French president Emmanuel Macron just appointed his third prime minister in a year, marking the latest twist in a long-running political saga that has seen multiple governments collapse — and left startups struggling to navigate the fallout.
Former defence minister Sebastien Lecornu was appointed on Tuesday, replacing outgoing premier François Bayrou, who was ousted by parliamentarians in a confidence vote over his 2026 budget proposals.
Lecornu has been tasked with passing a budget for next year but faces a divided parliament with no ruling majority since Macron called a surprise snap election over a year ago, creating a climate of deep uncertainty for businesses.
At the same time France has been facing economic turmoil as the country faces soaring debt and comes under pressure to bring its finances under control. This year’s budget slashed some tax breaks for startups and reduced investments in tech, impacting business’s financing and ability to recruit.
As many founders adopt a wait-and-see attitude, the French “startup nation” is slowing down. “We’ve just raised funds, and you’d think we’d be deploying fast to grow, but it’s not at all the case,” says Fabien Koutchekian, the cofounder of Paris-based deeptech Genomines..
The combination of political chaos and economic uncertainty has been a source of great concern for founders over the past year.
A poll published this week by startup and VC lobby France Digitale with consultancy EY found that 75% of startup founders find the current political situation is a source of risk.
“We’ve put some brakes, we are recruiting a little bit,” says Koutchekian. “We’re doing the bare minimum so the company keeps going, but we’re not confident.”
Funding fallout
Founders are seeing the impact of austerity measures, with this year’s budget significantly impacting business plans.
Direct government funding for startups has taken a hit. France 2030, a €54bn multi-year plan launched in 2021 to support innovation, saw its annual budget slashed to €5.2bn this year — over €2bn less than in 2024 (€7.3bn).
Raphaelle Taub, the cofounder of Paris-based healthtech Matricis, says she was planning to apply for funding for the i-Nov programme, an initiative funded by France 2030 to provide grants of up to several million euros to emerging innovative companies.
“The application process was supposed to open in July, and it hasn’t,” says Taub. “I don’t know if it will [...].”“These are pools of money that are becoming rarer. You can feel you’re navigating in an environment that is more hostile globally.”
Another major change concerned the removal of a tax credit companies can claim when hiring junior researchers who have just completed a PhD, allowing them to claim back their entire salaries for up to two years.
“We have many researchers and up to half of our annual budget is dedicated to research and development (R&D),” says Koutchekian. “So the disappearance of this credit was hugely impactful.”
“We had to slow down recruitment for these functions and in some cases we didn’t renew departures.”
The budget also reduced the number of businesses who could qualify for a tax exemption on employer contributions, which typically represent about 40% of the cost of an employee’s salary, and limited the scope of several tax breaks for R&D-intensive startups.
Lecornu’s budget proposals for 2026 will be closely scrutinised, therefore, but it could be a few months before founders get any clarity. The budget for this year was approved after several back-and-forths and with over a month of delay due to the difficulty of securing a majority in Parliament.
“We don’t know what other changes are coming,” says Edita Bezeg, the cofounder of Paris-based agri-tech startup Alvie. “There are probably going to be more savings in the next budget.”
“You never know when government mechanisms in support of innovation might stop. So if you rely on this funding it can be catastrophic from one year to the next.”
Startup nation slowdown
Amid the uncertainty, recruitment has taken a hit. France Digitale’s survey found about 70% of founders polled currently plan to recruit, compared to nearly 85% at the same time last year. The proportion of respondents planning to reduce their headcount has nearly tripled from 5% in 2024 to 14%.
France Digitale also notes the growth of the ecosystem overall is slowing down: 1,200 startups have launched in the last 12 months, fewer than half as many at the same time last year (3,500).
Maya Noël, CEO at France Digitale, said in a press conference that after several years of pro-startup policy, which accelerated in particular under Macron’s tenure, she was expecting to see a “massification of the ecosystem”. “This has been jeopardised,” she said. “The massification effect is not happening.”
“You can feel a lack of vision and a lack of strategy, it creates a disconnect with entrepreneurs,” says a Paris-based SaaS founder, who requested anonymity. “Lots of positive, value-creating things have been implemented so far in the startup nation, so it’s a shame.”
Without the prospect of long-term stability for startups, VCs are also more reluctant to invest. Sifted data shows French startups raised €3.2bn in the first half of 2025 — a significant drop from the same time in 2024 (€6bn).
With no end in sight to the crisis, founders are preparing for worst-case scenarios. “Our tech team is in France, in part because there are important fiscal advantages,” says Taub. “If that stops [with the next budget], I’m not sure it’ll be that interesting to stay here.
“Our market is in the US, where there isn’t the same instability for businesses. I’m not saying we’ll move. But founders are going to be asking themselves that question a lot more.”
