Venture capital funding for emerging-tech companies in the Netherlands hit a record in the second quarter this year, with cloud, automation and financial technology grabbing a big share of funding, according to a report from financial-services firm Ebitwise and The Dutch Venture Capital Journal.
The funding should drive job growth for IT professionals in the country, and points to emerging technology that is being increasingly deployed by enterprises.
A government initiative backed by a Dutch prince to connect companies with venture capital firms, as well as the pandemic’s demand for ubiquitous connectivity and the technologies that can facilitate it, helped drive investments in Netherlands start-ups and so-called scale-ups, according to researchers.
Sixty-eight Netherlands-based companies garnered €2.48 billion (US$2.9 billion) in venture investments in the second quarter of 2021, according to research by Ebitwise and The Dutch Venture Capital Journal. Total investments were tenfold higher than the €250 million for the same period last year, at the height of the pandemic, and also more than three times more than the €713 million raised in the first quarter this year.
Calling the boost of funding “an economic phenomenon,” Sebastiaan van Essen, editor of The Dutch Venture Capital Journal and the researcher who compiled the numbers, explained the distinction that venture capital investors in the Netherlands make between the two types of emerging companies. Start-ups have “clear potential” but still need to find their legs and strategic position in their particular market, while scale-ups already are earning revenue and experiencing growth, but need capital to scale globally to stay ahead of competition, he told CIO.
Government raises profile of Dutch start-ups
There are some obvious drivers of the recent windfall for Dutch companies, van Essen said. One is TechLeap, an organization subsidized by the Dutch government “to raise awareness and to build connections between the venture capital market and start-ups in the Netherlands,” Van Essen said.
TechLeap has as its "special envoy," Prince Constantijn van Oranje of the Dutch royal family, lending both credibility and an established public face to the initiative. TechLeap has been instrumental at getting Dutch start-ups and scale-ups a seat at the table with venture capitalists that is clearly paying off, Van Essen said.
“It’s winning them more publicity and making sure they are going to more events and [being] more visible,” he said.
Pandemic drives need for connectivity tech
Another factor that seems to be affecting VC investment in Dutch companies is the COVID-19 pandemic and the overall need for more ubiquitous connectivity to cater to an increasingly remote workforce and a booming e-commerce market, Van Essen said.
“There are some investments with remote-technology start-ups that have been boosted because of the coronavirus crisis,” he said.
Indeed, the two companies at the top end of the Q2 investment round which are gaining international attention for their technologies seem to reflect this notion. Amsterdam-based scale-ups Mollie and Messagebird both landed nearly €700 million in a Q2 round of funding — €676 million and €662 million, respectively. This is in addition to significant multimillion-euro investments both companies already had raised in previous funding rounds.
Mollie provides a payment platform designed to make it easy for online merchants to integrate payment systems into a website or mobile app through an API — something that many companies likely were scrambling to do when the bulk of consumer purchasing moved online during the pandemic.
Messagebird offers a cloud-based platform to connect enterprises to their global customers through unified communications solutions that connect SMS, voice and chat APIs. Again, it’s a solution that supports a pandemic phenomenon — the move to a largely remote workforce and the inability of companies to connect face-to-face with customers.
However, Mollie and Messagebird are just two of the 68 companies that raised capital in Q2. The mixed bag of companies on the list also demonstrates clear venture capital interest in myriad other technologies as well, including automation, IoT, and verticals such as fincial technology, biotech and agritech, Van Essen said. For example, Redwood Software, which makes cloud-based business process automation software, received €315 million in venture capital, putting it into third place for the quarter.
Venture funding fuels need for tech talent
This influx of cash into the Netherlands tech market will likely lead to a raft of new IT hires in the coming years as these companies scale up, Van Essen said. However, not all of those hires will come from the Netherlands itself.
While there certainly will be employment opportunity for tech talent coming out of the country’s top two tech universities —Delft University of Technology and Eindhoven University of Technology — emerging firms likely will have to look further afield to fill available positions as they scale up as well, he said.
A shortage of tech talent is a perennial problem for Dutch companies, as it is for enterprises in other areas of Europe that face a shrinking labour pool. “This is a big challenge in the Netherlands,” van Essen told CIO. “When you get a massive amount of capital, you most probably will spend it on tech-savvy workers. You will definitely also need to look more and more abroad for talent.”
The current trend in the Netherlands when it does these type of hires is to recruit professionals from southern and eastern Europe, central and Latin and South American countries such as Mexico and Brazil, and Indonesia particular, he added.
Recently, there also have been efforts to connect African tech talent to European enterprises in search of coders. The EU-funded Match programme, for example, is working to bring African tech talent to the Netherlands as well as Belgium, Luxembourg and Italy.