Investments in Dutch startups almost doubled in 2019. How come?

Thomas Mensink
Mar 4, 2020 · 6 min read

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Dutch tech startups and scale-ups raised more than €1.4 billion in venture capital last year. That's again a new high, and almost twice as much the year before:

You've probably read about this on your favourite startup blog already. But to be honest, we find this ‘nice-to-know’ information.

As startup analysts, we are more interested in the underlying patterns like:

  • how can we explain this increase in investments last year?
  • were there more deals or larger deals (or both)?
  • what are interesting developments and patterns?

In a series of blogposts we'll dive into the venture capital investments in Dutch companies. We base these articles on our comprehensive dataset (some say the best available and who are we to disagree) and analysis that is available to all of you via our webshop. In this way, we encourage you to do your own analysis, scout new dealflow and make better informed decisions about fundraising and investing.

Interested in our complete dataset for your own analysis (to find relevant (angel) investors, to scout startups, to analyse the performance of your hub)?

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In this blogpost we'll explore how we can explain why the investments in startups have almost doubled in 2019 compared to 2018. We look into a number of different possible explanations:

  • more deals, bigger deals or both?
  • more later-stage rounds?
  • more Medtech deals?
  • more outliers?
  • more foreign investors?

In some cases, we can make a comparison with last year's statistics, and in other cases we'll just dive into what we have collected and analysed this year.

Yes, we saw more deals in 2019 than in 2018: 286 vs. 255 (+12%). Our feeling was that the Dutch startup ecosystem gained momentum over the past years and the venture capital market has grown in parallel. Therefore, this 12% increase is actually smaller than we expected.

On the flip side, deal sizes have increased in every stage (both average and median). Especially in the Series B rounds we saw a strong increase in the average ticket size: +183% (and +60% median).

Conclusion: the biggest contributor of the increase of VC funding is the increase in round sizes, not in number of deals.

Later rounds (say Series B and up) are an indicator of the maturity of the venture capital ecosystem. A lack of later rounds has always been one of the Archilles' heels of the Dutch ecosystem.

Good and bad news. The good news is that the number of Series B deals has increased quite sharp: from 24 in 2018 to 35 in 2019 (+46%).

The bad news is that the number of Series C+ rounds have decreased: 9 in total versus 12 in 2018. Perhaps, more later stage rounds will follow in 2020/2021 when the companies that raised Series B will raise new rounds.

Conclusion: more Series B rounds, less Series C+ rounds. Let's call it a draw.

The biotech scene is traditionally strong in the Netherlands, both on the startup and venture capital side. Medtech startups (incl. biotech, therapeutics, drug development and medical devices) often raise high funding amounts, which makes sense given the capital intensive business they're in.

Last year, 39 out of 281 deals were in the Medtech category. This is a decrease compared to 2018 (48/255).

However, we see that average funding amounts in Medtech are higher than other categories. Also, the average funding amount in Medtech in 2019 compared to 2018 increased more than in other categories, especially in Series B:

Conclusion: although there was a decrease in Medtech deals, Medtech companies did raise more capital on average in Series A and B, and had a higher increase in size compared to 2018.

Venture capital is always about outliers, about the power law. Last year, Picnic raised the highest amount: €250 million. That's almost 18% of the total amount of funding in Dutch startups!

As a reference, the company with the highest funding amount in 2018 was Bitfury, that raised just over €70 million.

The number two on our 2019 list, AM Pharma, received an investment of €116 million. So yes, these outliers have a huge impact on the total funding amount.

On the other hand, the number of large rounds (say >€50 million) has been quite stable over the last 3 years:

We especially saw more deals in the €1M to €2.5M segment that previous years.

Conclusion: outliers such as Picnic and AM-Pharma have a big impact on the total funding amount. But, even if we exclude these companies from our analysis, the total funding amount would still have gone up by €300M (or +40%).

Dutch VCs in general have relatively small funds and the Netherlands is a relatively small domestic market for startups. On top of that, you can add the Dutch cultural frugality and you can easily suspect that Dutch venture capital investors invest smaller tickets compared to their foreign peers.

Guess what: it's true.

In 2019, the average Series A round by Dutch VCs was €1.4M, and the average Series A by foreign VCs was €7M (and a combination of Dutch and foreign VCs €6.6M average).

In Series B, this difference was even larger: €6.4M (Dutch) vs. €17.2M (foreign) (and €20.2M combination).

In other words, rounds are much larger when foreign investors are involved.

Last year, around 40% of the VC-deals included at least one foreign venture capital fund. This hasn't really changed compared to 2018. What has changed is the average amounts that foreign investors invest. Their rounds have gone up more than the 'Dutch' rounds, both in Series A and B.

Conclusion: the percentage of foreign investors hasn't increased last year, but the average round sizes of foreign VCs increased more compared to their Dutch counterparts.

If you liked this analysis then please ‘clap’ (or share on LinkedIn) so others can find it too. Thank you! ❤

We'll publish some more deep dive blogposts about the Dutch funding landscape over the next period of time. Consider following this Medium blog, or Golden Egg Check on LinkedIn to get heads up when we publish our new blogs. And, if you're feeling really excited, you can get access to our comprehensive dataset and report via our webshop.

Oh, and I'm pretty sure we missed deals or we cut some corners in the above analysis, but we hope this gives an overall view about the Dutch VC market. Feel free to add your analysis or drop comments below.

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