The Netherlands can make Europe a global leader in entrepreneurship: McKinsey report

McKinsey & Company, a global management consulting firm, has published a new report titled “Building a world-class Dutch startup ecosystem.”

The report discusses The Netherlands’ opportunity to build a strategy to facilitate startups’ ability to scale and to encourage the participation of a more diverse group of founders to transform the entrepreneurship ecosystem. 

Startups in the Netherlands have the potential to make a real impact on the Dutch economy. With enough growth, these startups could become essential to the Dutch society, providing jobs and funding investments in education, healthcare, and social services.

According to the report, the Netherlands is regarded highly on several metrics of startup success within Europe. However, it 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,’ adds the report. 

Why the Netherlands?

According to the report, 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.

The Netherlands is performing relatively well in the total number of startups per capita, ranking fifth in the European Union.

Homegrown startups have also created more than 130,000 local jobs across all provinces, reveals the report. 

The McKinsey report states that approximately 1,000 startups are launched in the Netherlands annually, keeping Netherlands fifth in the European Union (Estonia, Ireland, Luxembourg, and Denmark score higher) and eighth Europe-wide. 

To create new companies at a higher pace, the Netherlands has to paint a broader, more diverse picture of what a founder looks like. The report claims that the initiative to boost entrepreneurship in the Netherlands could increase the number of Dutch startups by 35 to 45 per cent by 2030. 

How to boost entrepreneurship in the Netherlands?

The report has shared a list of five prerequisites needed to boost entrepreneurship in the Netherlands. They are: 

Increase the share of founders with a nonacademic background: Implementing this could lead to an additional 35 to 55 startups in the Netherlands founded per annum by 2030, adds the report. 

Increase the share of female founders: This could lead to an additional 115 to 170 startups in the Netherlands founded annually by 2030.

Double the share of founders with non-Western immigrant backgrounds: This could lead to an additional 50 to 75 startups in the Netherlands being founded per year by 2030.

Increase the share of experienced founders: This could lead to an additional 55 to 85 startups in the Netherlands being founded per year by 2030.

Increase the number of spin-offs from Dutch universities and research institutions: The report states the universities in the Netherlands generate fewer business spin-offs than leading universities in the United Kingdom and the United States such as Oxford and Stanford, respectively.

Increasing the number of university spin-offs by 2030 could lead to an additional 65 to 100 startups in the Netherlands founded per annum by 2030. 

Scaling successful startups

McKinsey’s report reveals that the Netherlands performs worse at scaling than leading countries globally, European front-runners, and the EU average.

The market capitalisation of startups as a share of GDP is around 6 per cent in the Netherlands, 25 per cent in Israel, 20 per cent in Estonia, 17 per cent in the United States, and 15 per cent in Sweden. 

The average startup valuation in the Netherlands is around €5.5M, €55M in the United States, about €19M in Israel, and €14M in Sweden.

The report says the Netherlands has potential room for improvement in terms of funding. 

Although Dutch startups and scale-ups received around €2.3B of VC funding in 2021, VC investment per capita in 2021 in the Netherlands was only 60 per cent of the investment per capita in Sweden and less than 50 percent of the investment per capita in the United States. 

Furthermore, only 22 per cent of the total financing volume in the Netherlands is local funding, versus 37 per cent in Sweden and 78 per cent in the United States.

To facilitate the growth of Dutch startups, the conditions for scaling a company in the Netherlands must be improved. Here’re six scaling prerequisites, according to the report:

• Focus on sectors that are both globally relevant and strong suits of the Netherlands
• Must adopt a global mindset from the outset
• Attract top talent
• Give startups sufficient guidance and funding, especially in the late stages
• Investment from a variety of investors
• Facilitate a supportive startup environment

“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 €250B to €400B market capitalisation,” mentions the report.