(Editor’s note: This post about the new DeepTechXL deep-tech fund is part of our Tech Tuesday series. Dispatches Europe tracks the tech scene – startups, scale-ups and mature companies – across Europe because so many of our highly skilled internationals are engineers, physicists and developers. )
The big knock on the Dutch startup ecosystem has long been the lack of early-stage risk capital. Now, with the creation of a new 100 million euro DeepTechXL investment fund, the region that includes deep-tech center Eindhoven is poised to leave those days behind.
With the DeepTechXL Fund I, the Dutch province of North Brabant is getting a fund – backed by global tech companies and Dutch economic development agencies – which will invest in promising Dutch deep-tech startups and scale-ups.
DeepTechXL Fund I general partners anticipate making about 20 early-stage seed investments and 15 follow-on investments and support throughout the lifecycle of promising deep-tech ventures, according to a media release. Though the release doesn’t include investment details, the DeepTechXL website says the fund will make seed investments in the 100,000 euro to the 2 million euro range. Series A investments typically average about 1 million euros.
Investors and co-initiators of the fund include ASML, Philips, Brabantse Ontwikkelings Maatschappij (BOM) and research institute TNO. PME Pension Fund and Invest-NL will also invest in the fund.
A new, united deep-tech effort
The participation of ASML – now among the most valuable tech companies in Europe, ranked by market capitalization – and Philips, which spun off ASML, makes this the most high-profile tech initiative in the Netherlands.
The effort creates a new entity, DeepTechXL, with its roots in eight-year-old deep-tech venture builder/accelerator HighTechXL, which is also supported by ASML, Philips and other fund investors. The raise was led by HighTechXL founder and serial entrepreneur Guus Frericks. Frericks, Teska van Vuren, Ron Maurer and Ronald Meersschaert are the fund’s general partners. The four partners combine seasoned experience and proven track records in deep-tech venture-building and venture capital investments.
The partners will support Dutch deep-tech ventures with access to expertise, network and technology. DeepTechXL Fund I aims for a minimum fund size of 100 million euros, but organizers project the fund will be over-subscribed. The fund also received a 9 million euro loan from the Dutch government institute RVO (Rijksdienst voor Ondernemend Nederland), specifically dedicated to early-stage seed investments, according to the release.
The fund will include more than just initial capital, according to the release. Together with the investing industry partners, the fund will provide deep-tech startups and scale-ups access to knowledge, network, technology, licenses and business development support. The fund aims to introduce launching customers, find partners in the supply chain, assist in the entry of new markets and scaling up manufacturing.
Since its 2018 pivot to deep-tech from tech-agnostic, HighTechXL has produced a number of successful deep-tech startups and scale-ups. The venture builder has also put together multiple emerging next-gen deep-tech startups, including Carbyon in carbon capture, Aircision in 5G communications, Incooling in the semiconductor sector and inPhocal in advanced laser technology.
Deep-tech is hard
The Brainport region, which includes Eindhoven, is the tech capital of the Netherlands and northern Europe. Yet, many deep-tech startups spend on average more than 50 percent of their time chasing early-stage funding. Many active investors lack the specific knowledge to judge the technology potential for future business impact. As a result, each year dozens of promising deep-tech propositions remain unfunded in the Netherlands.
That’s due in part to the nature of “deep-tech,” which includes complicated technologies such as semiconductor, robotics or any technology that requires extensive initial research and development in hardware, mechatronics and precision engineering. Compared to software or fintech, deep-tech requires a far longer time to market, and far more capital even in the initial development stages, factors that make potential investors think twice.
The upside is, the successes of ASML – which essentially owns the global photolithography market, a lynchpin of computer chip-making – and chip supplier NXP illustrate, deep-tech innovation brings long-term sustainable economic gains and creates high value employment in the advanced industries for which the Brainport region is known.
“Deep-tech venture capital is all about startups and scale-ups with novel and complex technologies.
These ventures are in their early days, extremely time- and capital-intensive and have difficulties
getting access to finance and proper support,” Frericks stated in the release. “Yet these deep-tech ventures are the ones which have the potential to completely transform a sector or even an entire industry.
“We are convinced that with our fund and the strong support of our partners, we are going to make a positive impact on the creation of new, fast-growing deep-tech companies.”
The details:
The DeepTechXL fund operates from the High Tech Campus Eindhoven, the largest research campus in Europe and a high-tech ecosystem that includes the headquarters of NXP and other global companies. The Campus also includes the largest startup hub in the Netherlands, a multi-building complex that includes the AI Innovation Center and the 5G Hub.
