Belgian VCs fail to benefit from country's hidden wealth

Moderating the event's closing panel, Peeters also noted that in 2013 approximately €100m was deployed into the Belgian economy by the venture industry, through 96 individual investments. "It's frightening because the average is incredibly low," said Peeters, speaking to unquote" after the event. "It shows that a lot of money is available for seed and early-stage, but when it comes to series-A to series-C rounds of €2-5m or €10-20m, there are not many investors around."

Bjorn Tremmerie, head of the European Investment Fund's (EIF) €1bn ERP fund-of-funds, shared the sentiment during BVF's closing panel and indicated the emergence of a worrying trend: "We're seeing a later-stage gap. Who in Europe can write a ticket of €30-40m?"

Mind the gap
The figures reveal a region of start-ups struggling to secure larger funding rounds, as well as a challenging market for venture capital funds to raise the amount of money needed to make a significant impact on the local ecosystem. And yet there is cash to be invested.

"This is in contrast with the huge sums of money sitting in Belgium's bank accounts that are not generating any yield in real terms, if you compare it to inflation and current interest rates," says Peeters. "There is a lot of money sitting there and doing nothing for the economy."

While other parts of Europe have made efforts to tap into individual wealth - such as the UK's VCT scheme and France's tax-relieving FCPI funds - Belgium has had difficulty coaxing its wary citizens to put their cash into riskier investments. This is despite the country's favourable capital gains tax system in which shareholders are not taxed on capital gains after a holding period of a year.

"I think the risk perception in Benelux, in particular, has been aggravated significantly by the banking crisis," Peeters notes. "Don't forget that we had Fortis and Dexia, which were two well-known, very respected banks that were considered safe investments. There were literally thousands and thousands of people who had their savings in shares of these banks and both became worth nothing. So in the mind of the man in the street, if something you perceived as having no risk was suddenly worth nothing, then things that are considered high-risk like technology or biotech are far too risky."

One-trick pony
This perception is perhaps exacerbated by the fact that a large part of Benelux's venture industry revolves around the technology and life science sectors. Indeed, Guy Geldhof of the Belgian Venture Capital & Private Equity Association (BVA) pointed out in the closing panel of the BVF that 51% of the €100m invested in Belgium last year by VCs went into life sciences.

But it's not all bad news: government initiatives across Belgium have come to the rescue amid the fundraising downturn. Indeed, one of the country's largest players, Gimv, is in partnership with the Flemish government through its Arkimedes investment initiative.

Likewise, Wallonia mandated Sowalfin to establish a fund that provides capital to investment companies, though the firms must also secure third-party funding. There are currently nine firms under Sowalfin's stewardship, all of which must invest equity in spinouts based in the Walloon region.

However, the initiatives tend to remain within the parameters of small ticket sizes; the result is a region heavily weighted towards the seed and early-stage end of the funding pool.

"We have companies in Europe that grow from small to medium and then hit a ceiling," said Christian Homsy, CEO of Belgian venture capital-backed Cardio3 Biosciences, speaking on the opening panel at BVF. If Belgium wants to stop its start-ups heading out of the country for their bigger tickets, its venture industry should figure out how to tap into the significant wealth sitting dormant in the country's bank accounts.

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