Dutch Startups Struggle to Secure Venture Capital Amid Funding Challenges
The Hague, Monday, 30 December 2024.
Dutch startups are hindered by limited venture capital access, affecting growth and innovation. Calls for increased government and pension fund support highlight the urgent need for funding solutions.
Stark Funding Disparities
The Dutch startup ecosystem faces significant funding challenges, particularly evident in the stark contrast with international markets. In 2024, venture capital investments in the Netherlands amounted to just $3.6 billion (approximately €3.45 billion), compared to the United States’ $190.9 billion (€182 billion) [1]. This disparity becomes even more apparent when examining per capita investment: €193 in the Netherlands versus €546 in the US [1]. The funding landscape has deteriorated further, with total venture capital funding dropping from €1.8 billion in 2023 to €1.2 billion in 2024 [5].
The ‘Valley of Death’ Challenge
Dutch startups particularly struggle during the crucial ‘valley of death’ phase, where substantial investment is needed for research and development despite insufficient revenue [1]. This challenge is illustrated by the highly selective nature of venture capital investments. Djoni de Vos, managing a €270 million fund, reveals that out of a thousand startups reviewed annually, only about five receive investment [1]. The situation has worsened in 2024, with only 15% of startups successfully securing their sought-after funding, down dramatically from 40% in 2023 [5].
European Context and Brain Drain
The funding crisis extends beyond the Netherlands, affecting European competitiveness as a whole. Former European Central Bank President Mario Draghi’s report highlights a concerning trend: between 2008 and 2021, 40 out of 147 European unicorns relocated abroad, primarily to the United States [1]. This exodus is partly driven by the preference of foreign investors for riskier investments, as noted by Cradle’s co-founder Jelle Prins, who warns that ‘much of the value flows abroad’ due to the lack of domestic investors [1].
Potential Solutions and Initiatives
Several solutions are being proposed to address these challenges. Parliament member Joost Sneller has suggested allocating €30 million annually for startups in medical and climate technology sectors [1]. Additionally, Prince Constantijn van Oranje advocates for increasing pension fund investments in venture capital from the current 0.01% to 1% of their assets [1]. The EU’s INVEST project offers some hope, having already supported 312 companies and facilitated €930 million in funding since 2020 [2]. However, finance professor Dennis Vink expresses concerns about higher-risk investments of pension funds, highlighting the ongoing debate about balancing risk and innovation [1].