A group of leading players in the Dutch agrifood sector, including StartLife, have jointly sent an urgent letter to the Dutch Cabinet calling for a level playing field allowing the Dutch to capitalize on its high potential food scale-ups. Dutch food scale-ups are innovative and help solve he world’s sustainability challenges, while helping the Netherlands secure its international lead in food and agriculture for the future. But to capitalize this high potential, an important investment gap needs to be fixed.
Open letter to the Dutch Cabinet:
The Netherlands as Global Powerhouse of Food Innovation
The Netherlands is known worldwide for its strong agriculture and horticulture sector. In addition, our country is also a leading player in food ingredients and processed foods. We owe this prominent position to a combination of innovative small and medium-sized enterprises (SMEs), advanced higher education institutions, Wageningen University & Research, and multinationals such as Unilever, Corbion, Cosun, FrieslandCampina, DSM-Firmenich and Upfield. These companies are firmly anchored in the Netherlands with both their research and development (R&D) departments and production sites.
This high-tech sector delivers significant economic value and is a major buyer of our agricultural products. The global market for food ingredients and processed foods is dynamic and full of opportunities. The Netherlands can capitalize on these while securing its own food supply.
Healthy Innovation System for Food Startups
The Netherlands has established a healthy innovation system that has spawned a new generation of food scale-ups. These companies not only generate economic value, but also help the existing food industry to become more sustainable and healthy.
The early phase of technology development and innovation is increasingly shifting from the large corporate laboratories to startups and scale-ups. This process has been strongly supported by active government policies over the past decade.
Organizations such as StartLife, Foodvalley NL, regional development agencies and Invest-NL provide solid support. The knowledge exchange between organizations and knowledge institutions is excellent. For example, getting initial funding takes only 2.5 years on average In the Netherlands, which is faster than in France or the UK.
Investment Gap
Although developments are mostly positive, one important gap stands out: Dutch scale-ups expand their production significantly slower than international competitors. Dutch scale-ups raise an average of 35 million euros, while competitors in neighbouring countries receive an average of 84 million euros.
An example is Revyve, which raised 8 million euros in the Netherlands, compared to a younger German competitor that received 15 million euros. The difference is even greater when we look at Rival Foods, which received 6 million euros, partly from foreign investors, while French competitor Umiami raised over 100 million euros. (Source: Dealroom)
Many Dutch food scale-ups struggle to attract more funding, which threatens the continuity of their operation in the Netherlands. These scale-ups often turn to international capital to build plants abroad.
Innovating in the Agrifood Sector
Innovation in the agrifood sector is complex. Investment requirements are high, margins are small, and development and growth cycles are long, leading to a delayed return on investment. This sets the sector apart from high-tech manufacturing and companies in data science and ICT. Despite European competitors facing the same challenges, they are more successful in attracting funding.
Government Support in Neighboring Countries
Like Dutch startups, international competitors have significant capital needs when scaling their production. The public financial instruments provided by countries such as Belgium, Germany and France make scaling up production more attractive to private investors. In these countries, it is possible to obtain bank loan guarantees for the construction of unique plants. Moreover, public investment banks there are more likely to provide soft loans for scaling up production.
In practice, this means scale-ups in these countries need to raise relatively less equity or ‘dilutive funding’. Not only does this make them more attractive to global private investors, who invest significant amounts in the international competitors of Dutch scale-ups, but also more interesting as acquisition targets for global players, as the financial risks in an acquisition are lower.
The consequences for the Netherlands are significant: Dutch scale-ups lose momentum against foreign competitors. Companies move their production to other countries, causing an erosion of economic activity and investment in the Netherlands, and threatening to wipe out the gains of previous government policies.
Urgent Call to the Dutch Cabinet
The current scenario can easily be avoided. The Netherlands has the capacity to adopt and improve the foreign model, for instance by encouraging existing companies to implement innovations at home. This would make it more attractive for scale-ups to expand their production in the Netherlands. Applying more combined funding could also help.
The Dutch innovation system can build on the strong foundation of a highly productive agriculture and a well-developed food industry. In cooperation with the government, the sector can improve financing, innovation strength and commercial returns.
Based on the total financing needs of Dutch food scale-ups and comparison with foreign competitors, we estimate that around 200 million euros of additional public funding is needed to create a level playing field. This could mobilize a multiple of additional private funding, as happens in neighboring countries. Invest-NL is a logical vehicle to realize this. This requires an adjustment of its mandate and additional resources.
We call on the Dutch government to include this in its plans and bridge the investment gap so that the Netherlands retains its leading position in the Food & Agri sector.
Signed by:
- Bert-Jan Woertman, Managing Director, StartLife
- Kees Aarts, CEO, Protix
- Kim de Boer, Partner, Brightlands Venture Partners
- Thomas van den Boezem, Principal, PeakBridge
- Sebastiaan Berendse, Director Value Creation, Wageningen University & Research
- Corjan van den Berg, Co-founder, Revyve
- Marjolein Brasz, CEO & Anieke Wierenga, Lead Entrepreneurship, Foodvalley NL
- Maarten Bosch, CEO, Mosa Meat
- Joana Carneiro, CEO, Nutrileads
- Birgit Dekkers, CEO, Rival Foods
- Brigit van Dijk, CEO, Brabantse Ontwikkelingsmaatschappij
- Sue Garfitt, CEO, The Protein Brewery
- Erik Hertel, CEO, Vital Fluid
- Wendy de Jong, Managing Director, OostNL
- Daan Wilms Van Kersbergen, Investment Director, Yield Lab
- Rienk Landstra, Co-Founder, Agxeed
- Bram Ledeboer & Florentine Fockema Andreae, Partners SHIFT Invest
- Ferdinand Los, CEO, Hudson River Biotechnology
- Willem-Jan Meulemeesters, CEO, Ceradis
- Ruud Peerbooms, Chief Innovation Officer & President Health & Nutrition, Corbion
- Jasper Schouten, CEO, 1-2-Taste
- Anouk Snelders, Founder, Health Food wall
- Marco Snikkers, CEO, One Third
- Jaap Strengers, Managing Partner, Future Food Fund