Felix Zwart: Record-breaking investments in private equity and venture capital
This column was originally written in Dutch. This is an English translation.
By Felix Zwart, Director of Research & Policy at Nederlandse Vererniging Participatiemaatschappijen (NVP)
Last year, Dutch private equity (PE) and venture capital (VC) fund managers raised almost €9.2 billion in new capital from investors, €3.2 billion of which was raised by venture capitalists. It was striking that pension funds' investments in VC rose sharply. The previous peak year was 2021 with €7.3 billion, of which €2.4 was for VC.
At the end of this week, enthusiasts can browse through the new figures for 2023 on our website. But what lies behind these special figures?
The usual outliers
In both PE and VC, there are a number of fund managers who have raised very large funds. For PE, think of Waterland, with, among other things, a ninth fund of €4 billion, and for VC, Forbion, with €1.35 billion for, among other things, their sixth fund, and Gilde Healthcare, with €740 million for only their sixth fund.
About every other year we see large funds that push the figures up considerably. It is striking this year that we see a strong increase in the contribution of pension funds to VC funds. It is mainly foreign pension funds that write the largest tickets, but for the first time Dutch parties are also participating significantly.
We see this especially in the life sciences, the VC sector with the longest track record in the Netherlands. But there are also appealing examples in deep tech, such as Innovation Industries and DeeptechXL, which were able to raise larger funds thanks to Dutch pension funds.
In PE, pension funds have been an important source of capital for decades. Private individuals form a new group. They invest through umbrella funds, initially mainly in PE, but now also in VC. Although in most cases the minimum investment is € 100,000, this makes PE and VC accessible to a much larger group.
An abnormal outlier
It will not have escaped anyone's notice that we live in a very different world than on February 23, 2022, the day before the Russian invasion of Ukraine. Since then, security and defense have been high on the agenda for the first time in decades, including innovation and capital for this. That is why the NATO Innovation Fund (NIF) was launched in Amsterdam in 2023.
This €1 billion VC fund – with contributions from 24 NATO member states, but not the US – has started investing in European startups and in VC funds that make innovative contributions to (European) security. Not so much in tanks and ammunition. Years of peace, but also exclusionary policies, had created a poor investment climate for startups that could be (remotely) linked to defense. The government money from the NIF should stimulate these investments for the market.
In the UK, the asset management industry and the Treasury have already indicated that investing in defense can fit in well with a sound ESG policy. It is important that the ESG policy is really in order: these innovations must of course not leak away to dubious regimes.
In a few years, in the section on usual outliers in PE and VC, will we see that small investors in defense and security tech have been able to raise large funds? What will you invest in in 2024?