Why are angel investors so important in closing the early stage funding gap?

Dutch startups and scaleups have been raising new heights in fundings in the past years. This is mostly due to larger rounds. However, the total amount of early-stage investments stagnates. The share of early-stage deals, meaning lower than €1 million, have also been following a downward trend.

Source of the graph: Dealroom - Note: due to reporting lag, the last 12 months are systematically under-reporting on rounds especially small rounds; often occurring under the radar

Also, when comparing on an international level, The Netherlands is lagging behind with early-stage investments per capita.

Source of the graph: Dealroom - Note: due to reporting lag, the last 12 months are systematically under-reporting on rounds especially small rounds; often occurring under the radar

Furthermore, when looking at early-stage investors, we see that VCs are shifting more towards later-stage investing, having cut their share of early-stage investing in half since 2018.  

Source of the graph: Golden Egg Check - Note: most of the ROM numbers only become available at the end of the year, not yet providing a complete image 

As VCs’ early-stage investments have diminished, the role of angel investors is, more than ever, the key to startups’ development. Why? Here are a few reasons:

• Angels hold significant knowledge and connections in a specific field, often having been entrepreneurs of their own, their insights are highly treasured by startups. 
• Their higher risk appetite and lower level of bureaucracy makes them more accessible for early-stage startups. However, angels operate more privately, making them harder to reach. 
• Nevertheless, they can help startups accelerate and set the crucial steps required to grow to their full potential. Once grown, startups themselves can then pass on their knowledge and capital gains to the next generation of startups, as angel investors. This valuable learning and funding cycle should be nourished and maintained, to enhance the Dutch startup ecosystem.

When looking from an international perspective, the percentage of angel investments in The Netherlands significantly lags behind its peers. 

Source of the graph: Dealroom - Note: due to reporting lag, the last 12 months are systematically under-reporting on rounds especially small rounds; often occurring under the radar

Overall, this results in an early-stage funding gap, leaving startups with fewer opportunities to secure the much-needed funding and expertise from angel investors in the earliest, most risky phase of their business.

Therefore, Techleap.nl is looking at how angel investments can be incentivised, to close the early-stage funding gap and to nourish the flywheel of innovation. We are currently comparing how other countries have done this, for example, the UK with the Seed Enterprise Investment Scheme (“SEIS”). 

To ensure the effectiveness of possible incentives, we also need to capture and map the Dutch angel investor community and their investment practices. 

As a solution for this, we would like Dutch angel investors to fill in a short survey. The answers will be treated as highly confidential and can be submitted anonymously.