Start Thinking bigger about entrepreneurship in The Netherlands

The Netherlands has become one of the best start-up ecosystems in the world. However, relatively few start-ups transform into scale-ups and unicorns. A culture that enables the growth of start-ups seems to be missing, research from Utrecht University says. It is called the ‘Dutch entrepreneurship paradox’: we start many businesses, but we don’t focus on growth for businesses to become scale-ups and unicorns and create large economic and societal value.

Besides, The Netherlands is underperforming in their female ambition level compared internationally, although the gender gap in start-ups has decreased with 17% since the early 2000s. However, women report a higher fear of failure than men and are substantially less confident in their ability to start a business.

A culture of sharing and paying forward between experienced and first-time founders, learning from entrepreneurial experience and more female entrepreneurial role models could create a more stimulating culture. These and other recommendations for the Dutch entrepreneurial ecosystem can be found in Thinking Bigger. How ambitious is the Dutch entrepreneur? a joint research report by Techleap and Utrecht University School of Economics (U.S.E.).

Starting a business is more admirable than growing it successfully

The scale-up ecosystem in the Netherlands seems to succeed less than it could. Starting a business and being self-employed is highly valued, and a low fear of failure partially explains the many start-ups that are born. However, successful entrepreneurship is not as highly valued as self-employment. In other words, starting a business is more admirable than growing it successfully. The Dutch population less often has the ambition to grow their business than entrepreneurs in other benchmark countries (i.e. Switzerland, Israel, UK and US).

Thinking Bigger. How ambitious is the Dutch entrepreneur? dives deeper into different demographics, searching for unused potential in building the businesses of tomorrow. The findings show that entrepreneurial activity in general decreases with age, increases with educational level, and is higher for males than for females. Especially the younger generation stands out. Age in general shows a ‘hill’ shaped relation with ambition, but 18-24 year olds in the Netherlands participate in startups relatively often and show relatively high ambition.

The good news is that this youngest generation is more entrepreneurial and ambitious. That is remarkable, in the international comparison’, says Professor of Strategy, Organisation and Entrepreneurship Erik Stam.

Gender gap

The Netherlands is underperforming in their female ambition level compared internationally. Notwithstanding previous efforts to promote women entrepreneurship, this report finds that women still experience higher hurdles in the Dutch culture to build and scale a business. Positive news is that the gender gap has decreased over time, from 50% less female entrepreneurs in the early 2000s to about 33% less female entrepreneurs in 2019. However, women report a higher fear of failure than men and are substantially less confident in their ability to start a business. This aligns with other studies that indicate women feel more pressed to show their capabilities before taking the plunge to start, let alone to start as an ambitious entrepreneur and raise capital in doing so.

Additionally, fast-growing fields of innovation and technology are male-dominated, both in education and start-ups. Given that technological innovation often is a key characteristic of unicorns, potential female entrepreneurial role models are missing.

‘It’s a vicious circle that seems hard to break. It’s getting better but still not good enough,’ says Stam. Still, I don’t see it as a lost case, if all the positive developments we also see continue.

The international comparison shows interesting differences by the way,’ he adds. ‘Female entrepreneurs in the US for example are more ambitious than male entrepreneurs in the Netherlands, on average. And in Israel we see a much smaller gender gap, most likely caused by military service for women and men, as a result of which they not only develop a network at the same time, but both to the same extent get acquainted with new technology.’

Failure as an essential part of entrepreneurship

In creating the right culture for male and female entrepreneurs to thrive, failing and learning is key. That is why the research team has compared entrepreneurs that have run, sold or discontinued a company over the past twelve months (serial entrepreneurs) with people without founding experiences. Serial entrepreneurs are much more likely to be growth-oriented, have a lower fear of failure and more often perceive business opportunities in tech and innovation.

Also interesting: Our dossier on women-run start-ups

The gender gap is much smaller once female entrepreneurs had experience building a business. Serial female entrepreneurs are substantially more confident in their skills and knowledge to start a new business than first-time female entrepreneurs. They triple their confidence, to be on par with serial male entrepreneurs.

Recommendations for Thinking Bigger

In their report, the research team makes suggestions for what we can do as a society to contribute to thinking bigger about entrepreneurship in the Netherlands:

• One idea is to foster a culture of sharing and paying it forward between experienced and first-time founders. Entrepreneurial experience can be very important in future (fruitful) attempts at ambitious entrepreneurship. By paying more positive attention to entrepreneurs who have discontinued their first entrepreneurial ventures, serial entrepreneurs might be better incentivised to share and build upon their learnings.
• Financial policies to capitalise on learnt experiences and accumulated resources may be fruitful for triggering this specific part of the untapped potential for entrepreneurship. Make it attractive for serial entrepreneurs to get involved again in start-ups and scale-ups. As an example, a fiscal incentive is a suitable instrument for improving investment by private individuals.
• In addition, it will be important to enable ambitious, young, highly educated talent to enter the start-up space. A policy opportunity here is to create the possibility for a residence permit for an orientation year for (foreign) employees with specific tech and/or entrepreneurial experience. This will allow the Netherlands to distinguish itself in the battle for brains.
  

These policy measures should enhance a virtuous cycle in which successful entrepreneurs become role models for next generations, and also improve the scale-up ecosystem with their experience, networks and capital, not the least for (potential) female entrepreneurs.