Rabo Innovation Loan stimulates growth, innovation and impact of Dutch startups

Since its market launch in 2017, more than 850 companies have now been financed with a Rabo Innovation Loan. A good time to reflect on the impact of this. We did this through a survey among startups with a Rabo Innovation Loan. In this article, we present the results of this research, which show that, according to the survey results, the Rabo Innovation Loan contributes to the growth of startups in the early phase.

The Rabo Innovation Loan was created to support startups in the early phase, in which they (yet) have little access to funding. This is because there are many (technological) uncertainties in this phase and no proven results, cash flow or paying customers yet. Based on its transition-driven strategy, Rabobank developed this product to support entrepreneurship and innovations that contribute to the digitization, sustainability and vitalization of society. By stepping in at this early stage, Rabobank's goal is to help companies get through the Valley of Death . In this case, startups do incur costs, but they do not yet have a (large) flow of income (see figure1).

Almost eight years after the Rabo Innovation Loan was first granted, we investigate the growth that these companies have experienced. What themes and transitions are these startups working on? How fast are they growing? What was the loan used for? And what effect has the loan had? To find answers to these questions, we conducted a survey among startups that currently have a Rabo Innovation Loan. Companies that have already repaid the loan are therefore not included. The survey was completed by more than 100 startups.

The Rabo Innovation Loan has been provided to hundreds of startups in the Netherlands over the past eight years. These startups are in almost all sectors. When we compare the distribution across sectors with all Dutch startups in Dealroom, it is striking that a relatively large number of startups in the healthcare sector have received a Rabo Innovation Loan. At 29%, this share is a lot higher than the 7% in Dealroom. The portfolio also has significantly more startups in the agricultural sector: 11%, compared to 1% in the Dealroom database.

The group that completes a survey (the sample) is not always representative of the entire population. That is now also true. Relatively few startups in ICT and trade completed our survey, while other sectors, industry and energy are overrepresented. Despite these differences, the sector distribution in the sample corresponds reasonably well with that in the entire Rabo Innovation Loan portfolio.

The startups are all working on a social transition or theme. This is a condition for receiving the loan. On average, the startups contribute to 2 transitions or themes.

Momo Medical developed BedSense, a smart solution that helps care workers monitor residents in nursing homes more effectively and efficiently. Thanks to a Rabobank Innovation Loan, the company was able to further develop the technology, scale and enter the market. This support provided an important foundation for Momo Medical’s growth into a successful scale-up with international ambitions and a proven contribution to easing pressure on the healthcare sector.

Several reports indicate that there is insufficient funding in the Netherlands, both in the early-stage phase and in the scale-up phase. For example, Techleap's latest State of Dutch Tech shows that this funding has decreased in recent years. The Rabo Innovation Loan contributes to solving this problem. The fact that the loan has been granted frequently is a sign of success, as it is proof of alignment with a need for financing. In addition, the results also show that the Rabo Innovation Loan has unlocked (other) financing that would (probably) not have been provided without the Rabo Innovation Loan. This is evident from two effects: a direct and indirect effect.

To begin with, the direct effect. At least 10% of the respondents indicated that they would not have found alternative financing (see Figure 4). This group also indicates that they have insight into this, as otherwise they would have ticked the option 'no insight into' or 'I don't know'. Moreover, the latter group may include additional startups for which this also applies, although they indicated that they were unable to estimate this.

60% indicate that they would have had another financing option without the Rabo Innovation Loan and give various options. 75% of this group indicates that they could have received equity financing from a Dutch party. 42% indicate that they could have obtained a different loan. And finally, 35% indicate that they could have received equity financing from abroad. Of course, several answers were possible. The Venn diagram in the figure below shows how these financing options overlap for these respondents. It is notable that no respondent indicated that equity financing from abroad was the only alternative option.

In addition, there is also an indirect effect of the Rabo Innovation Loan. We asked the startups whether they had received additional funding from other parties because of the Rabo Innovation Loan. We are explicitly referring to financing that in all likelihood would not have been provided if they had not received the Rabo Innovation Loan. 54% of respondents indicated that this was the case for them.

DENS develops innovative battery solutions that contribute to the energy transition and solving grid congestion. With the support of Rabobank, DENS was able to invest in the further development and upscaling of its technology. The Rabo Innovation Loan helped the company to commercialize, expand production capacity and grow into a successful scale-up that plays an important role in sustainable energy supply.

Innovation requires more than a good idea. It requires the space to develop, test, validate and scale up. Financing is often essential, especially in an early phase. That is why Rabobank has developed the Rabo Innovation Loan, A financing solution especially for startups that are working on innovative technologies, products and services with potential social impact. The loan is intended for startups that are still in an early development phase and helps to take important steps towards market introduction and further growth. Are you a founder, and are you curious whether the Rabo Innovation Loan could benefit your startup? More information about the Rabo Innovation Loan can be found here. You can start your application directly by requesting the brochure.

Companies that receive a Rabo Innovation Loan are working on an innovative product or service. In the early phase, they usually incur a lot of research and development (R&D) costs. The Rabo Innovation Loan is therefore used for this purpose by 70% of the respondents, as shown in Figure 6. Just under half (45%) indicate that the loan has (had) the function of extending the time until the next (equity) investment.

In Figure 6, the internationalisation answer option is least ticked, presumably because it is more relevant for companies in a later growth phase. This is indeed evident from the breakdown in Figure 7. In it, we show how the use of the loan differs between the growth phase in which startups find themselves. We use Gritd's StartupFramework, in which 4 stages and 12 milestones are defined. Gritd is an organization that is committed to increasing the success rate of startups.

We asked the startups what milestone they had achieved when they received the loan, and which ones they have achieved since then. The figure below is based on the milestone they had achieved when receiving the Rabo Innovation Loan.

Figure 7 shows that from milestone 4 (product-market fit) startups use financial resources less often for R&D and more often for staff growth, sales and internationalisation.

In addition to financial support, Rabobank can also offer other support, for example through the bank's network. Figure 8 shows the extent to which the respondents received non-financial support. A small majority (55%) indicates that this was the case. Most often this was in the form of support from the network (34%). To a lesser extent, this was the case for knowledge and sector insights (20%) and strategic business advice (8%).

Based on the Gritd StartupFramework cited above, we can show the growth startups are experiencing while they have a Rabo Innovation Loan (see Figure 9). At the time the loan is granted, the startups have, on average, just achieved milestone 2 (product-solution fit). At the moment, they have reached an average of milestone 5 (repeatable sales). If we combine this with the average duration of the respondents (2 years and 8 months), we can say that the startups achieve about 1 milestone per year. The Rabo Innovation Loan also does what is intended: to support startups to move from the early phase to commercialisation.

Growth can also be seen in turnover and the number of employees. We cannot calculate an annual growth rate for the group that did not yet have any turnover when receiving the loan (60%). We do know that the majority of that group now has turnover (33%-point of the 60%-point). For the group that already had turnover when receiving the loan, we can calculate the annual turnover growth. The median annual revenue growth of a startup is 86%. We choose the median, because a few outliers in a relatively small group raise the average enormously. The median growth is higher than the average revenue growth of startups and scale-ups from an analysis by Statistics Netherlands, the Ministry of Economic Affairs and Climate Policy and RVO: it is about 50% (see Figure 4.1.3 in that report). Startups with a Rabo Innovation Loan therefore have a relatively high turnover growth.

The average FTE growth among the respondents is 160%: from 3.2 FTE to 8.5 FTE. This is achieved over an average of 2 years and 8 months. There are also major outliers: the largest startup that received a loan – if we go by the number of FTEs – had 15 FTE when they received the loan. Today, 126 FTE is the highest number of employees among the respondents.

58% are satisfied with the growth achieved since receiving the Rabo Innovation Loan, compared to 21% who are dissatisfied with it. The rest is neutral. The dissatisfaction may be due to the fact that there has been virtually no growth, but also because of the feeling that there could have been more. Even a startup that is experiencing high growth can experience that there was still an obstacle somewhere due to internal or external factors. A lack of (more) funding is one of those possible factors. We have investigated that.

63% of the respondents indicate that they could have grown faster with a higher loan. The Rabo Innovation Loan is a loan between €25,000 and €200,000. A large part of them indicate that their desired loan would be 1-3x as high. There are also outliers: three respondents indicate that their desired loan would be no less than 10-11 times as high (see Figure 11).

We also asked the startups about their revenue target in 3 years. Based on this, we calculated the annual growth rate to arrive at that. That is a lot higher than what this group has shown in recent years. While the median revenue growth achieved was 86% (see Figure 10), the median revenue growth targets for the next three years is 169% per year. Gritd describes an insight to the same effect in 2022 in their Startup Development Report. They state: "Startups fail to achieve their high ambitions. Expectations of 250% revenue growth per year are 7 times higher than usually achieved." In some cases, funding can be an obstacle to this, but not in all cases. The right focus at the right time is just as important in many cases. And in addition, there are many other internal and external factors that influence the success of a startup, as described by RaboResearch. These include company characteristics (e.g. the degree of uniqueness and presence of intellectual capital), characteristics of the inventor and the team with whom he has surrounded himself, and characteristics of the startup ecosystem (e.g. laws and regulations, culture and infrastructure).

Finally, we also presented some statements about the Rabo Innovation Loan and the process. It follows:

The Rabo Innovation Loan was granted for the first time in 2017. Since then, hundreds of startups have received this loan. Based on the results of a survey completed by more than 100 startups, we can say the following:

1. All startups with a Rabo Innovation Loan have the ambition to actively contribute to social transitions and themes;
2. The Rabo Innovation Loan has provided additional funding for startups in the Netherlands. Both directly (without the loan, the startup would not have found financing) and indirectly (through the loan, the startup has also received additional financing);
3. The Rabo Innovation Loan does what it is intended to do. The loan is mainly used in the early phase for R&D, and the loan supports startups on average from the early phase ('product-solution fit') to commercialization ('repeatable sales'). Startups with a Rabo Innovation Loan achieve significant revenue and FTE growth. The median revenue growth is 86% per year.

Are you working on a scalable innovation in areas such as sustainability, digitalisation, healthcare or food ? Then now is the time to explore the opportunities available for your startup. Discover whether the Rabo Innovation Loan aligns with your ambitions and take the first step towards the next phase of your business today. More information about the Rabo Innovation Loan can be found here. You can start your application directly by requesting the brochure.

This is a publication of the Rabobank Startup & Scale-up Team. Startups and Scale-ups are innovators of the economy due to their innovative power, contribute significantly to solving social challenges and are an important engine for the growth of the economy and employment in the Netherlands. The target group therefore represents great strategic value for Rabobank.

The Startup & Scale-up Team supports founders who believe in this same mission to grow sustainably by opening up (international) network, knowledge and funding. In an early phase with, for example, the Rabobank Innovation Loan, but also in a later phase with non-dilutive financing options to support scaling your business. Learn more on www.rabobank.nl/startup-scaleup.