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It is raining investments down on Dutch start-ups and scale-ups. In the first six months of 2021, that amounted to €3.1 billion worth in venture capital. More than what was raised in 2019 (€1.3 billion) and 2020 (€1.7 billion). This record is mainly attributable to Mollie and Messagebird, which each brought in more than half a billion in investment rounds. It gave the Netherlands three new unicorns (software company Remote, Mollie and Messagebird), as revealed in a report by Dealroom.

With recent amounts of €600 million for Picnic and €150 million for Sendcloud, the tally continues to rise. A salient detail: the large sums all come from abroad. Is that a bad thing? And where are the major Dutch investment funds?

Where is the money?

Lucien Burm of the Dutch Startup Association, an advocacy group for Dutch start-ups and scale-ups with several hundred members, sees that the high-end of the market is changing, but feels that not enough is happening at the lower end. “Lately, we see that the sums are getting higher. What we are seeing now is really unprecedented. But the number of investments is not necessarily picking up. Amounts above €500 million are becoming more common, which shows that the Dutch market is becoming more mature. While at the bottom, far too few start-ups progress to become scale-ups. In the US and Israel, more than half of the start-ups manage to grow further. About 4 to 5 times more often than is the case here in The Netherlands. Countries around us are also doing better in this respect,” he explains.

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    It is ambiguous, he says, that much of the major investment is coming from abroad. “On the one hand, of course, it’s very nice. Dutch start-ups are doing extremely well in all kinds of sectors. The fact that so much money is coming from abroad means that we are being noticed. That attracts even more attention. At the same time, this money will disappear again from the Netherlands in the event of an exit.”

    Also interesting: European start-ups grow better due to higher valuation in early stages

    So, is there any money at all in the Netherlands? There certainly is. As an example, he cites Invest-NL, which invests in companies that are working on the energy transition and circular economy. This fund has €1.7 billion to put into start-ups; just €28 million of this was invested in 2020. “They could have participated in investment rounds as large as Messagebird. No idea why that didn’t happen.”

    ‘€300 million is small potatoes’

    Invest-NL CEO Wouter Bos announced that investments in companies and other funds worth over €240 million had already been agreed upon. Part of this money, €150 million, was used to establish the Dutch Future Fund. This fund allocates €300 million (the other €150 million comes from the EU) to various venture and growth capital funds. These funds in turn invest that money in Dutch start-ups so that they can grow into scale-ups.

    By divvying up this amount among local funds, Lucien Burm says you won’t get the best out of the funds. “€300 million for scale-ups is small potatoes anyway. But by spreading it among different investment funds, you will not end up with shocking amounts. That’s a shame.”

    Even the additional €300 million that the outgoing Dutch cabinet promised on Budget Day for the tech sector is also not enough. The money is primarily earmarked for technologies and services in the chip and cloud industry. Burm: “This €300 million is a nice gesture, but it is mainly a safeguard for our own cloud and chip services. It is not aimed at innovation and does not go beyond what is needed. A more decisive cabinet might have come up with real decisions, then we would have had a proper budget.”

    Dutch start-ups raise less money than the rest of the EU

    Dutch start-ups bring in an average of €5.9 million, compared to €7.5 million in Europe and almost €20 million in the US (2020 figures). The fact that the average investment in Dutch start-ups is lower than in other places certainly does not mean that things are going badly for Dutch start-ups. According to Burm, the Netherlands has strong innovative young companies across the board in different branches of the economy. “Investments in retail and fintech have been going up and up for years. Other sectors are also doing well in our country.”

    So why is it that Dutch start-ups are still raising less money than European or American start-ups? According to Burm, it has to become more attractive to invest in venture capital. “The tax regulations differ per EU country and are not always favorable in the Netherlands. You also see much more interesting funding abroad. Look at France, where the government raised €4 billion within less than a week after the outbreak of the pandemic. Here in the Netherlands, you see venture funds worth around €100 million; that starts to get serious if we can bring that up to €500 million. Pension funds abroad can also put money into VCs much more easily. Here, the rules are much stricter, we could take a look at that.”

    Legislation takes too long

    He also advocates “tax-friendly” reinvestment of profits after an exit, the sale of a start-up or a scale-up. “That way, after the sale, funds can reuse these profits to invest favorably in any subsequent start-ups. It continues to flow forward like that. In The Hague, they are also increasingly recognizing that start-ups are important for our economy. But good legislation takes too long in a rapidly changing world. That certainly applies to start-ups. So the fact that we still don’t have a new government is definitely not helping here.”

    There are no official figures, but due to the fiscal climate in the Netherlands, talent prefers to start working somewhere else. “That comparison is hard to make, but if you can start somewhere else under better conditions, that’s what you do. A lot of talent are given shares in start-ups. These shares, if they are tradable, are considered income, so you must pay taxes on them. But as an employee, you run a risk. Your salary is low and the chance that you will not see anything back from those shares is quite high. In other countries, this taxable rate is much lower; the Netherlands would also benefit from a friendlier rate.”

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    About the author

    Author profile picture Milan Lenters is a writer and editor. Through IO, he got to know his native city Eindhoven in a different way and sometimes looks with amazement at the many stories that lie ahead.