5 takeaways for the Netherlands: Atomico State of European Tech Report

So every year the world leading VC fund Atomico in collaboration with Slush release the State of Europen Tech Report. The report is the largest and most comprehensive dataset on European tech. Offering key insights into what’s happened and the challenges faced. The data covers talent to upcoming hubs, investment to research and development.

The report offers a great opportunity to take a deep dive into the Dutch Startup Ecosystem. Below is some food for thought on the challenges facing the Dutch Startup Ecosystem based on data from the report.

Where is all the money 💸?

The Atomico report begins with the good news stating “Another record year for investment into the European tech ecosystem”. This should be a celebration but one thing stands out clearly amongst the cheers and elation. The Netherlands numbers tell a different story, going from an upward trend from 2015 to 2017 has taken a sudden drop. Going from 2017 highs of $640 million to $464 million in 2018.

To give some perspective here are the UK, France, and Germany alongside the Netherlands. Showing capital invested ($M) by country per year. Please note the Capital Invested Axis values.

Some may attribute this to fewer deals being done and high-value outliers. Firstly below you see the decrease in deals, which is not relative to the decrease in funding. It’s also worth noting that France, Germany, and UK all saw fewer deals as well. To the second point, I would argue not to disregard outliers as a Startup Ecosystem relies on those outliers for success. All successful startups can be argued to be outliers with such odds stacked against them so it makes no sense to exclude them from the data to this regard.

Furthering this point is the data shared from Dealroom on the Top 20 European hubs by capital invested ($M) for 2018. This chart is a great symptom of a bigger financial problem, with Amsterdam having significantly less capital investment than most other major European capital cities. For perspective, Hamburg had over triple the investment of Amsterdam.

Does this problem lie with a lack of foreign investment, a small national investor landscape or lack of government investment vehicles for startups?

Is the Netherlands content with being good for its size?

One thing is evident straight away when going through the report, the Netherlands tends to rank in the middle somewhere for most things. However, when you look into contextual data based on population size the Netherlands skyrockets. Here are some examples:

  • VC funds raised per capita by country of GP by year — Netherlands no .1 $222, Norway no.2 $204 — EU average $72
  • # of funded companies per million citizens since 2013 — Amsterdam #2 with 480
  • # of professional developers per 1,000 inhabitants, 2018 — Netherlands is #2 behind Iceland

So for its size, the Netherlands is supposedly doing well however that doesn’t tell the full story. Is that enough though? For a country that pioneered Wi-Fi, invented the DVD and became the number 2 exporter of food in the world. If every startup settled to be good for its size it wouldn’t take them very far. So although it’s good news the Netherlands is doing well for a country with 17 million people, it’s still not time to settle.

Developer problem

Talent is one of the most important factors for a Startup Ecosystem’s success if not the most important thing. An integral part of that talent pool is software engineers/developers.

So let’s start with some good news that the Netherlands is №2 in Europe for # of professional developers per 1,000 inhabitants in 2018. Now the challenging part begins, the Netherlands overall ranks 7th with 300,000 developers. This is an impressive number, however, the Netherlands was one of only two countries in the Top 10 to see a net decrease in professional developer numbers since 2017.

This decrease in the talent pool is accentuated even further by two other data points. Firstly 73% of all the developers in the Netherlands are located in Amsterdam for comparison in the UK 43% are located in London and in France 55% in Paris. This then comes as no surprise that the Netherlands ranks №1 for software engineer job postings that are hard to fill. Hard to fill meaning that they were job postings left online for longer than 60 days.

Is this an issue of the educational system not creating enough programmers or/and that the Netherlands isn’t an attractive place for talent to come to. Well…actually the Netherlands according to the data is pretty popular 😎. It ranks №4 in the Top 10 European destinations for all international movers into European tech in 2018 with 7.8% of people wanting to move there, the same position as last year but an increase of 0.4%. For context at №3 is France with 11.1%. U.S citizens specifically are interested in coming to the Netherlands ranking №4 with 0.88% share of US.-originated cross-border searches containing ‘software’ and ‘engineer’ (double that of France who sits №5).

So the Netherlands is an attractive country for foreign people to come to yet it has the highest rate at hard to fill software vacancies…

The world’s best universities without the founders

The Netherlands historically has had and continues to have some of the worlds most prestigious educational institutions. The Times Higher Education World University Rankings has all but one Dutch university listed in its Top 200. On top of this international success and prestige, the Atomico report highlights that Dutch researchers are the 2nd most cited behind only the UK. Even more impressive considering it has considerably fewer scientists and engineers than the likes of France, Germany and the UK.

So the stage is set, world-leading universities, internationally cited research and a high density of scientists and engineers. The problem is clear though converting this into startups is missing in the Netherlands. Of the Top 10 institutions by the number of alumni who have founded companies in Europe stood not a single Dutch university. Cementing this issue in the chart below is the capital invested in deep tech companies. A common chain of events is university research — spin-off deep tech startup — investments earned. The Netherlands sits below Sweden, Switzerland, Spain for Deep Tech investment yet has the background in terms of academia to be on the same level.

The solution is given in the research to this problem The clear two reasons why this is the case from the academic/research community are:

1. Access to capital

2. Bridging the divide between the tech community and them.

It’s a start but it means nothing if it's not put into practice.

The point that has never been so important

To conclude the report Atomico and Slush leaves predictions on what will happen in 2019. From their four predictions, one really stood out that resonated with the sentiment of this post.

Slush prediction: Founders choose to stay where they are and build from home — this makes building the ecosystem here even more important especially valorization opportunity
Founders choose to stay where they are, emboldened by the quality of the local ecosystems they see arising around them all across Europe.
The more that founders and talent choose to build from home, the more that 10x difference will contract.

The challenges outlined in terms of financing, talent, education, and mindset mean more now than they ever have. With more reliance on nurturing national talent, the ecosystem around them needs to function properly by giving them financing, an attractive place for foreign technical talent to come to and the ability to breakthrough from research to business smoothly.

I highly recommend reading the full State of European Tech report and making your own conclusions.