If you’re a Dutch deep tech startup, there’s a new fund in town aimed at early-stage quantum technology startups.
Despite its vibrant and fast growing ecosystem, Dutch startups have struggled to raise seed capital compared to their peers in other European countries.
The €15M QDNL Participations fund, being launched today, aims to circumvent that challenge for early-stage quantum tech startups in the country.
With €15M in capital allocation, the fund aims to help researchers turn their technology into investable startups.
As the tech industry makes its transition towards transversal technologies like AI, Robotics, and Quantum, the fund will be an early supporter of Dutch quantum technology startups.
Turning research into sustainable business
The €15M QDNL Participations fund is fully backed by Quantum Delta NL, a foundation focused on developing the Dutch quantum technology ecosystem.
It plans to invest in early-stage quantum technology startups with investments of up to €1.5M. The fund will also help research teams launch startups based on their technology.
In addition to supporting early-stage founders seeking venture funding, the fund will also offer €50,000 in SAFE Note agreement to idea-stage founders even before they incorporate as a startup.
Ton van ‘t Noordende, Managing Director of QDNL Participations, says, “We want to get in very early and make sure that we protect and support founders.”
He adds that the fund will address the massive disconnect between quality of research and creation of economic value. “Scientists have been battling headwinds for decades,” he exclaims.
When it comes to the state of Dutch deep tech startups, Ton believes that there is “mistrust and misunderstanding of the commercialisation process” and “brilliant scientists have been left to flounder.”
According to him, the current state of the investment ecosystem leaves world-changing innovations and billions in economic value on the table.
There is a clear need for risk capital to turn research into a sustainable business model and the QDNL Participations fund wants to be that for quantum tech startups in the Netherlands.
A thriving research ecosystem
There is no dearth of research institutions in the Netherlands working on industry leading quantum technology.
To support this ecosystem, the QDNL Participations fund will primarily source its dealflow from research being conducted at leading Dutch universities, including TU Delft, Eindhoven University of Technology, Leiden University, the University of Twente, and the University of Amsterdam.
Quantum Delta NL is already backing quantum tech startups QuantWare and QphoX, and the fund will support research across computing and hardware to communication, sensors, and advanced materials.
“I’m eagerly waiting for the first company that will develop and build a full stack quantum computer, out of The Netherlands,” says Ton.
One area where the QDNL Participations fund can make a difference is fixing the inertia around research-based founders becoming business people.
Ton says research-based founders often receive advice that can limit or stop business progress. He also believes that organisations offering grants to these researchers do not “foster commercial outcomes.”
He adds, “We need to support researchers to share their commercial dreams to get from un-investable but exciting moonshot ideas to investable research-driven businesses with huge commercial potential.”
To tie these loose ends, Quantum Delta NL is also launching a new support programme called Infinity.
With a goal to build a connected and sustainable quantum startup sector in the world by 2028, Infinity will help Dutch university researchers with navigating the university spin-out process and raising their first funding round.
Filling a gap in early-stage startup funding
“Fundraising is the number one challenge for Dutch deeptech startups,” says Ton before explaining that the primary challenge is securing a lead investor.
He says the majority of funding is directed at startups above Series A stages and it has now led to a gap in early stage funding.
As evident from Dealroom data as well, there is a shortage of specialist investors in the early stage.
With the QDNL Participations fund, Ton says they are looking to fill a gap. “With €15M, we can only commit in the earliest stages and that is also where the main challenge is,” he says.
Interestingly, this gap not only exists in the Netherlands but is an Europe-wide phenomenon.
Deep tech startups headquartered in the US, the UK, and Canada account for 80 per cent of all private investments and 62 per cent of all private rounds.
If the QDNL Participations fund succeeds, it will pave the way for more private investment in Dutch as well as European deep tech startups.
“We want to make sure that the first check is one of patience and support and we’re advocates of fair valuation, fast transactions, and keeping the researchers in the driver’s seat,” Ton says before adding that he does see a scope to expand the fund.
For the forecast period 2022 to 2032, Future Market Insights expects the global market demand for the deep tech industry to grow at a CAGR of 21.8 per cent.
A segment with such demand offers significant upside potential and an investment opportunity unlike any other.
With an investment network of over 800 specialist deep tech funds across Europe and the US, Ton says the QDNL Participations fund will be an anchor for Dutch deep tech startups while later stage capital comes from outside of the Netherlands.
“I believe we’re going to see some exciting ventures coming out of stealth in the next few years,” he says.