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Dutch startups continue to raise record capital with substantially more investments happening this year than before. While venture capital investments in Dutch startups grow, Dutch investors lag behind and raising start-up capital remains a major challenge, says a new quarterly data analysis.
The Quarterly Startup Report, a quarterly data analysis carried out by Dealroom.com, Dutch Startup Association (DSA), Golden Egg Check, KPMG, de Regionale Ontwikkelingsmaatschappijen (ROM’s), Nederlandse Vereniging van Participatiemaatschappijen (NVP), and Techleap.nl, shows the scale at which Dutch startups are raising venture capital. The analysis aligns with another shared by NGP Capital with Silicon Canals.
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The NGP Capital analysis showed that European VC funding broke records every quarter in 2021. The analysis observed that smaller cities like Amsterdam were on the rise. The Dutch capital saw funding to the tune of €3.3B during the first nine months of 2021. The Quarterly Startup Report goes a step further to show that investments in Dutch startups actually tripled in 2021.
Investments in Dutch startups tripled in 2021
The analysis by the Quarterly Startup Report shows that Dutch startups attracted investment of €5.3B in 2021. This is three times more than the investment of €1.7B in 2020 and almost double the investment seen in 2019. The Dutch startups are entering 2022 on the back of a third straight year of record growth in venture capital investments.
In 2021, the number of deals also increased from almost 300 the previous year to more than 400. The exponential rise in investment can be explained by the presence of larger funding rounds in 2021. The data shows that 2020 saw only two rounds that raised more than €100M while 2021 witnessed no less than nine such rounds. The largest of these rounds were witnessed by Mollie and Messagebird with funding rounds of €800M and €600M respectively.
The Quarterly Startup Report agrees with the preliminary analysis from NGP Capital that this growth trend will continue in 2022. The report states that there is a “lot of interest in Dutch startups and scaleups, especially from foreign investors”. Venture capitalists have reportedly raised large funds to make more money available for new investments and 2022 could see corporations and non-traditionals investors join the fray.
Access to foreign capital
The year, according to the Quarterly Startup Report, saw a steep increase in foreign investments in Dutch startups. While European VCs have been active, the report states that American investors took keen interest in Dutch startups. While access to foreign capital grows, there was a ripple effect on easy access to Dutch capital. The report highlights the decline of Dutch investors in relation to their foreign counterparts.
The share of Dutch investors in the startup ecosystem decreased from 62 per cent in 2019 to just 21.7 per cent in 2021. The share of American investors has doubled since 2018. The decrease in share of Dutch investors has led to lack of influence on growth and innovation within the Dutch market. The benefits of Dutch startups and scaleups are increasingly seen overseas, resulting in favourable return on investment for foreign investors.
Growth across all phases
The report also shows that Dutch startups saw an overall increase in investments across all growth phases in 2021. The largest increase, however, was seen in large, mature investment rounds as evident from the record funding registered by Mollie and Messagebird. In 2021, the Dutch startups saw more than twice as many rounds worth €15M or more than in 2020.
One of the common themes across all analyses is that Dutch startups continue to attract investment in the form of large funds but smaller rounds continue to see lower participation. Venture capital funds have not increased their investments in smaller rounds as much as they did in larger and more mature rounds.
The report notes that the growth of new innovative companies will be guaranteed only if the gap in smaller rounds is fixed. The Quarterly Startup Report even recommends a series of “tax schemes, such as better employee compensation” to ensure a bigger percentage of ROIs remain in the Netherlands.
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