The Netherlands is one of the largest incubators for tech startups, but McKinsey says there’s room for improvement. The research firm examined the potential of the Dutch market. Although McKinsey concludes that the Netherlands could become a world leader in the field of startups, several conditions will first need to be met.

According to the research firm, the Netherlands is among the top five startup countries in Europe. In terms of value creation, Dutch tech startups rank fourth. The average tech startup has exceptional revenue and potential

Nevertheless, there’s room for improvement. McKinsey analyzed the Dutch market to determine the factors limiting its potential. The research firm believes the Netherlands could become a world leader in the field of startups, provided it tackles the challenges standing in the way.

Perfect storm

According to the research firm, Europe has lost the technological race to the United States. The average American company generates more revenue, grows faster and invests more in research. The Netherlands could turn the tide, McKinsey argues.

The country’s conditions are near perfect. “The Netherlands is facing the next wave of global challenges, including food insecurity, energy resilience, climate change, and health access”, the research firm described. “Solutions to these challenges may lie in the next generation of start-ups.”

McKinsey emphasized that the country’s full potential isn’t being realized. The current tech startup landscape accounts for about €100 billion in market capitalization. That amount could rise to €400 billion by 2030, according to the research firm. The big question is how.

Room for improvement

First, McKinsey argues that too few Dutch tech startups distribute stock options. Providing shares to employees is a way to motivate staff, similar to a financial bonus. An additional benefit for tech startups is that employees receive a serious payout if the company is sold.

The payout can encourage employees to start their own businesses, according to McKinsey. Stock options for startup employees indirectly lead to the founding of new tech startups. The research firm calls on the Netherlands to encourage stock options.

Second, McKinsey argues that tech startups do not receive enough investments from Dutch parties. According to the research firm, 78 percent of all investments come from abroad. As a result, once a startup is sold, some of the value leaves the economy.

Finally, McKinsey states that startup employees insufficiently comprise underrepresented groups, including women, individuals with a practical education, individuals in an older age group and individuals with a non-Western migration background. Greater diversity could lead to a 35 percent to 45 percent increase in startups, according to the research firm.

Techleap

Techleap, a Dutch organization tasked with stimulating the startup landscape, stands behind McKinsey’s conclusions. According to the organization, the Netherlands needs a more coordinated approach to startups.

“The Netherlands has almost everything to make a leading contribution to the global transitions coming our way”, said Techleap ambassador Constantijn van Oranje. “The potential is enormous, as this report shows, but that does not easily translate into social, economic and climate success.”

“With targeted tax measures, investment can be spurred. Sharing more wealth among employees of successful tech companies makes it easier to attract and retain scarce talent.”