Stricter rules for Dutch tech investments

The Dutch government is significantly tightening its oversight of foreign investments. The cabinet is expanding the scope of the Act on Security Screening of Investments, Mergers, and Acquisitions (Wifo Act). Starting January 1, 2027, six new technology sectors will fall under this law. This decision aims to prevent vital knowledge from leaking to countries that pose a risk to our national security. The measure has major implications for the Dutch tech sector. Innovative companies must prepare for stricter rules and longer procedures when raising capital.

The six new key technologies

The expansion of the Vifo Act focuses on technologies that are crucial for the future. As of 2027, the government is adding six sectors to the list of sensitive technologies. The six technologies are biotechnology (including stem cell technology and seed breeding), artificial intelligence (AI), advanced materials, nanotechnology, sensor and navigation technology, and nuclear technology for medical use.

All these sectors have one thing in common: they are of strategic importance to the Dutch economy and defense. By bringing these areas under the law, the government gains control over who invests in these sensitive innovations. This is intended to prevent undesirable foreign parties from gaining control over vital Dutch tech companies.

European autonomy and geopolitical tensions

The Netherlands is not alone in this approach. The expansion of the Vifo Act is part of a broader European movement. The European Union aims to strengthen its strategic autonomy. This is enshrined in the European Foreign Investment Screening Regulation. This directive encourages member states to screen foreign investments more rigorously. Through this, Europe seeks to become less dependent on countries outside the EU, such as China and Russia.

The impact on startups and scale-ups

The stricter rules also have a downside. The expansion could be particularly detrimental to startups and scale-ups in the tech sector. These young companies need significant capital to scale up their innovations. To do so, they often rely on foreign venture capitalists. The reporting requirement to the BTI creates additional administrative burdens. The assessment procedure can also take months. This creates uncertainty among investors, who may turn to countries with more flexible rules. Industry organizations warn that this will put pressure on the Dutch investment climate. The government acknowledges this risk. The government is trying to mitigate the impact by investing more in innovative sectors itself. The government also aims to improve access to European venture capital. Nevertheless, striking a balance between security and economic growth remains a difficult dilemma.

What entrepreneurs need to do now

The expansion will not take effect until January 1, 2027. This gives companies time to prepare. Entrepreneurs in the affected sectors need to do their homework. It is wise to thoroughly vet the background of potential investors in advance. This prevents a deal from falling through at the last minute due to the government review.