McKinsey report: Building a world-class Dutch startup 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. Dutch startups are already thriving in many ways, but countries such as the United Kingdom, Sweden, and the United States are more competitive along key metrics of startup success.
The Netherlands has an opportunity to build a strategy that encourages the participation of a more diverse group of founders, which will lead to even more entrepreneurial activity than already today. Additionally—and where the most significant share of value creation lies—is the opportunity to facilitate startups’ 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 startups founded in the Netherlands between 2022 and 2030 potentially contributing an estimated €250 billion to €400 billion market capitalisation.
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 largely reflects the fact that Europe missed the boat on the last technology revolution, particularly in the area of value and growth in information and communications technology, and on other disruptive innovations.
Within Europe, the Netherlands is highly regarded on several metrics of startup success. Still, the Netherlands has the potential to become not only a leader in the region but also the engine that helps make Europe a global leader in entrepreneurship. First, the Netherlands is facing the next wave of global challenges, including food insecurity, energy resilience, climate change, and health access, and solutions to these challenges may lie in the next generation of startups. Second—and perhaps even more important—are the many factors that favour the Dutch entrepreneurship ecosystem.
The Netherlands ranks fourth in terms of startup value creation in Europe, and among cities, Amsterdam is one of Europe’s fastest-growing startup hubs. Another metric of a country’s success in entrepreneurship is the total number of startups per capita. In this regard, the Netherlands is performing relatively well with a ranking of fifth in the European Union. Looking at the labor market in the Netherlands, homegrown startups have created more than 130,000 local jobs across all provinces.
Still, there is potential for improvement. Equally clear is what is at stake. Failure to act puts the Netherlands’ entrepreneurial standing in jeopardy. Our analysis has identified two vital factors for startups in the Netherlands to be more competitive with entrepreneurship ecosystems in other parts of Europe and the United States: first, bring a new and diverse set of entrepreneurs to the table to lay the groundwork, which will generate about 20 percent additional economic value over the status quo; and second, and by far the most critical lever with doubling to tripling (two to three times) the economic value generated by the startup ecosystem, ensure that all startups are able to scale.
More startups: Priming the pipeline
Today, approximately 1,000 startups are launched in the Netherlands annually. This pace of founding puts the Netherlands fifth in the European Union (Estonia, Ireland, Luxembourg, and Denmark score higher) and eighth Europe-wide. To found new companies at a higher pace, the Netherlands can help paint a broader, more diverse picture of what a founder looks like. Specifically, several initiatives across five mandates can address some of the identified barriers and help increase startup activity across underrepresented demographic groups—and from one particular institutional source.
If successful, the Netherlands could increase the number of startups founded each year by 35 to 45 percent, or 350 to 450 in absolute terms, on top of sustained activity of 1,000 startups founded annually. Its per capita start-up number would grow from a total of about 900 startups per million residents by 2030. This increase would place the Netherlands in the top three of startups per capita in the European Union, behind Estonia and Ireland.
- Increase the share of founders with a nonacademic background
- Increase the share of female founders
- Double the share of founders with non-Western immigrant backgrounds
- Increase the share of experienced founders
- Increase the number of spin-offs from Dutch universities and research institutions
Bigger startups: Successful startup scaling
To facilitate the growth of Dutch startups, the conditions for scaling a company in the Netherlands will likely need to be improved. McKinsey identified six scaling prerequisites that could help in this regard:
- Focus on sectors that are both globally relevant and strong suits of the Netherlands
- Adopt a global mindset from the outset
- Attract top talent
- VC ecosystem: Give startups sufficient guidance and funding, especially in late stages
- Capital: Investment from a variety of investors
- Facilitate a supportive startup environment
The impact
If the Dutch startup ecosystem were to unlock these five levers for increasing the number of startups founded and address the six priorities for improving successful scaling, startups founded in the Netherlands between 2022 and 2030 could potentially contribute an estimated €250 billion to €400 billion market capitalisation.To put this sum in perspective, it is equivalent to 30 to 45 percent of the around €850 billion market capitalisation of today’s AEX. In addition, these startups could potentially generate 165,000 to 250,000 new jobs.
Building globally competitive startups in the Netherlands could have a significant impact on the overall Dutch economy. With sufficient scale, the startups 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 startup 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 startup ecosystem.
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