The Netherlands leads the way in startups, but lags behind in scale-ups

The Dutch startup ecosystem is among the best in Europe, but performs below average in the scale-up phase, according to a new study by McKinsey & Company. The Strategy Office is in favor of a further strengthening of the ecosystem, because it contains enormous economic potential and the opportunity to take a leading role in tackling the major challenges of the near future.

McKinsey notes that in recent decades the Netherlands has grown into one of Europe’s most important breeding grounds for innovation and entrepreneurship. Based on various criteria, the study ranks the Dutch startup ecosystem among the international vanguard.

In addition, Amsterdam is one of the fastest growing startup hubs and we have particular success with various payment processors and fintechs. Think of success stories like Adyen, Mollie and BUX.

A few numbers: no less than 12% of Dutch people between the ages of 18 and 64 are entrepreneurs. Last year, 564 startups were founded per million inhabitants, good for fifth place in the EU. In terms of value creation, we are number four in Europe.

Tackling the next wave of challenges

Based on quantitative models, McKinsey predicts that startups established between 2022 and 2030 could generate a market capitalization of an estimated $250 to $400 billion. This corresponds to 30 to 45 percent of the market value of the current AEX. Also 165,000 to 250,000 new jobs can be created.

“A robust ecosystem of start-ups realizing its full potential makes a significant contribution to the national economy, is a pillar of a strong labor market and an important asset for the country’s (and the region’s) ability to compete in the global marketplace”, the researchers said.

Startup climate and patent applications

They also point to the “next wave” of challenges facing the world, including food and energy insecurity, climate change and access to health care.

“The most effective solutions to these global challenges will take time to mature, but the companies behind these solutions are likely to be established in the coming years, if not already.”

In the previous technological revolution, Europe and the Netherlands have already missed the boat, says McKinsey: the continent is lagging behind “in terms of value and growth in ICT and other disruptive innovations”. For example, only Spotify comes from Europe of the big tech giants that control today’s economy.

Investment in the scale-up phase

In short: enough reason to continue investing fully in the Dutch startup ecosystem. According to McKinsey, the focus must be on the phase after the start-up phase: scaling up from start-up to scale-up.

The Netherlands currently lags behind other countries in this regard: “Dutch startups are less successful in scaling up than their peers and perform below the EU average in scaling up into long-term, stable businesses.”

Scale-up indicators, 2021

Most of the additional value that can be created up to 2030 would come from improving the scaling process. “Currently, the Netherlands is losing €100 to €250 billion in value due to lower conversion rates across the entire entrepreneurial funnel,” the researchers said.

Thinking beyond national borders

To change this, McKinsey advises first and foremost to focus on sectors for which there is broad demand and which are a good fit for the Netherlands, such as health and fintech. Secondly, startups should focus more on the global market right from the start – at the moment ambitions too often stop at national borders.

Even more than many other countries, the Netherlands struggles with a lack of technical talent. In the initial phase, it often lacks the capital to pay high wages. To still attract talent, Dutch startups could offer employees a share package, something that currently happens relatively little.

Other advice is to provide entrepreneurs with adequate guidance and funding (especially in the late stages), to secure additional investment from various investors and to facilitate a supportive start-up environment, for example through favorable tax rules.

By further facilitating the launch of innovative startups and creating the aforementioned conditions that enable startups to grow, “the Netherlands can reposition itself globally in entrepreneurship and contribute even more to Dutch society,” the researchers conclude.

McKinsey’s observations about the Dutch start-up ecosystem partly mirror those of an earlier report by the strategy firm, which found that Europe is not sufficiently able to translate its knowledge advantage in quantum computing into commercial success.

Leave a Comment