Ten CEOs of Dutch scaleups have issued a manifesto urging the government to bolster the country’s innovation climate. These leaders, representing key sectors like photonics and AI, argue that current conditions hinder growth and competitiveness. They propose ten improvements, including faster approval processes and better access to public infrastructure. The CEOs emphasize the need for government risk-sharing in scaling businesses, citing difficulties in securing financing for the critical growth phase between startup and maturity. This call to action aligns with a recent government study recommending increased investment in innovative scaleups, highlighting the crucial role of public support in nurturing future tech giants in the Netherlands.
Why this is important:
Helping scaleups to grow is key in making their innovation impact society, but also essential to retain knowledge, talent, and competitiveness as a country.
Addressing the valley of death
The scaleups face what is commonly referred to as the ‘valley of death’ – the precarious phase where they transition from a startup to a mature entity. During this period, securing financing can be particularly challenging. Johan Feenstra, CEO of Smart Photonics, pointed out to the Financieele Dagblad that while startups can rely on venture capital and established companies on private equity, scaleups often fall into a gap where substantial funding is hard to come by. The CEOs argue that the government should play a pivotal role in bridging this gap, especially for companies working within the ten key technologies identified by the cabinet.
The IBO study’s alignment
This call from the tech CEOs aligns closely with the findings of a recent Interdepartmental Policy Research (IBO) report on business financing. The IBO study advocates for significantly increased investments in larger financing rounds for innovative scaleups. It recommends the creation of more substantial private investment funds in the Netherlands to support these types of companies. Additionally, it emphasizes the importance of enhancing the financial capacity of Invest-NL, the Dutch state investment bank.
Invest-NL, working in collaboration with the European Investment Fund (EIF), has already been pursuing strategies to attract more institutional investors. The IBO report’s recommendations include providing more tailored financial solutions for companies and potentially deploying capital with lower return expectations to stimulate growth. The new Dutch cabinet has already allocated an additional €1 billion to Invest-NL to support these initiatives.
Institutional advantages
The IBO report also highlights the benefits of consolidating the execution of innovation financing instruments within Invest-NL. This consolidation could lead to greater synergies, lower transaction costs, more coherent management and direction, and a stronger concentration of expertise. The report suggests that a single financing line for entrepreneurs would be more efficient and effective. However, it also notes that this approach requires careful coordination with the relevant ministries to ensure discretionary power in implementing these measures.
New ministers Dirk Beljaarts and Eelco Heinen will decide how to act on the IBO report’s recommendations. Their decisions will significantly impact the future landscape of innovation and entrepreneurship in the Netherlands. The CEOs hope the government will heed their call and take decisive action to support the country’s burgeoning tech sector.
Looking forward
Several Dutch scaleups have announced substantial financing rounds in the past few months, and more announcements are expected soon. Large investment funds in the Netherlands have also raised hundreds of millions of euros for tech scaleups. However, as Mattijs Slee, CEO of Battolyser Systems, stated, these are just the initial steps. To achieve the societal impact envisioned for the key technologies, the Netherlands will need several €1 billion in funds available for seven to ten years. This level of funding is still lacking.
The manifesto and the IBO study both underscore the critical need for increased government support and investment in the tech sector. By addressing the challenges scaleups face and providing the necessary financial backing, the Dutch government can help create an environment where innovative companies can thrive and contribute to solving future societal problems in sustainability, health, and security.
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