Dutch semiconductor sector startups are attracting an increasing amount of funding, the organisation set up by the Economic Affairs Ministry to strengthen tech entrepreneurship in the Netherlands said in its annual review on Wednesday.

Venture capital funding for Dutch chip startups grew for the fifth consecutive year in 2023, reaching 216 million euros ($234 million), the report by Techleap said, helped by increasing recognition of chip equipment maker ASML as Europe's largest tech firm.

The Netherlands is home to chipmaker NXP, and equipment firms ASM International and BE Semiconductor.

The report named two companies that received significant funding in the photonics sector - photonics chips use light rather than electrons to make transistors - Smart Photonics and Effect Photonics.

The report, a critical look at the relative position of Dutch startups, noted that Dutch firms continue to have difficulty in "scaling up" or growing past their initial funding stage.

When they do grow, they take longer to negotiate additional funding than peers in Britain, Germany and France, and much longer than in the United States. Dutch companies are also more likely to be bought out before reaching a 1 billion euro ($1.1 billion) valuation, as happened with Booking.com in 2005, now worth more than 100 billion euros.

Dutch payments firm Adyen and meals company Just Eat Takeaway are notable exceptions.

The report recommended the Netherlands emulate Sweden in attracting more pension fund money into funding deals, copying France and Britain in offering more tax breaks to venture capital, and noted Germany is now granting greater stock ownership to employees.

It said the Netherlands is improving at capitalising on its university research and in funding "deep tech" companies, those based on engineering or scientific advantages - but it could do better.

Among the few Dutch artificial intelligence startups, Weaviate, a platform for building AI software applications, raised $50 million.

(Reporting by Toby Sterling; Editing by Mark Potter)