Building a world-class Dutch start-up ecosystem

A robust entrepreneurship ecosystem has the potential to be among the fundamental drivers of a nation’s economy and a linchpin of its society. While Dutch start ups are already successful in many areas, the United Kingdom, Sweden and the United States are more competitive when it comes to key metrics for start-up success. The Netherlands has an opportunity for a strategy to encourage participation by a larger number of founders. This will result in more entrepreneurial activity than is currently possible. Additionally—and where the most significant share of value creation lies—is the opportunity to facilitate start-ups’ ability to scale. Together, these strategies can transform the entrepreneurship ecosystem in the Netherlands into a pillar of the national labor market and an engine of value creation and innovation, with start-ups founded in the Netherlands between 2022 and 2030 potentially contributing an estimated €250 billion to €400 billion market capitalization.

Although Europe has many high-performing companies in aggregate, European companies underperform relative to those in other major regions: they are growing more slowly, generating lower returns, and investing less in R&D than their US counterparts. This is due in large part to the fact Europe failed to catch up on the last technological revolution, especially in the areas of value and growth information and communication technology and other disruptive innovations.

The Netherlands is highly respected in Europe for its success in start-ups. The Netherlands is a potential leader in Europe, but it also has the potential to be the engine that makes Europe a global leader for entrepreneurship. The Netherlands faces the next wave in global challenges. These include food insecurity, climate change and access to health care. Solutions may be found in the next generation. Second—and perhaps even more important—are the many factors that favor the Dutch entrepreneurship ecosystem.

The Netherlands ranks fourth in terms of start-up value creation in Europe, and among cities, Amsterdam is one of Europe’s fastest-growing start-up hubs.





Another metric of a country’s success in entrepreneurship is the total number of start-ups per capita. The Netherlands has a fifth-place ranking in the European Union.





Look at the Dutch labor market and you will see that homegrown start ups have created more local jobs than 130,000 in all the provinces.

However, there are still opportunities for improvement. What is at stake is equally clear. Failure to act puts the Netherlands’ entrepreneurial standing in jeopardy. Our analysis has revealed two key elements that will make the Netherlands more competitive in entrepreneurship ecosystems elsewhere in Europe and the United States. The first is to bring in a diverse group of entrepreneurs to help lay the foundation, which will produce about 20% additional economic value over the status-quo. The second lever is to ensure that all startups are able scale. It can double to triple (two or three times) the economic impact of the start-up environment.

More start-ups: Priming to the pipeline

Every year, the Netherlands launches approximately 1000 start-ups. This rate of founding makes the Netherlands fifth within the European Union (Estonia and Ireland, Luxembourg and Denmark are higher) and eighth throughout Europe.





The Netherlands can provide a wider and more varied picture of founders to help you start new companies faster. Specifically, several initiatives across five mandates can address some of the identified barriers and help increase start-up activity across underrepresented demographic groups—and from one particular institutional source.

The Netherlands has the potential to increase the number and activity of start-ups each year by 35-45 percent. This is in addition to the 1,000 start-ups that are established annually. The per capita number of start-ups would increase from the current level of 900 per million to 2030. This would put the Netherlands behind Ireland and Estonia in the top three start-ups per capita within the European Union.

Image description: A vertical, stacked bar graph shows the number Dutch startups established in 2021 (1,000) and the number projected start-ups for 2030 (1350-1400). This chart illustrates an estimated rise in the number start-ups by 35 to 45 percent.

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1. Increase the percentage of founders from non-academic backgrounds

While there is potential for universities to be bigger launching pads for founders, investing in the potential of entrepreneurial-minded people without a university education is also important. Our research revealed three possible actions that could make a positive impact on increasing the number founders from non-academic backgrounds.

• Making entrepreneurship an integral part of secondary education through, for example, competitions and courses that are dedicated to it
• Promote structured mentoring programs, networking events, and other activities to increase knowledge, experience, capital and access.
• Running a public campaign to highlight the success stories of founders who have received vocational education or studied applied sciences.

An increase of around 40% in non-academic founders, from approximately 13 percent to 18% by 2030, could see an additional 35-55 start ups in the Netherlands each year.

2. Increase the percentage of female founders

When it comes to actually starting a company, there is a significant gender gap, with only around 15 percent of start-ups founded between 2010 and 2020 having at least one female founder.





The good news is that there has been a decrease in the gender gap. Around 25% of all start-ups established since 2019 have at least one woman founder.





These three potential actions could make a positive impact on closing the gender gap.

• Promote structured mentoring programs, networking events, and other activities to increase knowledge, experience, capital and access.
• To encourage inclusion, raising public awareness about gender bias in funding processes is key to increasing public awareness
• Promoting more diversity at the Venture Capital (VC) level in order to infuse more diversity among founder sets. Fundright, for example, is a Dutch group of VCs that aims to have a 35% female management team by 2023.

Our analysis indicates that this could translate into an additional 115 to 170 start ups in the Netherlands each year by 2030.

3. Double the number of founders who are not from Western countries.

14.5 percent of total Dutch residents are non-Western immigrants





Only 7% of founders start their own businesses.





These four potential actions could make a positive impact on increasing that percentage.

• Promote structured mentoring programs, networking events, and other activities to increase knowledge, experience, capital and access.
• To encourage inclusion, raise public awareness about background bias in funding processes
• To promote more diversity among VCs and infuse more diversity into founder sets,
• Partnering with organizations that have a track record in reaching migrants communities to identify talent pools

Our analysis suggests that this could result in an additional 50-75 start-ups being founded annually in the Netherlands by 2030.

4. Increase the proportion of experienced founders

Research shows that the average age for a successful founder of a start-up is 45.





However, early-stage entrepreneurs should be active





It is highest among the 18- to 24-year-old age group, and decreases with each age group. In order to increase entrepreneurial activity among the 25-54 age group, it could lead to more start ups and greater success rates due to the likely work experience of those in this age bracket. Two actions are possible to increase the number start-ups that have experienced founders.

• Establishing dedicated programs to increase the number of entrepreneurs with professional experience. This could be done, for example, by collaborating between the private sector and the government.
• Greater public awareness about success stories of founders with work experience

Our analysis indicates that this could mean an additional 55 to 85 Dutch start-ups per year in 2030.

5. Increase the number spin-offs of Dutch universities and research institutes

The Netherlands has fewer business spinoffs than the leading universities of the United Kingdom or the United States. This is due to the Netherlands’ universities. Three actions are possible to make a positive impact on the increase in spin-offs.

• Encouragement of an entrepreneurial mindset in students and university employees
• Supporting the commercialization of research and technology through reasonable term sheets (e.g., less equity stakes for universities than in the United States).
• In order to establish entrepreneurship centres that are closely linked and affiliated with universities, but which operate independently (for instance, UnternehmerTUM Germany).

Our analysis suggests that if we increase the number of spin-offs from universities to the level of leading universities globally by 2030, it could result in an additional 65-100 start-ups being founded annually in the Netherlands by 2030.

Start-ups with a larger scale: Successive scaling

While scale-ups create the majority of value in the later stages, Dutch start ups fall behind in terms of conversion rates in later funding rounds. (Exhibit 2). The Netherlands is currently performing worse than European leaders, European front-runners and the EU average in scaling.

Image description:
Here are some possible funding rounds for start ups. From start to finish, these stages are: foundation, seed series A, B, series C and series D long-term stable. Horizontal bars represent the conversion rates between stages in the Netherlands, the United States, Germany and the European Union. Data show that the Dutch scale-up ecosystem converts at lower rates than its peers for all stages of funding.

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When comparing macroeconomic indicators to determine the success of scaling start-ups, the Netherlands is below other leading countries. The market capitalization of start ups as a percentage of GDP is approximately 6 percent in Netherlands, 25 percent Israel, 20 percent Estonia, 17% in the United States and 15 percent Sweden.





The average start-up valuation in the Netherlands is around €5.5 million, €55 million in the United States, about €19 million in Israel, and €14 million in Sweden (Exhibit 3.).

Image description:
The heat map table below shows how the Dutch start-up ecosystem performs in scaling compared to other countries. Eight rows represent the following countries – Israel, Estonia and the United States.

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The Netherlands could be better at scaling up funding. Although Dutch start-ups and scale-ups received around €2.3 billion of VC funding in 2021, VC investment per capita in 2021 in the Netherlands was only 60 percent of the investment per capita in Sweden, and less than 50 percent the investment per capita in the United States. Furthermore, only 22 percent of total financing volume in the Netherlands is local funding, versus 37 percent in Sweden and 78 percent in the United States.

In order to encourage the growth of Dutch start ups, it will be necessary to improve the conditions for scaling companies in the Netherlands. Six prerequisites for scaling could be helpful in this regard.

1. Focus on sectors that are both relevant globally and strong suits for the Netherlands

The Netherlands could focus on investing in sectors that are both attractive based on global demand and that draw on the country’s unique expertise. These sectors are highly attractive internationally. The United States has a higher share of start-up funding for health and fintech than any other sector (19 percent) and 17 percent respectively. The top two spots in the Netherlands are also health and fintech. They command 13 percent and 25%, respectively, of all the start-up funding. This can be seen by the high level of financing in the United States. Health ranked first with 19% and fintech second at 17 percent. These sectors also received the greatest investment in the Netherlands (13% and 25%). These sectors are also home to a large number of Dutch start ups.





Because of their international know-how, the Netherlands could also focus on other sectors, such as energy and food.

2. Start with a global perspective

The Dutch start-up market has a primarily domestic focus, and so scalability within the Netherlands can be limited. Our interviews with many Dutch founders suggest that their growth aspirations are focused within the country’s borders. By focusing on the global market from the outset, Dutch start-ups could open themselves up to a much larger market with immense growth potential—and turn their focus to internationally relevant issues.

3. Attract top talent

Compared with the most successful start-up ecosystems, the Netherlands has a high share of hard-to-fill job openings in the tech sector, with 56 percent of the tech job openings in the Netherlands considered hard to fill, versus 47 percent in Germany, 40 percent in the United States, and 44 percent in Sweden.





Because of the complexity and increased amount of work, it is crucial to be able attract international talent during the scaling phase. Noncash compensation may help. The Netherlands is currently in the bottom quartile when it comes to employee stock ownership plans. This is compared to the top quartile for its chosen peers.

4. Start-ups in the VC ecosystem should be given sufficient guidance and funding, particularly in the late stages.

The Netherlands’s per capita financing volume is lower than that of Sweden and Israel.





At the same time, the Netherlands historically tends to build companies with a profit-over-growth business model (the “PE mindset”). The Dutch VCs tend to be less active in later rounds, and therefore make fewer repeat investments. VCs play an important role in the success of start-ups by providing guidance and advice. A strong and engaged Dutch VC network could help increase the success rate for start-ups.

5. Capital: Investment from a variety

The availability of enough domestic and foreign capital is an important catalyst for entrepreneurship activities such as attracting talent, conducting R&D/product development, and marketing. These activities are especially important in the scaling phase of start ups. The ability to attract more capital from institutional investors may increase the success rate of scaling. In the Netherlands, pension assets are greater than 210 percent as a proportion of GDP.





Dutch VCs raised €220 million from Dutch pension funds between 2016 and the first half of 2021, 0.012 percent of the total Dutch pension assets.





Domestic financing makes up 22 percent of total Dutch financing volume, while it makes up 37 percent in Sweden.





Capital is essential for start-ups in order to grow.

6. Facilitate a supportive startup environment

By winning the talent race and raising additional funds through alternative taxation and the 30 percent ruling, you can create a favorable environment for start-ups. Additional tax incentives are available in many other countries including France, Spain and Sweden for angel investments.

The impact

These five levers could be used to increase the number of start ups in the Netherlands and address six priority areas. Scaling up with success, start-ups founded in the Netherlands between 2022 and 2030 could potentially contribute an estimated €250 billion to €400 billion market capitalization.

To put this sum in perspective, it is equivalent to 30 to 45 percent of the around €850 billion market capitalization of today’s AEX. These start-ups can potentially create 165,000 to 250,000 jobs.

The Netherlands can have a major impact on its economy by creating globally competitive start-ups. With sufficient scale, the start-ups of today can become fundamental to Dutch society, helping create jobs and supporting the country’s ability to invest in education, healthcare, and social-services delivery. Looking beyond the Netherlands’ borders, a strong Dutch start-up ecosystem would contribute to building a European economy that is more globally competitive. Our analysis shows it will take an orchestrated effort of the full range of stakeholders—from educators and legislators to VCs, founders, and C-suite executives—to create a more prosperous and globally competitive start-up ecosystem.