Only two in ten Dutch investors typically provide start-ups with the full investment amount in one go. The vast majority, eight out of ten investors, do not, and sometimes or even always choose to split up the amount of a start-up investment.
For example, they do this in tranches, linked to milestones, or interim business goals that must be achieved by the start-up.
This is evident from a survey of 43 Dutch investors by entrepreneurship website MT/Sprout, with varying fund sizes ranging from less than half a million euros to 250 million euros, according to MT/Sprout in a press release. The surveyed investors have investments ranging from 50,000 euros to 30 million euros. The vast majority of them (forty parties) invest amounts up to 10 million euros.
About three in ten Dutch investors (28 percent) always split financing into instalments, half (53 percent) do this occasionally to frequently. Only about two in ten investors (19 percent) routinely transfer funding amounts to the recipient start-up or scale-up in one lump sum.
Smaller and larger investors
There are hardly any differences in the way smaller (N=16) and slightly larger lenders (N=24) shape their stakes. In both groups, about eight out of ten investors surveyed by MT/Sprout indicate that they sometimes or never transfer the full investment amount in one payment. However, the proportion of investors who immediately invest the full amount in a start-up is slightly larger (38 percent) within the group of smaller investors than among the larger investors (21 percent).
We define “smaller investors” for this study as financiers who invest amounts of up to 1 million euros. This type of early-stage financing of companies is also described as seed capital or even pre-seed capital. We define ‘larger lenders’ as investors who make rounds involving up to and including 10 million euros. For example, an investor who injects amounts ranging from half to 3 million euros belongs to the latter category. One investor stated that they invest stakes of 10 million euros or more. Two lenders did not provide insight into the size of their investments.
Set-up of research
For this survey, MT/Sprout approached a total of 95 Dutch investors, from well-known venture capitalists to regional government funds. MT/Sprout only interviewed investment groups for this study, therefore, no solo angel investors. Not all financiers are willing to disclose their investment methods. No less than 52 of the approached lenders, despite repeated requests from MT/Sprout, did not respond or deliberately declined to participate in this survey.
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MT/Sprout asked the surveyed investors whether they pay the full sum immediately or finance it in instalments (tranches), which are linked to intermediate goals (milestones) for start-ups. We then asked them to explain their decision. As a final question, we asked the investors to disclose the installment sums of their investments and their eventual fund size. Percentage numbers for the results in this study have been rounded up.
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