Foreign investors capturing Dutch start-up market

Foreign investors capturing Dutch start-up market

22 March, 2022

Never before have Dutch start-ups raised as much capital as they did over the past year. Venture capitalists invested a total of 4.3 billion euros in Dutch start-ups and scale-ups. Compare that to 2020, when another record amount of 1.7 billion euros was raised. What are the new developments and why are Dutch start-ups so sought after?

What does that mean for the Netherlands?

Dutch start-ups are highly attractive among investors. Never before has the total amount of investment been as high as in 2021. Dutch start-ups and scale-ups are extremely popular with foreign investors – with Americans in particular. NVP, the Dutch private equity and venture capital association, reported that 1.8 billion was invested in Dutch start-ups in 2021. Dutch scale-ups also raised a record amount of 2.5 billion. According to NVP Chairperson Annemarie Jorritsma, although this is an extraordinary development, it does include some negative aspects: “If there are only foreign investors in these companies, we will gradually lose these companies.” On the other hand, the expectation is that if the companies that are now profiting from foreign capital succeed, then they will reinvest in Dutch business in the future.

Scale-ups vs. Start-ups

Scale-ups are companies that have survived the start-up phase and are entering the next phase of growth. These companies have already achieved a degree of success and are keen to take their business to the next level with the help of investments. Scale-ups have moved past the experimental phase and are turning a profit, unlike most start-ups. This is also one of the reasons why they are so interesting for investors: there is less risk and a high degree of growth. Among the well-known Dutch scale-ups are the companies Picnic and the payment service provider Mollie.

Why are Dutch start-ups so sought after?

Dutch start-ups raise a remarkable amount of money from American investors. Dutch start-ups are very attractive to American investors as they are valued relatively low in comparison to start-ups in the US. New tech companies in particular saw their valuations increase over the past year in the midst of the overheated acquisition market in the US. The reverse also applies – American investors are attractive to Dutch start-ups as well. They often offer more than Dutch investors.

Apart from that, it is also difficult for start-ups to secure bank loans, as the companies carry a high risk and little remains in the event of bankruptcy. They are often dependent on investors for these reasons. In exchange for the investment, these investors want shares in the company. This is a way of profiting from the possible future growth of the start-up.

Conclusion

Foreign investment can be extraordinarily interesting for fast-growing Dutch start-ups. Beyond that, it is also clearly important for the investor to have international contacts and expertise in the sector where the start-up is involved, in order to raise the company to a higher level. If not all the right elements are in place for Dutch investors, there is no harm in trying your luck across the border.

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