Robert Verwaayen is a Dutch venture capitalist. He is currently setting up his own investment firm, RoBen, and was a principal with Prime Ventures.
As a startup hub, Amsterdam grabs the same amount of attention as the girl with braces at the high school dance. Slowly but surely, however, we have a quietly emerging ‘ecosystem’ (as it is often called in tech lingo).
So is the Dutch tech startup story sold short? Not in my view. We have our own unique set of characteristics giving cause for great optimism. At the same time we have several culturally-driven attitudes holding us back. So let’s take stock:
What do we offer?
Admit it – your subconsciousness was auto-suggesting coffee shops and legal brothels for a millisecond. But hedonistic pleasures aside, The Netherlands actually has a great foundation for tech entrepreneurship.
A top-notch infrastructure
To put it into management speak, our digital infrastructure is world-class. The Netherlands ranks top place in a large number of ICT indicators. We boast the world’s second highest fixed broadband Internet subscription rate only an inch behind Sweden.
Ninety-four percent of households are equipped with a computer and have Internet access (the others are still playing 8-bit Nintendo). On both these indicators, the Netherlands ranks second worldwide. We are the most active Twitter country in the world (measured by tweets per account) and the third most socially networked.
In short: a small country that is hyper connected.
The first thing any American notices when coming to Amsterdam is that unlike Germany and France, everyone speaks English. But Dutch skills go well beyond this feature. The Dutch have a highly educated workforce due to a great secondary educational system with the third best enrollment rate worldwide as well as one of the highest math and science student scores (top 10 OECD).
We have three universities in the top 100 of the Shanghai ranking for engineering and technology. Our population churns out 181 patents per million inhabitants ranking us #8 in the world – ahead of the US, South Korea and Norway.
Bringing macro back down to micro – there are Dutch techies and executives ‘kicking ass and taking names‘ around the globe. Think of Werner Vogels (CTO of Amazon), Guido van Rossem (founder of Python programming language and senior engineer at Dropbox) or the more senior Gerard Kleisterlee (chairman of Vodafone).
At home we have entrepreneurs who think global day one. Think of the Tom Tom and Booking.com founders, or more recently Pieter van der Does of Adyen, Derek Roos from Mendix, Peter Weijmarshausen of Shapeways, Jitse Groen of Takeaway.com and Symen Jansma & Dennis Klompalberts of TravelBird .
In the upper echelons of tech you may well find someone offering you a: shhhmoke and a pancake.
A conducive business environment
The Dutch ‘invented’ the limited liability corporation with the inception of the Dutch East India Company. The company has a checkered past, but it was the first corporation in history to issue stock in exchange for capital.
This legal-financial ingenuity lead to the creation of the world’s first stock exchange in 1602: the Amsterdam Stock Exchange.
Beyond us claiming the first IPO ever, the Dutch could potentially claim (with a fair bit of imagination) history’s first ‘Super Angel.’ A desperate John Adams negotiated a 5 million guilders convertible loan with private investors Nicholaas Staphorst and Wilhelm Willink back in 1782.
It was the first foreign loan in US history. Mr. Willink would later bank roll the Louisiana Purchase – in someway a ‘super angel’ of the 18th century. But forget the quaint history facts. The Dutch have a solid business environment today.
It takes five days to start a business today, ranking us #10 in the world in terms of ‘incorporation’ speed. We have 30 procedures to go through when starting a legal business entity – ranking us #5 globally of light bureaucracy when incorporating.
For both indicators we rank better than ‘entrepreneurial-friendly’ USA. In addition, Dutch businesses enjoy an effective and efficient political & regulatory environment. We have great intellectual property protection, and have efficient ways to enforce contracts.
But if we’re honest, Amsterdam is currently outdone by several places in Europe. This paradox of having a ‘best in class’ foundation but a mid tier tech ecosystem, begs the question:
What is holding us back?
Before going into VC, I used to work as a strategy consultant (I will not defensive about that ) and in true form I will use a 3-point format to distill my hypothesis. For you top-down freaks out there – I apologize – its not MECE. But let’s double click anyway:
Clusters yes, Anchors no
Much has been written about the secret sauce for dynamic innovation clusters. I leave it to academics to spell out all the precise mechanisms, but think of institutions such as top-level universities, multi-nationals and R&D centers in close proximity of each other supporting entrepreneurial activity (exchange of knowledge, pools of talent, supply chains etc.).
The advantages of spatial clustering go under the name “agglomeration economies” and the Netherlands has a very big one called the ‘Randstad.’ Most of ICT related activities are concentrated in the northern part of Randstad in the areas of Amsterdam and Utrecht.
In addition, we have the Eindhoven area (traditional home ground of Royal Dutch Philips) where the likes of Shapeways and Liquavista come from.
So we have plenty of economic clustering. What we lack is a heavy anchor that attracts hyper activity. Think of Stanford and Sandhill road in Silicon Valley, Route 128 in Boston or IIT in Bangalore India. We need a center of gravitas.
It doesn’t need to be a traditional ‘institution.’ It could be an urban area where several startups settle (think Silicon Alley in London) or a grass roots organization like the famous ‘home-brew computer club‘ or even a hipster coffee place like Berlin’s Oberholz cafe.
In my view there is not a very clear place in the Netherlands (except maybe for the High-Tech Campus in Eindhoven) you can point to as a rallying point. Luckily, some cities recognize this fragmented situation and are actively taking initiatives in their urban planning.
For example, the city of Amsterdam is currently tendering for a third ‘tech’ university in the city together with an investment fund and IP attached.
An uneasy relationship with ambition
To drive a great ecosystem, economic clustering and anchor points alone are insufficient. There are a variety of values that must be fostered collectively to drive the right entrepreneurial attitude of the individual.
In my view, our culture around ambition and success needs work (note: this is as much a European problem as it is a Dutch one): Work a little harder?
Dutch work ethic is steeped in a belief that we ‘work to live – not live to work’ often contrasted against the other side of the Atlantic. This is manifested in the one indicator in which we actually rank #1 in the world … drum roll…
The shortest workweek with 30.5 hrs (2011)
Luckily, the Dutch over compensate their working hours with a great deal of productivity and efficiency (top in EU). But I think its fair to say that the Dutch post-World War II welfare state isn’t exactly breeding the young and hungry entrepreneur you find in Turkey, Romania and Estonia. ‘Struggling to get by’ is a great motivator for a gritty work ethic, which in turn goes hand in hand with entrepreneurship.
Of course I am not suggesting we should do away with social benefits for the sake of creating an artificial level of scrappiness. Rather we should stay close to our old fashioned Calvinistic roots, “Those who do not work, do not eat.” Let’s applaud those who burn the midnight oil to get ahead in life.
The Dutch are an entrepreneurial bunch. According to the Global Entrepreneurship Monitor the Dutch outperform the EU big five in terms of early stage entrepreneurial activity.
But Dutch entrepreneurial activity is heavy on ZZp’ers (freelancers without staff). The freelance model appeals to many, as it has lower risk barriers while maintaining the ‘be your own boss’ benefit. There is nothing wrong with freelancers, but surely it’s not an ideal model of entrepreneurship to create the jobs of tomorrow.
For example, the Dutch have whopping 67,000 companies in the “Organizational Advisory” segment. In other words, that’s one advisory or coaching firm per 250 Dutch inhabitants.
The majority of these firms are single-person businesses. Look out China, we’ll advise you into submission!
The point is clear, we need more entrepreneurs with the ambition to build large lasting companies. This requires a risk appetite for gutsy ideas. Let’s make sure we have all the stimulants in place to go bigger.
This includes lowering the barriers for angel investors and giving entrepreneurs a second or third chance if they fail. It also includes becoming better at my next point:
The Swedes have the law of Jante, the Anglo-sphere has Tall poppy syndrome, but us Dutch have a saying that epitomizes our exaggerated egalitarian desires: “Act normal, that is strange enough.” It is a sober protestant version of “keeping it real.”
Dutch culture hates pretentiousness, showing off, discussing money, or any behavior that doesn’t follow the “normal” cultural norms. Max Weber would probably tell you this value is inspired by misgiving and envy rather than a collective desire to be authentic – but that’s a topic for another time.
And so while several studies show we are pretty appreciative of entrepreneurs – in general, we are not very fond of making success stories explicit. As soon as an entrepreneur hits it big and talks about it, he or she conflicts with the cultural norm of acting “normal.”
As a result, inspiring stories for the next generation are mostly kept in the dark. Yet the Dutch can rave about millionaire football players like there is no tomorrow, so why not do the same with entrepreneurs?
Let’s at least celebrate ‘the crazy ones‘ – our progressive tax system will make sure they are normal enough!
Insufficient social capital
The term ‘social capital’ refers to the connections and relationships between individuals and entities that can be economically valuable for a society. A fundamental underpinning of social capital is the level of ‘trust’ a society has.
These ‘circles of trust’ can be very small (think deep family ties in Italy), or very large (think easy formation of large industrial groups in Northern Europe). As a general rule, the more trust a society has, the lower the cost/friction of transacting with each other.
The Netherlands is often described as a ‘high trust society.’ But our trust is rooted in the security of strong institutions and the rule of law.
What we need though, is skill-based trust. We need deeper networks of talent and experience coming together on the basis of trusting each other’s competence and skills, without resenting the inevitable force of reciprocity.
If this sounds ambiguous let me offer you the following quote to clarify:
” Along with sharing the same type of risks, the [Silicon Valley] entrepreneurs also shared a camaraderie unsurpassed almost anywhere else in American industry. Even engineers and scientists who work at competing firms during the work day remained close friends off the job. … the manager of one semiconductor firm would not hesitate to call a competitor for assistance on technical matters. – Regional advantage: culture and competition in Silicon Valley and Route 128
In my view, we can do a better job of forming strong tech communities. We don’t have a ‘Paypal’ mafia, a Netscape brethren or an equivalent strong network in tech. I believe it is our excessive urge to ‘act normal’ and disdain of ‘networking’ that dilutes our social glue.
How to fix this? Pick up the phone and ask that experienced Dutch entrepreneur for help – and in return – pay it forward. If we all do that we can form our own tech mafia!
Let’s get to where we belong
With a ‘best in class’ digital infrastructure, a highly educated workforce and a solid business environment we have the fundamentals in place to be among the best settling grounds for start ups and technology firms.
However we lack some prerequisites for a great ecosystem. I have been fairly brutal with generalizations in this post (which easily happens when describing cultural attitudes), but I think the Netherlands has too little anchor points, a mentality that doesn’t always help and a real need for more effective social capital.
I don’t think there are any quick fixes. But I believe that with collective consciousness and effort we can achieve a lot. In fact, we have made quite some progress over the last five years.
Today we have lots of promising tech companies, several accelerator programs (e.g. Rockstart, Startupbootcamp) larger and smaller VCs (e.g. Prime Ventures, Endeit, Newion and HenQ), great events and publications (eg. The Next Web and the Next Women) and several government backed initiatives. There is an eco-system and it is slowly evolving into maturity.
But this shouldn’t take a whole generation. Deep down I am confident that the Dutch have it in them to create something even more spectacular than found elsewhere in the world within the next decade.
We are used to punching well above our weight on the international stage. I know drawing parallels to football is easy, but heck – let’s seek inspiration from it. Our socially progressive attitude has helped shape the most creative and agile playing of the global game.