By Susan Kil-Hershey, Client Relationship Director, Funds
Dutch deep-tech investment is poised to take off, and private equity is perfectly positioned to fund the next generation of innovation.
What the Netherlands lacks in size, it more than makes up for in brainpower. The 2024 Global Innovation Index ranked it the 8th most innovative country in the world. There are countless examples of how the Netherlands has earned this ranking, from AI and quantum technologies to health tech. Advances in vertical farming, seed technology and robotics have made it a global model of food production and the second-largest exporter of agricultural goods in the world.
But despite its robust history of innovation, the Netherlands has fallen behind in deep-tech investment. According to Techleap’s 2024 State of Dutch Tech report, Dutch tech companies typically lag one year behind the European average and two years behind the U.S. average in advancing to the next funding round.
The problem isn’t a lack of ideas. It’s a lack of capital with the patience and vision to bring those ideas to scale. In this article, we’ll explore why private equity is the key to unlocking the next chapter of Dutch deep tech.
What’s holding Dutch deep tech back?
One factor at play is the unique structure of the Dutch university system. Unlike the academic ecosystem in the U.S., Dutch universities receive substantial government funding and often operate independently of private investors. While this funding model promotes some degree of research freedom, it can also limit knowledge transfer and commercialisation opportunities.
In other words, Dutch universities are innovating, but there’s no commercial bridge to carry those ideas into the market. Many early-stage Dutch startups struggle to secure follow-on investment. This is especially true in deep tech, where development timelines and capital requirements are significantly longer and larger than in software or consumer tech.
Faced with this challenge, many Dutch technology ventures end up offshore. When Dutch technology start-ups scale, ownership often passes to foreign businesses or private equity firms. Between 2019 and 2023, 66% of Dutch start-ups and scale-ups were acquired by non-Dutch companies or PE funds.
Why private equity is uniquely positioned to launch Dutch deep tech
Deep tech isn’t a fast-growth sprint; it’s a long-term play. These ventures are often built around fundamental scientific breakthroughs with the potential to transform entire industries. Consider photonics, which has already revolutionised solar-powered transportation (and where the Dutch are currently among the world’s leaders).
But turning deep tech into a viable business takes time. These start-ups are typically high-risk, capital-intensive, and require longer timelines to carry innovations through from the research lab to the market. Patient capital, operational guidance and long investment horizons are essential.
While venture capital remains the primary engine for early- and mid-stage funding, the market is showing signs of strain. Early-stage venture capital (VC) funding has declined in recent years, creating potential gaps for emerging deep-tech ventures. At the same time, private equity funds – which traditionally focus on later-stage investments – are increasingly active in supporting scale-ups with proven potential.
Private equity offers:
- Follow-on capital to help ventures scale beyond initial VC rounds
- Strategic oversight to professionalise operations and navigate complex intellectual property (IP) or regulatory issues
- Longer holding periods, ideal for start-ups with extended research and development (R&D) cycles and delayed commercial pay-off
This is what Dutch deep-tech start-ups need to thrive. After seed money, they need staying power.
According to Techleap, if just 1% of start-ups in the Netherlands made the leap to scale-up stages, it could deliver a 5% increase in current ecosystem value. That’s why Techleap has focused on connecting founders, investors and policymakers in an effort to make the Netherlands Europe’s leading tech powerhouse by 2026.
Dutch pension funds present another opportunity for growth. As some of the largest institutional investors in Europe, pension funds are increasingly exploring allocations to venture capital and deep-tech strategies. Their involvement could play a pivotal role in closing the growth-stage funding gap, ensuring that Dutch innovation stays anchored in the Netherlands.
While public initiatives like Invest-NL are laying a strong foundation, it’s private capital that has the unique capacity to turn breakthrough research into globally competitive companies.
Tjarda Molenaar, Managing Director of the Dutch Private Equity and Venture Capital Association (NVP), commented: “Deep tech offers enormous opportunities. If we want to become a global deep-tech leader, we need to close the gap between venture capital and private equity funding. We should mobilise more private capital from Europe alongside public funding. Private equity can provide the growth capital and professionalisation that start-ups need to scale. This ensures that Dutch breakthroughs don’t leave our borders but instead create jobs, prosperity and strategic autonomy here at home.”
The right investment strategy deserves the right support
The Netherlands has long been a hub for world-changing ideas, but talent and research alone won’t secure the Netherlands a place on the global deep-tech stage. Turning breakthrough innovation into world-leading companies will require an ambitious capital deployment strategy, and private equity is the missing link.
The Netherlands isn’t just a breeding ground for innovation; it’s a strategic hub for cross-border scaling. With its strong infrastructure and access to European markets, the Netherlands offers deep-tech startups an ideal springboard to global growth. But global potential requires funding, and PE firms equipped with long-term vision can help Dutch innovation go the distance.
How we can help
At IQ-EQ, we support private equity firms with:
- Global expertise, local presence: Our Amsterdam office is backed by a local and global network of fund specialists
- IQ-EQ Cosmos: Our proprietary platform collates data from a wide range of sources to provide real-time visibility into fund and portfolio information, streamlining reporting and improving investor relations
- Asset Owner Solutions: Financial and administrative support specifically tailored to asset owners and LPs
- Regulatory compliance: MaxComply effectively automates AML/KYC compliance on a global scale
Ready to help scale the future of Dutch deep tech? Get in touch with our team today.
