Dutch startups’ toughest hurdle: winning venture capital
Despite raising $3.5 billion in 2024, the Netherlands lags behind countries like the U.S. in per capita venture capital investment.
Published on December 30, 2024
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Dutch startups are navigating a landscape fraught with funding challenges, particularly in securing venture capital during the critical 'valley of death' phase. Despite raising $3.5 billion in 2024, the Netherlands lags behind countries like the U.S. in per capita venture capital investment. This funding gap is exacerbated by high taxes and regulatory uncertainty, leading many startups to seek opportunities abroad. Increasing pension fund involvement is highlighted as a potential solution to bolster domestic investment.
While Dutch startups just had the second-best funding year ever, the ecosystem faces significant challenges. The stark contrast becomes evident when comparing per capita venture capital investment: €546 in the United States versus €193 in the Netherlands. This disparity is particularly acute in the crucial 'valley of death' phase, where startups require substantial funding for research and development.
Institutional investment and pension funds
A critical bottleneck in the Dutch startup ecosystem is the limited participation of pension funds. Currently, only 0.01% of Dutch pension funds' assets are invested in domestic venture capital, significantly lower than Sweden's 0.19% and the United States' 1%. This conservative approach is defended by finance professor Dennis Vink at Nyenrode University, who expressed NRC his concern about investing pension money in high-risk assets. The funding environment is further complicated by tax regulations, which tech foundation Techleap envoy Prince Constantijn van Oranje identifies as a major deterrent for potential investors.
European context and solutions
The challenges faced by Dutch startups reflect a broader European issue. According to PwC's analysis, only 10 of the global top 100 unicorns are European, compared to 58 in the US and 23 in China. In these months, an initiative called EU Inc has emerged, gathering thousands signatures for creating a unified legal entity for European startups.
This proposal aims to standardize investment processes and simplify cross-border operations and has been submitted to the European Commission. The European tech ecosystem has shown potential for growth, with €426 billion invested since 2015, but the total growth-stage funding gap remains substantial at $375 billion.
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Atomico's State of European Tech Report 2024 shows the growth of European tech ecoystem in the past decade and its limits. We look at the numbers in this new episode of Behind the Figures.
Future outlook
Despite current challenges, the Netherlands has positioned itself as Europe's fourth best-funded startup ecosystem, following the UK ($17 billion), Germany ($7.9 billion), and France ($7.7 billion). The ecosystem shows particular strength in the climate tech and biotech sectors. However, addressing the funding gap remains crucial and will tell much of the fate of the Dutch startup ecosystem.