'I see funds making more active calls again, which is a positive sign'

Every year, Belgian scaleups broke records when it came to capital rounds, but in 2023 the engine fell silent. Sven De Cleyn of imec.istart keeps his finger on the pulse of the sector, and sees first signs of improvement.

Every month, Scaleup Flanders publishes a top ten of the biggest capital rounds of the past month. It is an interesting gauge to see who the major players in the Flemish tech world are and how the market is evolving. In the past year, for example, we saw a striking trend: there were several months in which there were not even ten investments. Where Belgian scaleups still raised 1.4 billion euros in 2022, a year later it was "barely" 733 million.

That the market had fallen back to 2019 levels is a trend that was also felt in the rest of the world. So says Sven De Cleyn, program director and funding expert at imec.istart. 'There is uncertainty in the socio-economic climate due to the conflicts in Ukraine and Gaza, among others. These are also causing interest rates to rise enormously, as a result of which safe investments with a certain return suddenly become available. State notes, for example, and to a certain extent term accounts and bonds. For investors, these become to some extent more interesting than a risky investment in a startup.

Shift of power

Although the first month of 2024 began cautiously optimistic with large rounds of capital for CrazyGames (10 million euros) and N-Side (6.2 million euros), among others, Sven remains cautious. 'We're not out of the woods yet, but on the other hand, funds have refueled money in recent years. As long as they don't invest that, it brings nothing, so they are going to have to deploy that under time pressure. I see that funds are having more active conversations again, which is a positive sign.'

On the other hand, there is another important indicator, and that is the market for mergers, acquisitions and IPOs. 'That has largely stalled and that's not good. When the people behind a fund want to reinvest money, they also need to have sufficient liquidity. If too little goes out, there are insufficient funds to invest back.'

The drought is causing the balance in the market to shift. Where scaleups for a long time determined who was "allowed" to invest in them, funds are now in a stronger position. Sven: "The conditions at which investments happen have changed, and valuations are lower now than they were two years ago. That's not necessarily a bad thing, because in previous years they may have been on the high side. The shift in funds and venture capital is also noticeable in banks and grants. I see significantly less bank lending, and the rules have been tightened.'

Sustainable growth

Still, Sven has a hopeful message for entrepreneurs: "The evolution we are experiencing is not necessarily a bad thing. Three years ago people wanted to grow at any cost, now investors focus on healthy growth and charting a visible path to profitability. I see entrepreneurs being much more aware that they need to become profitable faster, and that's not necessarily a negative.'

The important thing, Sven says, is to pay close attention to your business metrics. 'Things like your conversion rates and customer acquisition cost need to be well mastered in order to convince investors. On March 26, we are organizing a Finance Masterclass at Scaleup Flanders, where we prepare scaleups for raising capital. We will show them possible elements of a financing mix, give them realistic expectations and discuss do's and don'ts.'

‍Wouldyou like toexperience the Finance Masterclass? At this page you will find more information.