In our weekly ‘follow-up’ column we feature a sequel to the best-read article of the past week. This week: Is Pandora Intelligence to become the next Dutch unicorn?
Unicorn? At first Peter de Kock of Pandora Intelligence had no idea that this is a start-up worth more than 1 billion euros. He had to look it up when he heard from several quarters that his intelligence start-up might well become the ‘next Dutch unicorn.’
According to a report by data and analysis company Dealroom, twelve unicorns have emerged from The Netherlands since 2008. The exact definition of the term is the subject of considerable discussion. If we take the ‘official’ meaning of the term, we are talking about young companies that have reached a private worth of 1 billion dollars on their own merits. Did they reach that threshold by going to the stock exchange? Doesn’t count. Are they being taken over by another party? Not a unicorn.
For simplicity’s sake, Dealroom leaves out the privately-owned part of the definition. In their definition, a unicorn is a Dutch-based tech company with a value of $1 billion or more. If you put all twelve companies mentioned by the research bureau through the wringer, not one of them is left over. Even Adyen, which went public last year, doesn’t make the grade.
Prince Constantijn had already voiced the ambition that The Netherlands ought to produce one or two unicorns a year. In comparison: a start-up reaches this mythical status every month in the United Kingdom. Is it realistic that The Netherlands could produce this kind of start-up each year?
Scale-up at a faster rate
According to Henk Zeegers, author of the book “Start-Up or Start-App – Why Breakthrough Start-Ups often fail” all depends on which side of the start-up country you happen to be active in. “Of course, there’s plenty of discussion about this, but you do see that a great many terms and concepts get mixed up here as well”, Zeegers says over the phone. Zeegers states that it’s easier for start-ups to be scaled up who focus on applications for existing techniques. “These companies enter the innovation cycle at a relatively late stage. These are start-ups involving IT, software or other information technology. They make use of existing innovations and do not add anything to the development of a technology. This allows them to scale up faster as less money is needed for development costs.”
For start-ups that are developing a completely new technology – referred to as breakthrough start-ups in the book – it is more difficult to scale up swiftly to a value of $1 billion. Zeegers: “If you look at how ASML came into being and how this company has grown so big, there’s a lot to consider. A lot of money was invested under the Philips flag and the government subsequently did the same. But you can’t get there with money alone. New technologies often require that an infrastructure be set up. It’s a mix of factors that all need to come together. But one in twenty technical start-ups has the potential to break through, though even less than that reach the top of the pyramid.”
According to Zeegers, it is extremely important for these start-ups to have a clear overview in writing beforehand of where they stand: “How close am I to the market? Can I do this with or without investors? Even if it’s only written out on one A4 piece of paper. But as a breakthrough start-up it is crucial that you have a plan to survive the valley of death.”
Why a unicorn?
Then why is it so important to become a unicorn? Zeegers thinks it’s mainly a speck on the horizon. “A milestone that you as a company can work towards. Besides, if you’re standing on top of the pyramid, you’ll have a lot more impact. This will allow you to grow from start-up to scale-up and if things go really well, you will also notice that other small businesses are flourishing around your company.”
Dealroom’s report states that the Dutch start-up sector accounts for some 108 thousand jobs. Two years ago that was down by more than 19 thousand. How important is the start-up ecosystem for our economy? Zeegers: “Extremely important. But we shouldn’t just focus on job growth. A lot of start-ups are companies that employ two to five people. More people will be employed and the company will grow only if they become a scale-up. But without start-ups you don’t have scale-ups either. Companies have a particular life cycle. It’s a good thing that there is a mix between existing, established companies and start-ups. Start-ups are engaged in revolutionary innovations, they’re making the new battery a reality.”
How does the Dutch start-up climate seem in his opinion? “It varies by region. Around Amsterdam you see a lot of ICT and software companies. Here the valley of death is much smaller than in regions around Twente, Delft and Eindhoven. They are far more busy with technical development around there. When it comes to financing or refinancing, the Netherlands is not doing very well. What you see is that we are very risk averse here. It’s different in Sillicon Valley. You see vast amounts of money pouring in there, and there can be quite a few big hitters among them.”
Read about the Dutch start-up ecosystem in our series here.
Zeegers thinks that the government in The Netherlands can play a more prominent role in supervising start-ups: “If you look at the number of programs and schemes that exist in The Netherlands and at EU level, then it’s tricky to find your way around them. Especially as a young entrepreneur or someone who comes from a completely different perspective. That system can be much more efficient, it’s a jungle at the moment. Proper support is essential, especially in the early stages. Apple would never have been able to grow so huge without help from the government – from a NASA program and a trajectory at the Ministry of Defense.- If they had had to do this on their own at that early stage, they probably wouldn’t have made that leap.”
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