about.

Tom Chitty

Are you concerned about your location in six months, given that France is facing an upcoming election?

Roxanne Varza

It is possible that a lot could change in the next presidential election, but it is unclear how dramatic those changes will be. Some people believe that things like having a minister for digital may be completely deprioritized, which could slow down progress. However, others are confident that these changes will occur on a policy level and may take more time to implement. Despite this uncertainty, we are trying to remain optimistic.

Arjun Kharpal

If the far right experiences a resurgence and negatively impacts immigration policy, it could affect access to foreign talent.

Roxanne Varza

The real issue lies in the message sent to foreign talent and investors when looking at both extremes of the political spectrum. While some may feel that things will go so poorly that the next election will reverse the current state, there may be a silver lining in both cases. However, if either extreme wins, it will not be as good as we are today.

Arjun Kharpal

What have been the significant positive outcomes of President Macron's tech push and his efforts to promote innovation in France?

Roxanne Varza

There have been numerous changes in the visa scheme, and I believe he played a significant role in it. The overhaul of the visa scheme coincided with the launch of Station F, and we saw the impact immediately. The funding landscape has undergone a transformation, with early and late stage funding now readily available. Prior to this, we felt that there were no funding opportunities in these stages.

Arjun Kharpal

And why is that though?

Roxanne Varza

The government has made efforts to encourage early-stage investments through tax breaks and other policies. However, the most significant initiatives have been in late-stage funding, with the government gathering up the necessary capital. Additionally, there have been minor adjustments to labor laws and regulations to improve clarity. Overall, the government's actions have been forward-looking, with no backward movement.

Arjun Kharpal

The funding gap with the U.S. persists not only in France but also across Europe. What are the necessary steps to bridge this gap even further?

Roxanne Varza

The issue of late-stage funding is still prevalent in Europe, as we are not seeing the necessary amounts or number of rounds to build companies at the same pace as our American counterparts. The main challenge lies in exits, and we need to encourage more acquisition culture among European corporates. IPOs are the market that requires attention to be fixed.

Arjun Kharpal

Last week, I was on the roof of the London Stock Exchange. The IPO of Raspberry Pi, a computing startup that has been around for over a decade, was the focus of big fanfare, confetti cannons, and lots of noise. The company was valued at just over $500 million, which underscores the concerns about the market at the moment. Despite being a relatively small IPO in the tech world, there was a lot of excitement because it hasn't been those exits on the IPO front in a while. In London, there are issues around founder shares, dual class share structures, and other things that need to be reformed to allow for greater access to startups in the earliest stages from pension funds and other areas. Are these similar issues prevalent here in France?

Roxanne Varza

I would say that probably we also have just, how can I say this? The market just doesn't exist. So I think when it comes to listing a technology company, people just automatically assume I mean, we have had some here, I shouldn't say we haven't because a few years ago, we had quite a few, two or three. But I think today just anybody who wants to go public just will not look at this market, given what the track record that we've had.

Arjun Kharpal

The market doesn't exist for companies like Mistral to go on an IPO with a valuation of $100 billion in a few years, even if they have raised astronomical sums at high valuations, as the market doesn't exist for such valuations. Additionally, European corporates are not as active in buying or acquiring technology companies.

Roxanne Varza

I believe that I can effectively communicate with the French market when I say that, although it may not be the case across Europe, it is a feeling that I have. At Station F, we have a significant number of early-stage companies, and we frequently host American corporate development teams. However, we have had very few French counterparts. This suggests that culturally, they may be less aggressive in that space. In some instances, they do not even have corporate development teams. As a result, it is essential to work on building this aspect.

Tom Chitty

How do you envision the future for Station F and whether you are focused on maintaining your leadership in other areas while keeping an eye on what's happening elsewhere, or if you are solely focused on your own progress? What do you anticipate the next few years will look like for Station F?

Roxanne Varza

We have an upcoming election, so please ask me again in a few weeks. While we do look abroad for inspiration, we also focus on local needs and demand. Station F was built specifically for the local market, and we didn't simply copy an existing model. Instead, we consulted with entrepreneurs and other members of our ecosystem to determine what works well locally and what is needed. Some of the solutions we've implemented are unique to France.

Arjun Kharpal

Have the characteristics of startups in this region evolved as technology trends have shifted, from the crypto craze to the AI revolution?

Roxanne Varza

We refresh our programs on a yearly basis. Two years ago, we launched our crypto Web3 program. Last year, we focused on quantum computing and two AI programs. I hope to see more progress in climate tech this year. Europe has a chance to excel in this area. In terms of entrepreneurship, I've noticed a shift from first-time, young entrepreneurs to more experienced repeat entrepreneurs. Over 50% of the entrepreneurs on our campus have already created a business, which reflects the maturity of our ecosystem.

Arjun Kharpal

And you're building a hotel.

Roxanne Varza

In 2019, we launched our housing component, which currently houses 600 people. We are finishing up a restaurant and sports facility on site, which are about 15 minutes away. Later this year, we will launch 12 spaces that will offer additional services to entrepreneurs, such as healthier food options, bike repair, smartphone repair, and a podcast studio. These services will be available next to our hotel in two-to-four years.

Tom Chitty

We have to do a state of the week, but we only have time for it. Have you considered it?

Arjun Kharpal

What is the weekly statistic?

Tom Chitty

The value of France's AI market in 2025 projected.

Arjun Kharpal

On the right-ish tracks but no cigar.

Roxanne Varza

Amount invested in AI since the beginning of the year?

Arjun Kharpal

Close. I'll do one more round of guesses.

Roxanne Varza

What was the global volume for the first half of the year?

Arjun Kharpal

Roxanne will receive this one because she was very close. The amount of French generative AI startups that have raised funds to date is quite astronomical. Here are some fun stats: London is the top city for generative AI startup creation in the region, with 27% of GenAI startups originating from there. Tel Aviv is in second place with 13%, followed by Berlin with 12%, Paris with 10%, and Amsterdam with 5%. Despite being fourth in terms of GenAI startup creation, Paris has the highest levels of funding due to some of the companies based there.

Tom Chitty

If you'd like to follow and subscribe to the show, you can. Additionally, you can rate the podcast with five stars. Thank you, Arjun.

Arjun Kharpal

Thank you, Tom.

Tom Chitty,

Thank you, Roxanne.

Roxanne Varza

Thank you.

Tom Chitty

We'll return next week for another episode of Beyond the Valley. Farewell.