April 1, 2020
The first financial emergency measures, including the NOW scheme, are now a reality. An ambitious, progressive, and valuable package. However, it is insufficient for startups. In China, VC investments have fallen by 57%; a similar trend is to be expected in the Netherlands and Europe, as confirmed by initial analyses from Dealroom. With our Borski Fund, we are in the middle of a dilemma: being cautious with investments without deepening the recession. Not locking everything down, but realistically searching for the new reality.
The fact is that most private early-stage VC funds are currently tightening their purse strings until market predictability becomes more stable. However, in addition to refining plans and strategies, startups and scale-ups need capital now more than ever. Is nothing happening then? On the contrary, some investments are proceeding. Initial investments in startups are being made, provided that COVID-19 has only a limited impact (or even a positive one). However, the number of companies that meet these criteria is limited. We must not view the exception as the new norm; many, very many startups and scale-ups are having or will have great difficulty attracting capital.
We see great value in deploying Dutch early-stage VC funds. As a government, make use of the existing expertise, time, network, and capacity of investors to provide short-term bridge loans to startups. This can be achieved with a simple product in the form of convertible loans. Why government money? Because private funds cannot simply lower their return requirements.
If Invest NL sets aside €50M, approximately 25 VC funds can take small yet crucial steps, ensuring the Dutch VC landscape does not come to a standstill. This could help around 200 young companies with growth potential—not least the relatively large group of female entrepreneurs in the early stages.
We believe it is worth exploring this seriously. We have shared the detailed investment product with Techleap, the Dutch Startup Association, and Invest NL.
