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EBB for 23 July: How scary geopolitics are squeezing Eindhoven tech

(Editor’s note: Dispatches covers the Eindhoven tech scene because so many of our highly skilled internationals are engineers and entrepreneurs. The Eindhoven Business Briefing is part of our Tech Tuesday series.)

Dutch officials are facing the possibility of having to make a tough geopolitical choice … do they align with a far-right, Trump-led America? Or with the increasingly aggressive and politically repressive Chinese? This dilemma is exacerbated by chaotic American politics. With Kamala Harris replacing Joe Biden on the Democrat ticket, there’s no clarity on who will even be president three months from now.

If Donald John Trump returns to the White House, the Netherlands and its semiconductor industry is in deep trouble.

Republican Party presidential nominee Donald Trump single-handedly deleted about 10 percent from ASML’s valuation by announcing he’d abandon Taiwan and institute tight export restrictions on semiconductor technology should he become president. (If the Republican Party wins the presidency and majorities in both the Senate and the House, he could actually do this.)

ASML had been celebrating a great quarterly earnings report. Problem is, 49 percent of sales over the period were in China, and if there’s one thing Trump and the Democrats agree on, they’re going to stop sales of advanced tech tools to China.

Trump went a step further saying Taiwan should pay the US for defending it since it’s stolen the US’s chip industry. The New York Times reports that just as with his enmity toward NATO, his comments on Taiwan “raised the question of how invested a second Trump presidency would be in the island’s defense.”

The problem is, Taiwan-based TSMC is one of ASML’s biggest customers, along with Intel and Samsung Electronics. Even if the Chinese invade, and they’ve promised they would, they’d still need ASML’s most advanced photolithography tools.

Should our friends in Veldhoven be worried? It’s hard to know. If Trump wins, the world will become a far more volatile place because he views all foreign relations as at best, transactional, and at worst, a reality TV show.

Playing to the crowd is his first instinct; looking “tough” like Putin and Xi is his second. Protecting America and its allies isn’t part of the calculus.

Trump knows absolutely nothing about technology and thinks Moore’s Law was a 1980s crime drama starring Telly Savales. But his running mate JD Vance is a former Silicon Valley VC who’s fine with letting Vladimir Putin do whatever he wants with Ukraine. The Russians already love him. “He (Vance) stands for peace, for cessation of aid. We can only welcome this because, in fact, it is necessary to stop pumping Ukraine with weapons, and the war will end,” says Russian Foreign Minister Sergey Lavrov.

Here’s our question: If the Americans side with Putin, and Putin is allied with China, where does that leave Europe?

Nearfield raises $147 million C Round

We were in Amsterdam at TNW a few weeks ago when we learned that American VCs Walden Catalyst were going to invest in their “first Dutch company.” As it turned out, it was Rotterdam-based Nearfield Instruments, to the tune of $147 million. Walden Catalyst, a Silicon Valley-based VC focusing on deep-tech, and Temasek, a Singapore-based VC, led the round.

These are serious investors with links back to the world’s largest tech firms, so this is good news. Though you have to ask yourself, where are the Europeans when it’s time to properly fund the next generation of Dutch tech?

Nearfield is as cutting edge as deep tech gets, with technology that can map the surface of computer chips with atomic level accuracy.

There is a strong Eindhoven connection: Nearfield Instruments is a spin-off of TNO and like TNO, has an Eindhoven operation. Dr. Hamed Sadeghian, co-founder and CEO of Nearfield Instruments, is active with Fe+male Tech Heroes, the initiative at High Tech Campus Eindhoven to get more women involved in tech.

European VC

VCs in Europe

Speaking of investments, venture capital has transformed America’s economy since Gene Kleiner met Tom Perkins back in the 1970s, formed Kleiner Perkins, then saw their investments turn into mega-exits, starting with Genentech and including Amazon and Twitter. Yet, compared to other asset classes such as government securities and private equity, VC in the US is tiny. Private equity is at least 10 times the size of venture capital.

In Europe, VC is basically non-existent.

Which brings us to an interesting post on LinkedIn by Dan Bowyer, a partner at VC SuperSeed.

Dan Bowyer • 2ndPartner at SuperSeed VCPartner at SuperSeed VC

Bowyer posts that the International Monetary Fund has released a paper diagnosing the EUs failure to “do” venture capital. The IMF report states that Europeans park their savings in banks. Which explains why Europe has so many big banks and such tiny VCs, all of which seem to have 100 million euros under management.

Some salient points from the IMF paper:

• VC investments in the EU are significantly lower than in the US, recently averaging 0.4 percent of GDP compared to the US at 1.2 percent.

• The EU has fewer and smaller VC funds, leading to fewer scale-up financing opportunities and limited exit options, such as IPOs and acquisitions.

• This one we know from personal experience … European startups end up listing in the States after they hear “no” enough times in Europe.

• The EU’s financial system is “bank-based,” making it less friendly to financing high-tech startups. Risk is misunderstood.

There are some solutions including:

• tax exemptions or reductions for LPs who invest in startups and VC funds

• public institutional investors playing a bigger role in developing the VC ecosystem

• Reduce regulatory and tax obstacles to unlocking private pension funds

3EALITY Director Philipp Werle, left, and HTCE marketer Lale Boyd try out the new space. (Photo by Cheryl Boyd for Dispatches Europe)

3EALITY is a reality

Construction in HTC 37 for the new 3EALITY spatial computing and immersive reality hub is complete, with several tenants moved in. US-based Epic Games is the first major partner. We’ve seen the tenant build out, and the space is exceptional. (Interiors are posted on the website.) This is the fifth Campus innovation hub, and like the AI Innovation Center, it will host presentations and special events in addition to leasing office space and flex space.

A big opening bash is scheduled for the fall.

TU/e does its part

As part of Operation Beethoven, the Dutch effort to placate a restless ASML, Technical University of Eindhoven is dramatically expanding the number of students getting their masters in degrees relevant to the semiconductor sector. By 2030, the number of master’s students is projected to be about 2,000, with about 10,000 more graduating each year.

You can see the details here.

Speaking of TU/e, the university seems to be converting to an American-style campus with student housing … something we’ve never seen anywhere else in Europe. Two new student towers – Castor and Pollux – and the “student village” Terra will open next month.

The construction of the new towers and village adds 735 student units to the campus, bringing the number of student homes on campus to 1,468, according to the TU/e. Read more about the new towers here.

We’re guessing Dutch students will get first dibs since this is all funded by the Dutch government in Den Haag. The government has reserved 275 million euros of its 450 million education budget for the semiconductor industry in the Eindhoven region. The remaining 175 million euros available until 2030 will go to the technical universities in Delft, Twente and Groningen, according to Innovation Origins.

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Co-CEO of Dispatches Europe. A former military reporter, I'm a serial expat who has lived in France, Turkey, Germany and the Netherlands.

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