With the EU Chips Act, Europe has expressed a ton of deep tech ambitions, with a special focus on semicon and photonics. In pursuit of strategic autonomy and “semiconductor dominance”, the EU aims to increase its global market share in the semiconductor sector from less than 10% to 20% by 2030. The Act mobilizes over $45 billion for research, development, and manufacturing capacity, incentivizes investments from major chipmakers, fosters a fast-track permitting process for new fabs, and empowers EU states to subsidize projects.
Amid huge expectations because of the Chips Act, PIC Summit 2023 also tried to keep both feet on the ground by giving the floor to Rinke Zonneveld And Michael Jackson for a debate on the interplay of public and private capital in driving innovation and the challenges faced by the industry. Jackson is a successfully exited deeptech entrepreneur turned investor with nearly 20 years spent in venture capital on both sides of the Atlantic. Zonneveld is CEO of Invest-NL, the Dutch national investment institute. With currently around €2 billion of investment capital under management, it is Invest-NL’s strategic goal to speed up transitions in the field of a carbon-neutral economy, biobased & circular, deep tech, agrifood, and life sciences.
Michael Jackson:
“Europe has a lot of government initiatives, but those government investors are often not really financially driven. They’re seeing it as a regional economic development tool, which is not the right way to look at it. On a per capita basis, Europe needs to increase it, especially in deep tech significantly. Governments should pave the way for private investors. Instead of European governments trying to ‘roleplay as VCs’, they were much better off acting as customers. As an entrepreneur, if you’re trying to have a fast-growing company, you don’t necessarily want a mid-tier bureaucrat on your board or on your cap table.”
Rinke Zonneveld:
“I’m the CEO of a government-backed investor, but I love to make ourselves vanish in the long run. But the thing is, there’s hardly any institutional capital flowing in Europe, especially in the Netherlands. On top of that, many private investors were playing cuddle soccer (“Kluitjesvoetbal”) around software services. 80% of VC funds in the Netherlands until recently focused on the same kind of companies, like software services. Private investors tend to move towards the point where risk and return are optimal. And if you look, for example, at deep tech, we know it’s very capital intensive; it takes a long time to earn back your money, and that’s not where most private investors are willing to go. That’s why we always want to do our investments together with private VCs. Sometimes, we have to find them; sometimes, they convince us. It’s like a love story, how we find each other. If we would step out of the game as government-backed investors, it would all fall apart.”
Michael Jackson:
“In the US, the pension funds can invest up to 10% of their capital in private assets. And I think right now in Europe, there’s not necessarily the right incentives by the government. There’s more North American pension fund money in European tech than there is European pension fund money in European tech.”
Rinke Zonneveld:
“We have to try to activate the pension funds. I’m quite convinced that they will open up to the possibilities, but we have to help them to make the first step. It takes a while, also because this continent has been far too prosperous for too long. We are naive. We must become a third power block and build our own industry, open and strategically. We must make China and the US dependent on us. Unfortunately, we don’t understand power as an economic tool yet.”
Michael Jackson:
“Yes, Europe needs to wake up. Europe still has individual national interests that take precedence over continental issues. There’s a French agenda, a German agenda, a British agenda, etcetera, and they crowd out to a pan-European agenda. We need a lot more pan-European cohesiveness. Europe produces amazing science and amazing technology. The problem is that the commercialization stage is where it hits a lot of issues. Part of that is just because you don’t have one unified market. This also goes for the photonic chips market. There’s around $800 billion in this industry, 16% of which is European. The EU says it wants a 20% market share, but that’s not what I see happening, on the contrary. Europe will have to understand that you need to throw a lot of money at the winners instead of sharing the money with everybody.”
Rinke Zonneveld:
“Although universities in the Netherlands are still doing well, if you look at research, the amount of spinouts is way too low. It’s not valued within academia to start your own company; your citation score is more important. This means there’s not enough early-stage money and hardly any private money for university spinouts. It’s still an inside-out process, and it should be more dynamic. We need more entrepreneurs in the systems instead of academic bureaucrats. Systemic change is needed here.”
Michael Jackson:
“If you take an overall look, there are several urgent tasks for Europe. Minimizing the friction points between science and business is one of them. But let’s also start fixing the exit markets and focus more on deep tech than on software. And most importantly: get away from your national perspectives. The Netherlands cannot compete with the world in all industries. Look at it on a European level.”
Rinke Zonneveld:
“Yes, we need to improve, but I’m optimistic. We can see what is needed here in the Netherlands and Europe. And that is to come up with a real industrial policy focusing on where our strength is. We have to re-industrialize Europe, and it needs a lot of investment and a lot of courage.”
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