Foreign investment in start-ups sharply increased, Dutch investment lags behind

Dutch start-ups and scale-ups have managed to raise nearly €1.5 billion in venture capital in the third quarter of 2021, making the total for the first three quarters of this year €4.5 billion, already three times as much as in all of 2020. This continues the trend in the growth of funding for these companies. Noteworthy in this regard is the advance of American investors, which Dutch funds have not yet matched. This is evident from the Quarterly Startup Report, a quarterly data analysis carried out by Dealroom.co, Golden Egg Check, KMPG, the Dutch regional development agencies (RDAs)(ROMs), Nederlandse Vereniging van Participatiemaatschappijen (NVP), the Dutch Startup Association (DSA) and Techleap.nl.

The Dutch Startup Association reported in a press release that the total amount of growth capital raised for start-ups was lower in the third quarter than the previous one, mainly due to a number of mega deals in that record quarter. Despite this, a clear increase in funding for these innovative companies can be seen this year when compared to previous years. In comparison to the first three quarters of 2020, the increase is almost 200 percent, and with respect to 2019, even 270 percent.

Also read: Investments in Dutch start-ups on the rise, but money mainly comes from abroad

Although more venture capital is available from the Netherlands – €1.1 billion in the first three quarters of 2021 compared to €690 million in the comparable period last year – the increase still appears to be mainly due to foreign investment. The share of these (mainly US) investors in total investments in Dutch start-ups has increased from 10 percent to 55 percent since 2019. In contrast, the share of total investments by Dutch funds in Dutch start-ups is rapidly dropping, from 62 percent in 2019 to 19 percent in 2021.

VC funds are backing off

Continued growth in later-stage funding of start-ups is noticeable. The past quarter saw a number of large investment rounds for the likes of Picnic (€600 million), Sendcloud (US$177 million) and VanMoof (US$128 million). One area of concern, however, is the trend of VC funds backing away from investments up to €1 million. Since 2018, their share of these early-stage investments has dropped by half.

“We can safely conclude that Dutch start-ups and scale-ups are now on the map internationally as attractive investments. It’s just a shame that Dutch investments are still lagging behind,” says Lucien Burm, chair of the Dutch Startup Association. Investors are working hard to gain ground, given the number of new funds this year and their size. Yet more is needed to be able to gain a competitive edge.

Maurice van Tilburg, Managing Director of Techleap.nl adds, “We need to sustain growth and still be internationally competitive in a few years’ time. However, the downward investment trend at the bottom of the market could really be a cause for concern. It is important for the Dutch economy of tomorrow that start-ups at the beginning of their growth are being helped, whereby Dutch investors also have an important role to play.”

DSA and Techleap.nl have been advocating for, amongst other things, tax schemes to make these very investments more attractive since the outset of the formation of the new Dutch government.

The full report can be found here.