Dutch VC activity reaches all-time high

Dutch venture capital activity reached its highest ever level in 2017, stated the country's private equity and venture capital association, NVP, in its recently published annual review. The report found that 233 Dutch companies received venture backing, totalling an aggregate value of €320m. Until last year, the largest annual figure was in 2007, when aggregate value amounted to €272m.

Some of the largest investments in 2017 included the Accel-led $60m series-A funding round for cloud-based software company MessageBird and the €45m series-C funding round for medical devices company Xeltis, which included the participation of Life Sciences Partners (LSP) and Ysios Capital.

But while the largest deals might generate headline-grabbing figures, Newion partner Mathijs de Wit says the market as a whole has benefited from an environment that is conducive to spin-out activity. "Spin-outs in the past 10 years have created a generation of better-prepared entrepreneurs now leading good-quality companies and looking for funding," he says.

Biotech and healthcare were the most popular sectors for VC investments in 2017, accounting for 30% of aggregate value, followed by information and communications technology, and business products and services. Oskar Slotboom, a partner at BioGeneration Ventures (BGV) says the firm's main sector of focus, early-stage pharmaceuticals and biotech, has shaken its previous reputation for being relatively risky and unattractive. "Startups evolve from a discovery and pre-clinical phase to clinical phase more quickly, and equity tickets are becoming significantly larger," says Slotboom.

Leading the way
One particularly successful deal BGV had in the biotech space was Acerta Pharma, which it backed in 2012 and sold to UK-based AstraZeneca in 2015 for an upfront payment of $2.5bn and a further unconditional payment of $1.5bn. "We are evolving naturally," says Slotboom. "The Netherlands biotech environment is maturing and becoming more sophisticated, and as a result slowly becoming more similar to the US market."

Another factor underlined by NVP, is that Dutch regional development funds are particularly supportive of startups, as they focus mainly on riskier early-stage small investments.

Dutch VC funds raised €514m in 2017, in part thanks to LSP's Health Economics Fund 2, which closed on €280m. The amount is less than that raised in a record-breaking 2016, which saw €905m raised, but in line with what was seen in 2014 (€673m) and 2015 (€301m).

The Netherlands biotech environment is maturing and becoming more sophisticated, and as a result slowly becoming more similar to the US market" – Oskar Slotboom, BioGeneration Ventures

Governmental and regional funds, as well as EU institutions, have contributed 28% towards VC fundraising. These would typically invest in maiden funds, as in the case of the European Investment Fund and Dutch pension fund PME, which closed Innovation Industries' first fund on €75m in June 2017. High-net-worth individuals backed 16% of fundraising in 2017, its highest proportion since 2007, while family offices accounted for 14.6%. Thuja Capital's managing partner, Michel Briejer, says: "Wealthy individuals and family offices are recognising the VC market as a strong investment opportunity and backing it."

Commenting on the fundraising experience for Newion Investments III, launched and closed in 2017 on €85m, de Wit says the process was easier than with its predecessor, which closed on €50m. Half of the LP base is European, although not Dutch.

Newion's de Wit also underlines that several new, increasingly sector-specific VC funds are being launched, making the market more competitive and varied. "We are still working towards developing a mature VC market like the one in the US," he says. "However, a lot of effort is being put into improving the Dutch VC space," he adds, referring to the not-for-profit initiative VEECEE, which interconnects young VCs based in the Netherlands, Germany and the UK.

Spokespeople for BGV, Newion and Thuja all say their current or next fund will invest in businesses outside Benelux, with Germany, Scandinavia, the UK and Ireland being mentioned as future geographies for business opportunities. Equally, foreign VCs are investing in the Netherlands, accounting for up to 45% of deal value invested in Dutch firms in 2017 – a notable increase since 2016's 39%.

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