April 1, 2020
The first financial emergency measures, including NOW, are a fact. An ambitious, progressive and valuable package. But insufficient for startups. In China, VC investments have fallen by 57%, in the Netherlands and Europe a similar trend is to be expected, first analyzes by Dealroom confirm this. With our Borski Fund we are in the middle of the dilemma; be cautious about investment without reinforcing the recession. Not locked up, but realistically looking for the new reality.
The fact is that most private early stage VC funds are keeping their hands on the purse for the time being, until the predictability of the market is more stable again. However, in addition to tightening up plans and strategy, start-ups and scale-ups need capital right now. Does nothing more happen then? Yes, some investments will continue. First investments in start-ups are made, provided that COVID-19 has only limited influence (or has a positive effect). However, the number of companies that comply with this is limited. We should not see the exception as the new norm, we have many, many start-ups and scale-ups or have great difficulty raising capital.
We see great added value in using the Dutch early stage VC funds. As a government, make use of the available expertise, time, network and capacity of investors to provide short-term bridging loans to startups. This can be done 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 reserves € 50M, approximately 25 VC funds can take small and crucial steps and the Dutch VC landscape will not come to a standstill. This can help approximately 200 young companies with growth potential. Not in the least the relatively large group of female entrepreneurs who are in the early phase.
We think it is worthwhile to seriously explore this. We shared the detailed investment product with Techleap, Dutch Startup Association and Invest NL.