Dutch start-ups are attractive investments for Americans. They are valued lower than tech startups in the overheated US market. Various initiatives have been developed to bring these investors into contact with young companies. The fact that investors from America are flocking to the Netherlands is reflected in the figures. "About one in five deals in 2021 involved at least one US investor." Illustration: iStock/FD Studio
*Half of the venture capital for Dutch tech companies came from the US.
*Most US money went to scale-ups and less to early start-ups.
*Several initiatives hope to close this gap for early start-ups.
In mid-December, just before the new lockdown, eighteen Dutch start-up founders come together in the chic restaurant Brasserie Ambassade on the Amsterdam Herengracht. Duck leg confit is on the menu. In addition to the tech entrepreneurs, a venture investor from the US has also joined, and various partners of five Dutch investors.
'The Herengracht is of course a nice place for Americans,' says Dirk Huibers. He is co-founder of Spotr.ai, a tech company that raised its first seed capital of €2.5 million early last year, and plans to visit investors again next year. He describes the atmosphere as 'pleasant and informal'. It is a great opportunity for entrepreneurs to make contact with potential investors.
The lunch is an initiative of DutchTechInc, a new platform for contacts between financiers and tech entrepreneurs. It was set up by Oliver Binkhorst, a Dutchman in California. He wants to bring American money, Dutch money and start-up founders together. The founder lunches are just an example, he says. It can also be done quietly without a physical meeting. “Due to the pandemic, you see that American investors are much more willing to do remote transactions. The physical presence in the US or California that was once necessary has become less important.”
Lots of money to mega rounds.
The fact that investors from America are flocking to the Netherlands is reflected in the figures. Last year, Dutch start-ups raised a record amount of dollars to finance their growth plans. Of the €5.5 billion in venture capital last year, half came from the United States. Two years ago, that was still 10%, according to data agency Dealroom.co. Or as Thomas Mensink of data agency Golden Egg Check puts it: 'About one in five deals involved at least one American investor.'
Some of the money went to large investment rounds. In the spring of 2021, the Amsterdam software company Message Bird raised €662 million. Much of that came from American investors such as Accell, Tiger Global Management and Blackrock. Fintech company Mollie from Amsterdam, which raised €665 million last summer, was also almost entirely financed by American funds. The €600m round raised by web supermarket Picnic in September was led by the Bill & Melinda Gates Foundation Trust.
These Dutch mega rounds show what American investors are especially interested in: financing late stage companies (also called scale-ups in the Netherlands; start-ups that have survived the first phase and achieved initial success).
This picture is confirmed by the Dutch investor Johan van Mil, of the Peak fund. American colleagues often approach him, he says. They prefer to join when a start-up is already a lot more mature, with a monthly turnover of €150,000. Since the outbreak of the corona crisis, Van Mil regularly speaks online with American investors: 'They also do full deals based on video calls.'
The Americans concentrate on European cities where many start-ups arise: London, Paris, Berlin, Amsterdam and Stockholm. The dollar is also on the rise in these 'tech hubs', according to the Dealroom data: of the more than $93 billion that European start-ups raised last year, more than a third ($33.9 billion) came from the US. Two years earlier it was still a quarter.
The Americans also use 'venture scouts' to find very young companies, says Van Mil. These are local entrepreneurs, who receive up to $500,000 to take a stake on behalf of the venture investor in a promising tech company that has yet to launch its first product. Peak also uses such scouts, but with investment amounts of up to €100,000.
Dutch start-ups are attractive investments for Americans. They are valued lower than young tech companies in the overheated US market. The reverse is also true: American investors are interesting for Dutch entrepreneurs, because they offer more than their Dutch competitors.
For Rick Lamers and Yannick Perrenet, of data start-up Orchestra, this was one reason to raise their $3.5 million seed round from US investors this fall. 'In the end, financing is also just a marketplace. You go where there is the highest bid for your product', says Lamers. The specific knowledge about its market sector also plays a role: 'Dutch venture capital firms simply don't know much about our domain, developer tools.'
Lamers and Yerrenet are also affiliated with the online platform of Binkhorst, which organizes the fundraising lunches in the Netherlands. This digital part is mainly educational, says Binkhorst: 'Young, unknown start-ups from the Netherlands are brought into contact with foreign investors and they learn from Dutch entrepreneurs who have experience with this.'
Binkhorst is not the only one who wants to help young start-ups with American money. There is also a network of 'angel investors': Operator Exchange, set up by a group of Dutch people who have worked in Silicon Valley. The angels are often former entrepreneurs who make small investments.
The Dutch investor Unknown Group will also launch a fund next spring, especially for Dutch investors or Americans 'with an orange heart'. Ceo Hendrik Halbe of Unknown wants to use this fund to 'build a bridge' to investors who only participate in the first serious investment round, the so-called series A. 'We focus on Dutch start-ups that need a helping hand to scale up. have," says Halbe. His new fund starts out relatively small, but he hopes to grow from $60 million to $100 million. Halbe's example is Israel's UpWest, which also started small in 2012 and is now a major driver of the Israeli tech world.
And then there is the Dutch consulate in San Francisco, which has been offering the 'Holland in the Valley' mentoring program for years. In it, successful Dutch people from Silicon Valley give advice to entrepreneurs in their mother country.
In American hands.
The increase in American capital in Dutch start-ups is a major boost for fast-growing tech companies. But it also means that more and more shares of Dutch companies fall into American hands, and with the shares more and more control. Is that a problem?
Not really, thinks angel investor Rene Bonvanie. He spent the past 25 years in Silicon Valley with IT firm Oracle and Palo Alto Networks, a cybersecurity firm. As an angel he is involved in the new fund of Unknown, and he is a mentor in the Holland in the Valley program of the Dutch consulate. Firstly, it is expected that the entrepreneurs who now profit from American capital will eventually become so successful that they will invest again in the Dutch ecosystem as angel investors.
Not just financing.
But above all, 'the most important thing is that we get the right capital to the right people,' says Bonvanie. “It's not just about financing. An entrepreneur also wants to work with someone who has the right contacts in the US market, who employs analysts to help with market research, and who has expertise in the industry in which the company operates. It would be nice if this could always be done with Dutch investors. But often that is not the case.'