The road to becoming a Venture Capital powerhouse

Unraveling the Dealroom Report

Recent data from the Dealroom report shows growth in Groningen's startup ecosystem. With a 2.7-fold increase in early-stage venture capital investment from 2020 to 2022, Groningen is charting an upward trajectory. However, the total of $13M in investments in 2023, indicates there's considerable ground to cover. Compared to regions like Enschede and Leiden, our city is supposedly not getting the VC attention it deserves. Or is it?

The amount of investment does not tell the whole story. How many investments have been made? And were the investments seed investments, series A round or a different stage? To guide you through the report, we have spoken with G-Force Capital Fund Manager Niek Huizenga. Let’s see how Groningen can become a VC superstar. 

A Realistic Perspective on Groningen’s VC Scene

Niek sheds light on the challenges and opportunities in the Northern funding landscape. His insights are important in understanding the dynamics at play. The pre-seed and seed investment landscape for early-stage startups looks promising for the North. Public funds like the NOM and Rug Ventures, business angels and VC firms like G-Force Capital make a wide range of early-stage investments. However, he points out the scarcity of larger investment rounds that are crucial for scaling businesses, particularly in the deep tech sector. He notes, "The ecosystem in Groningen is growing with early-stage capital, especially for digital startups." 

Yet, the real challenge lies in scaling these ventures to a level where they can attract significant investment rounds." There are quite some early-stage investments done in the North, but these investments are mainly small tickets. To climb the investment ladder, Groningen needs more Series A round funding. These bigger funding rounds, typically between 2 million and 15 million, are rarely done by the current investors in the North. Some noteworthy exceptions are, for example, Ancore Health (3 million, Rabobank), Vipio (4 million, NOM), Slimmer AI (4 million, multitude of investors) or Reyedar (3M, round led by Cottonwood).

To climb the investment ladder, Groningen needs more Series A round funding

Niek HuizengaG-Force Capital

A need for a more diverse funding network

Huizenga’s observations underscore the need for a more diversified and strategic approach to funding. He emphasizes that while local funds and subsidies have laid a solid foundation, Groningen's startups require more substantial capital injections to make the leap from promising startups to scalable businesses. This gap in the funding landscape highlights the necessity for a broader range of investment sources.

One of these investment sources that we do see on the rise in the North is Angle Investors. “We're seeing a promising rise in business angels—successful entrepreneurs eager to reinvest in the startup ecosystem." These private investors fill a vital gap, providing not just capital but also invaluable expertise and networks to early-stage startups. “These angels are not just financiers; they're mentors bringing a wealth of experience." Their growing presence is a key development in fostering a robust and diverse investment landscape.   

Fostering a Startup-Centric Culture in Groningen

Government support, particularly from organizations like the NOM, is instrumental in developing Groningen’s startup ecosystem. Niek underscores the importance of proactive government initiatives, such as tax incentives, funding matches, and innovation support, in catalyzing the ecosystem's growth. The vibrant cultural scene in Groningen further enriches this landscape, merging creativity with business and technology. This unique blend, along with a rich talent pool from the University of Groningen and a robust pre-seed funding network, creates a fertile ground for startups. Huizenga believes that showcasing this dynamic environment and the abundance of promising startups can attract more substantial investments, highlighting the need for larger funding rounds to sustain and scale these businesses. 

A solid investment network is essential to find larger funding rounds. Currently, bigger VC’s from the Randstad and outside the Netherlands, do not have the North in their scope. This matter makes it hard for Northern startups to find this capital. You can either work for years on this network on your own or be introduced to bigger VC’s by matchmaking initiatives like Golden Egg Check or PHX, according to Niek. “A good pitch deck and business propositions are important, but in the end, investment is all about the right relationships,” he says. “ An investor prefers to invest in a startup that he or she knows”. 

Strategies for Groningen Startups to Secure Next-Level Funding

So, what can your startup do to secure the next round of funding? Check these tips: 

  • Utilizing Local Networks and Expanding Horizons: Leverage the robust local entrepreneurial community while actively seeking to expand their networks on a national and international scale. Participation in global tech events, investor meetups, and networking forums can open doors to new collaborations and funding opportunities. A good investor network or an introduction (Golden Egg Check, PHX) to this network is essential for big investments.
  • Showcase Potential for Growth: Clearly demonstrate your startup's scalability and potential for growth. This is crucial in attracting larger investment rounds, especially in sectors like deep tech.
  • Diversify Funding Sources: Expand your search for funding beyond local avenues.
  • Joining trade missions like the mission to CES or SLUSH can help a startup build a network of national and international venture capitalists and angel investors.

Groningen’s VC future 

Just like startups, the VC landscape in Groningen needs to dream big and scale fast. With the right vision, our city can score a spot in the most enviable list of the Dealroom report: The top 50 European startup hubs. Currently, Groningen is not even near a top spot. We need several big tickets to reach the capital needed - around 100 million a year. Something that should be achievable for the startups in our city. With better access to series A investors, Groningen can enter the Dealroom top 50. The foundation is there, now we need to build on it. Ready to become a VC superstar.