Fireside chat with Prince Constantijn of The Netherlands (TechLeap.NL’s Special Envoy)

Recently former ASIF Ventures Fellow Stijn van der Burg and current Fellow Marta Radzikowska had the privilege of sitting down with Prince Constantijn of The Netherlands to discuss all things venture capital. Prince Constantijn is Special Envoy to TechLeap.NL, formerly Startup Delta, an organisation that focuses on improving access to capital, talent, and markets for tech companies in The Netherlands. In this extensive interview they discuss the gender gap in venture funding, whether entrepreneurs should go to university, how governments can facilitate innovation, and much more!

Interviewee: Prince Constantijn of The Netherlands ( C )

Interviewers: Marta Radzikowska (M) and Stijn van der Burg (S)

S: Where does your passion for entrepreneurship come from and why did you decide to make it a large part of your professional life?

C: I like the drive of entrepreneurs that want to create something out of nothing. I like their sense of independence, their sense of wanting to build stuff and do things better. It actually originated from a frustration around 2010 when we were trying to execute the digital agenda for Europe, and nobody really cared too much about the digital transition.

[Note to reader: from 2010 to 2014 Prince Constantijn worked as a Senior Advisor, and eventually Head of Cabinet, for the European Commission Vice President Neelie Kroes, the Commissioner in charge of the Digital Agenda for Europe.]

We saw there were a lot of difficulties getting things off the ground, but the entrepreneurs were the ones who understood it much more than all the other parties. We engaged — rather Neelie Kroes, my boss at the time — engaged deeply with the whole community, asking “what do you need from us?”. People expressed a need for role models and more acknowledgement, so we set up the Digital Leaders Club with the founders of Skype, of Rovio, and Spotify. We had a lot of interaction with start-ups and when my term ended at the European Commission I thought “what am I actually doing here?”, and that kind of brought me back to start-ups.

M: You mentioned role models — who are some of the people that inspire you?

C: I personally don’t believe in role models — I take inspiration from people, like Neelie Kroes, in the sense that she was post-political. She didn’t care anymore about the political ramifications of what she was doing, she just did what she thought was good. I think not so much a role model for me but for Dutch entrepreneurs, people like Steven Schuurman, Pieter van der Does, Jitse Groen — they’re role models in terms of entrepreneurship and shrewdness.

S: In January this year you mentioned that you were considering bringing an end to your role in what was formerly StartupDelta and in June it was announced you would stay on board and see the transition to TechLeap.NL through. What changed your mind?

C: Well, it wasn’t quite as you put it — my contract would have ended in June. The government asked me to continue. I told them that this whole thing shouldn’t be dependent on me. They had lofty ambitions of being the biggest start-up ecosystem in Europe and I said look, you’re not doing anything to bring that any closer. If you don’t use your fiscal instruments, your education, your migration policy and all these kinds of things, then the ambitions are not realistic.

That helped because we then developed an agenda of possible policy interventions that could strengthen The Netherlands. They complied to most of those — they increased the budget for Startup Delta, and it became a more serious organisation. We can actually employ people now, whereas previously we could only have freelancers. Now we are in a much better position to make an impact.

M: What are some of the changes and initiatives we can expect from TechLeap.NL in the coming years?

C: More than before we want to quantify and accelerate the ecosystem. By that we mean understanding and analysing the ecosystem as it currently stands, and then accelerating its growth by filling in gaps with new programmes and initiatives. Particularly for markets, capital, tech transfer, and talent, so that we can improve access to those areas. This will help tech companies grow faster within and beyond the Netherlands and will bring the whole ecosystem up to a higher level of professionalism. But that takes time. There are many structural issues around fiscality, around migration, as well as an entrenched culture. The system is more traditional and very much leans towards private equity, which is not so involved in the venture-building side.

The total volume of venture capital in The Netherlands is relatively low and funds are rather small, so there all these structural things we want to address. However, current businesses won’t benefit from those changes — at least not immediately. So, we’re going to start something called the Access Programme which will provide 250 companies with access to a large global network of investors and entrepreneurs.

S: How do you see the current role of the state in facilitating the growth of the start-up ecosystem, and how do you see that role in an ideal scenario?

C: There is no ideal role — I think the government can do much more in terms of setting norms. If you say as of 2025 “we won’t use combustion engines anymore”, that will lead to a lot of innovation in terms of automotive and mobility solutions. Another role for government is to critically assess how regulation impacts innovation. What happens is that we tend to want to protect consumers and come up with all kinds of regulation that is often not enforced, so it doesn’t really protect individuals, but it does place a lot of compliance burdens on companies.

Governments should also be more coherent in their policies. You have all these policies, and they don’t communicate with each other. If you say we want to be big in AI, you have to start looking at all your instruments and make sure they work within a consistent strategy.

M: There still exists a significant gender gap between males and females in terms of access to funding. #FundRight is an initiative driven by Dutch VC’s focused on closing this gap — what is your involvement with the initiative?

C: We as TechLeap.NL are indeed an initiator and facilitator of the initiative, but the only ones who can commit are VC’s.

M: Why do you think these initiatives are important?

C: If you don’t have initiatives then nothing happens. Change only happens top-down. A lot of these biases against women are implicit. These firms are not aware of it — they actually want different outcomes. You hear things like: “We’d love to invest in companies led by women, but we can’t find them”.

The point we’re trying to make is that, firstly, there are more successful companies than you think, so we try to make that apparent. Second is that this should be a policy of yours because it’s proven that diverse teams perform better, so it’s good for you, good for your industry, and good for your investments. And finally, because it’s fair. It’s just fairer. In the Netherlands we have such a shortage of talent that everybody counts. If you miss out on women, that’s an issue. And also, women have a different perspective on market opportunities, because they have different interests. There is a lot of evidence that whole sectors are not developed because there is no capital flowing there because there are only men.

It’s important because there’s a real commitment there from the industry itself. These funds get together and help each other. They get to ask, “you have a more diverse team than us, how do you recruit these people?”. The sharing of different practices is very helpful.

S: Given your experience at the European Commission, how do see the role of the EU in the start-up scene and in innovation more generally?

C: They can provide a lot of money. You have the European Investment Fund (EIF) which is one of the main limited partners in European venture capital. There are many financial instruments like the SME programme on the horizon in 2020. They provide non-diluted capital, which is really great, but only 7 out of 100 companies get access to that. Europe makes a lot of legislation and that legislation is often a consequence of lobbying. Start-ups are typically not that well-connected, so it’s important that the European Commission is aware of smaller companies when making legislation.

M: To come back to The Netherlands, what do you think is a uniquely positive trait of Dutch start-up culture?

C: I think in Dutch culture, there is a challenge of authority which is one of the first steps of innovation — not taking for granted what is already there. Typically, in The Netherlands if someone asks you to do something, you’ll hear “why?” as the response. This can be very annoying but is also an important first step.

A lot of people want to do something new, because doing something new is cool. The Dutch are less good at the follow-up: going from something that is cool to building a big business. They tend to be quite transactional. Once they need money they go to an investor, instead of getting to know the person before you actually need the money. But I think the innovative nature of the country is quite high, and that we are pretty flexible people.

S: Earlier this year you commented that Dutch entrepreneurs sometimes need to think bigger. Do you think that’s still the case, and if so is that due to cultural reasons, or perhaps due to other limitations?

C: I think it’s quite a European trait, to think smaller. That’s because the money that’s invested is small. If you say I need a million to develop my business, but somebody tells you

“you have a really good product, why don’t you try this globally with 40 million?”, then suddenly you start thinking in a completely different manner.

In a business sense, in The Netherlands there are people who think globally in terms of solving global problems. But even that is a bit the same — they want to do something good locally but the idea of “I could actually solve a global problem” doesn’t often arise — like Boyan Slat is doing, he was an exception. A 17-year-old guy who says: “I’m actually going to do this”, and pulls in the right people, the right capital, and the scientific excellence from Delft, and the material science internationally. He gets people along in his vision, and that is the kind of mindset that you don’t see that often in The Netherlands.

M: Do you think The Netherlands has issues with providing certain types of funding?

C: Especially in the growth stage I don’t think there are many funds who can do tickets much bigger than 20 million euros or so. The game is kind of upped now, especially with Vision Fund and big funds like Sequoia who can do tickets of 100 million or more — we just can’t do that. We have private equity players who can do it, but not people in venture. What we miss as well are the smaller Series A’s. Our Series A’s are very small and not very numerous. Whereas in the US the average is around 5 million, for us it’s closer to 1 million.

In small funds you have to do many deals of a small size, and you want to control the investment because you’ll be pretty diluted in the next round. There’s an incentive to stop these entrepreneurs to grow fast and get new investments, which is really bad for these fast-growth companies.

What you would also want is much more early stage money for the ‘messing around’ stage. The UK, for instance, has done a good job in making it fiscally attractive for entrepreneurs that have exited to reinvest their funds into early stage companies, and for any proceeds that you reinvest again, you defer your taxes.

S: Do you see Corporate Venture Capital as something that’s positive for the ecosystem?

C: I would say it’s positive. It’s a source of funding, and especially in sectors dominated by large players, the investment often comes with a lot of support from the company. But it’s not a replacement for venture capital. You really have to have this strategic interest to work with a corporate venture fund. In the Netherlands we did a piece of research with Deloitte which showed that the Dutch corporates are investing about 80% of corporate venture capital abroad, so only 20% in Dutch start-ups. They typically invest in early stage, whereas other European countries invest at a later stage.

S: Is there a particular reason for that?

C: No, it’s stupid. These young companies are not so capable of working with corporates, so I don’t know why they do it, but we do see that we’re really an outlier in that sense.

S: Do you think it changes the playing field at all?

C: No, the volumes are not that significant. I think some of them have done a great job. KPN Ventures has been very aggressive and seen quite a lot of deals. They have a non-acquisition

policy so it’s really an investment — they act more like a VC than a corporate VC. Whereas Phillips and others are more strategic.

M: One of the founding beliefs of ASIF Ventures is that there is a gap between students and start-up ecosystems in The Netherlands, and that students are not aware of all the opportunities available. Why do you think that is?

C: I think we’ve come a long way. Until recently there weren’t incubation programmes, ASIF Ventures didn’t exist three years ago, so a lot of that is changing. I think the universities have not played and still are not playing a great role in accelerating start-ups out of universities. They tend to retain too much equity, require a lot of either payment or equity for intellectual property, and do not reward faculty when they spin out a company or build a company.

S: Do you look back at your time at INSEAD as valuable in preparing you for your current position?

C: It prepared me to go from a civil servant role to consulting, and consulting brought me to other roles. Sometimes I wondered at the people who already did a bachelor’s or master’s in economics, or people from investment banks or big consulting firms, how much value it really provided to them. Other than a timeout and the chance to meet new people — so for them perhaps that was the selling point.

M: If you could take this moment to address the student start-up community in The Netherlands, what would you like to bring across to them?

C: If you’re a student there is really no price on failure. You can do anything. It doesn’t sound intuitive because you’re trying to prove yourself to the world. But in fact, the world is super forgiving for you if you try something big and you fail. It’s the best time to do something big and audacious. And you’ll learn much more from that than from your university. If you have a dream just do it and consider it a huge experiment. Even failed experiments have very relevant outcomes and insights.

S: Where do you see the Dutch start-up ecosystem 10 years from now?

C: The way it’s going I think it’s going to flourish. We try to be good at everything but with 17 million people you can never have the kind of depth that you have in a place like China or the US. What I really hope is that our food and agriculture and horticulture sectors will actually somewhat pivot towards a more open, competitive environment. I think it’s very traditional — super innovative — but very much driving productivity and not applying new business models and going into the rest of the world. We should take our expertise and bring it to market and see if we can commodify some of those innovations to new platforms, or new scalable models, instead of just in more production per square meter.

M: What is something you wish you knew 20 years ago?

C: You should always be prepared to grab an opportunity. Even if you’re not a hundred percent sure you can manage it and you’re out of your comfort zone, you have to step into your new shoes. That helps you and that opens up new perspectives. Every time you think “this is too complicated for me”, you find out that you actually have something else to bring

to the table. You see that those people you thought were incredible are just people. They also try to manage their lives and their kids and their wives and their husbands. They are also stressed individuals — that’s the thing with role models, they’re only models for a certain role. Don’t look up too much to these people and think that you can’t be them. You can be them by setting yourself up for those opportunities, and by being willing to jump even if it’s not in your comfort zone.