The Netherlands is Putting A Call Out For Quantum Investors

Insider Report

• The Netherlands has a strong quantum technology ecosystem, the Dutch Financial Times reports, but it is struggling attracting quantum investors.
• Invest-NL has warns that the 18 existing or upcoming Dutch quantum companies require between €1 billion and €2 billion to reach profitability.
• Investors are hampered by the complexity of the technology and the uncertainty of what technologies and companies will prevail.

Dutch government has recognized quantum technology as a strategic asset and is injecting hundreds of millions into the technology. Despite this, the sector is facing a crucial funding challenge, as private investors are yet to substantially back Dutch quantum companies, according to a computer-enabled translation of the Financieel Dagblad, or FD .

Quantum technology, which underpins the development of new ultra-fast computers, quantum sensors and other devices, is seen as critically important by governments worldwide, including the Netherlands. As part of this global technology race, the Dutch government, through its National Growth Fund, has allocated over €600 million to maintain its leading position in scientific research and to monetize this knowledge through companies in the quantum industry. This effort aims to ensure that the Netherlands remains at the forefront of the quantum field.

However, private investors are hesitant to invest in Dutch quantum startups, considering the long journey to profitability and high risks involved, the newspaper reports. This reluctance raises the risk that startups might fail or relocate abroad, a concern echoed by Invest-NL, the government’s investment fund.

“There is a fundamental financing problem,” Gert-Jan Vaessen told FD. Vaessen is a fund manager at Invest-NL, and follows deep tech technologies like quantum.

FD reported that Invest-NL has warned that the 18 existing or upcoming Dutch quantum companies require between €1 billion and €2 billion to reach profitability. Of this, €150 million to €300 million is needed within the next year and a half. In contrast, private investors have only contributed between €10 and €15 million in total start-up capital to various Dutch companies with quantum technology in recent years, a stark difference compared to the 220 times more capital invested in similar ventures in the United States.

The development of quantum computers is still underway, with promises of performing more extensive and complex calculations than today’s fastest computers. This advancement could lead to breakthroughs in fields like medicine, climate science, and encryption, with commercial applications expected around 2030.

According to Willem Peutz, who conducted the research for Invest-NL, the development period for fundamental technologies like quantum is long and capital-intensive. Because many modalities and many devices are competing for acceptance and market share in the quantum space, no clear leader has emerged.

“Different types of quantum computers are being developed,” Peutz told the newspaper. “We still do not know which technologies will prevail. That makes it complicated for investors.”

Invest-NL has expressed a willingness to invest a portion of the €250 million allocated for fundamental technologies in quantum companies, but European rules mandate that private investors also contribute to avoid the classification as state aid, according to the newspaper.

The Netherlands is a leader in quantum technology development, with Dutch researchers holding numerous patents and leading publications. Despite this, the lack of private funding raises the risk of the nascent quantum sector in the Netherlands being outpaced. Other countries might attract these technologies with their investments, or companies could simply collapse from lack of funding. There is also a risk of companies relocating to the United States, where investors are more receptive to such technologies.

Invest-NL is trying to raise awareness among private investors about the potential of quantum technology and is prepared to push the boundaries of state aid rules if private parties do not contribute. However, the long development period required by these companies does not align with the typical lifespan of an average investment fund, which seeks exits within five to ten years – a timeframe not feasible for quantum companies. There are only a few funds in the Netherlands investing in fundamental technology, and even fewer in Europe compared to the United States and China, where the government is heavily investing in the technology.

You can read the report The role of the Netherlands in Quantum technology here.