NATO’s €1B innovation fund to be headquartered in the Netherlands; launch set for July

The Netherlands is home to the headquarters of NATO’s Innovation Fund (NIF).

The North Atlantic Treaty Organisation (NATO) had first detailed plans for a multi-sovereign venture capital fund, called NATO Innovation Fund (NIF), at its 2022 Madrid Summit.

In a decision announced on Monday, the alliance confirmed that the headquarters of NIF will be based in the Netherlands. It also confirmed the first three board members of the organisation.

With plans to invest €1B on behalf of NATO member countries over the next 15 years, the fund will plug an important gap in Europe’s early-stage funding.

NATO Innovation Fund (NIF): what you need to know

The idea of NATO Innovation Fund (NIF) is an initiative to drive innovation within the alliance.

First announced at the 2022 Madrid Summit, the fund is a financial partnership between participating NATO Allies as Limited Partners and an investment management arm purpose-built specifically for this fund.

The NIF is proposing investing €1B over the next 15 years in early-stage startups and other VC funds developing dual-use emerging and disruptive technologies to be used in military and defence applications.

Startups developing technologies in the field of artificial intelligence, big-data processing, quantum technologies, autonomy, biotechnology and human enhancement, novel materials, energy, propulsion and space, will be supported by NIF.

The fund will be officially launched at NATO’s next summit in Vilnius, Lithuania, in July.

In addition to announcing the headquarters for the fund, the participating NATO Allies also announced the structure of the organisation.

The NIF will be headed by a total of nine board members and the allies have announced the first three members.

Dr. Klaus Hommels, founder and chair of venture capital firm Lakestar, will serve as the Chair of the NATO Innovation Fund Board of Directors.

Dame Fiona Murray, Associate Dean of Innovation and Inclusion at the Massachusetts Institute of Technology (MIT) School of Management, and Dr. Roberto Cingolani, former Italian Minister for Ecological Transition and founder of the Italian Institute of Technology, will serve as the first two directors.

“This marks an important milestone in setting up this historic fund,” David van Weel, NATO’s Assistant Secretary General for Emerging Security Challenges, said adding, “[it] will allow NATO to tap into the innovation ecosystem for the benefits of our security and defence.”

The Netherlands and its advantage

When the fund was first announced, the Netherlands had proposed within NATO that the offices for the fund be established in the Netherlands.

“That was a close collaboration between the Netherlands Foreign Investment Agency (NFIA), Techleap.nl and the Ministry of Defence,” the government said in an official announcement.

However, the Financieele Dagblad reports citing NATO sources, the relatively fast admissions process of the country’s financial market regulator (AFM) could have swayed the decision.

The same sources also believe that Amsterdam will be the preferred location for NIF’s headquarters but there is no final decision on the location yet.

The Dutch government expects the fund will “increase the possibility for innovative Dutch startups to gain access to capital.”

Minister Micky Adriaansens of Economic Affairs and Climate Policy, says, “The NATO Innovation Fund positions the Netherlands even more firmly among investment funds for innovative companies. This helps start-ups to develop further in the Netherlands.”

“In this way, we are strengthening what our country is good at, namely working on solutions for the future.”

Dutch startups have lagged behind their peers from the UK, Germany and France when it comes to accessing early-stage venture funds.

The State of Dutch Tech report by Techleap.nl revealed how Dutch startups struggle to scale due to lack of funding.

With a startup to scaleup ratio of 22 per cent, the Netherlands is behind Germany (37 per cent), the UK (30 per cent), and France (26 per cent).

The NATO Innovation Fund (NIF) could plug this gap by supporting innovative early-stage startups in the disruptive fields such as quantum computing.

“More investment in high-tech is urgently needed,” says Minister of Defence Kajsa Ollongren.

Ollongren adds, “For example, we are working with our NATO allies to defend against new threats. That is also why the Netherlands has already decided to substantially increase the budget for research, technology and innovation. The arrival of the headquarters of the NATO Innovation Fund is an important milestone to this end. It’s great that the Netherlands, as a knowledge nation, can host the fund.”