BLOG: Start-ups and scale-ups finally receive government funding
The Dutch government has announced it will invest €500 million in start-ups and scale-up in the Netherlands. Professor Justin Jansen from Rotterdam School of Management, Erasmus University (RSM) researches corporate entrepreneurship and the impact of start-ups and scale-ups on society and the economy. Here are his perspectives on this government decision.
“I was pleasantly surprised a while ago to read that the Dutch Cabinet is earmarking €500 million for start-ups and scale-ups in the Netherlands. The government hopes this money will go some way to safeguarding our future economy. It seems the Cabinet has finally realised that an effective economic policy in these times of coronavirus must be geared towards both the short and long terms.
“But since the start of the coronavirus outbreak, the Cabinet has mainly focused on preventive measures. It has implemented stimulus packages geared to preserve jobs and minimise financial loss. But we will need more than that, especially if we are to have an energetic and successful recovery after the coronavirus crisis. Start-ups and scale-ups (young, promising and fast-growing companies) will play a prominent part in this process. Judging from our annual ScaleUp Dashboard, this group of companies generates more jobs in the Netherlands than other companies, even in times of a pandemic. But there is more to it than that. By developing ground-breaking technologies and introducing new revenue models, they are innovating certain sectors and (regional) economies, such as the energy sector, the healthcare industry and the high-tech industry.
“Despite their crucial contribution to the vitality and resilience of the Dutch economy, start-ups and scale-ups are highly vulnerable, particularly in times of economic uncertainty. Customers are less likely to spend money, while investors are less keen on investing in the more uncertain long-term innovation projects. Which is why Dutch start-ups and scale-ups need more support as well. Not to prevent them from losing their game, but to help them win it. However, the question remains as to whether the promised €500 million will suffice to help Dutch start-ups and scale-ups win the game. That is true now, during these times of coronavirus, but more importantly, it will be true in the long term.
Action is needed
“Personally, I don’t think it will suffice. More funding will be required, as is obvious from recent figures generated in our study of fast-growing companies in the Netherlands. Even before the coronavirus outbreak, the increase in the number of fast-growing companies and the number of start-ups that grew into scale-ups had stagnated. Although more start-ups have been established in the Netherlands in the last few years, this dynamic has stopped resulting in fast-growing companies. On the contrary: nearly two thirds of all fast-growing companies in the Netherlands stop growing fast after the initial growth spurt. This means that a huge amount of potential for economic resilience is getting lost in the process. And these trends developed at a time when huge investments were being made in start-ups and scale-ups. Apparently, there are lacunae in the ecosystem that cannot be fixed merely by throwing money at them. Worse, the solutions to the main challenges are not money-related at all, but rather related to clear choices and clever and targeted stimulus packages and measures. Generally, measures are too generic to resolve specific issues. What is needed is action.
Long-term growth plans
“Many start-ups and particularly scale-ups need a larger number of talented employees who are prepared for the challenges of the future, to be able to properly supervise the fast increase in jobs. This is true not just for the founders of a company, but for the entire team. For example, make it easier for start-ups and scale-ups to recruit talent from abroad, and make sure that they can retain their employees – for example by allowing them to pay wages in shares in the company. Support early and more large-scale internationalisation, particularly for young start-ups in industries such as the platform economy. Think beyond the short term. Many stimulus packages for start-ups and scale-ups only cover a relatively short period of time, and are insufficiently geared towards the longer term, or to the process of upscaling and retaining quick growth. This is something we will have to change. For that reason, we should focus on intensive supervision and stimulus programmes for ambitious start-ups and scale-ups, subject to strict selection criteria, and with due regard for major milestones.
“So let’s not be afraid to sail close to the wind, and to make clear choices – not only about funding, but also about smart growth strategies. This will allow us to win and help us prevent our brilliant people from leaving for Silicon Valley, Singapore or Shanghai during the course of the game.”
Professor Justin Jansen is professor of corporate entrepreneurship at RSM and academic director of the Erasmus Centre for Entrepreneurship (ECE). His research on strategic leadership, entrepreneurship, innovation and rapidly growing companies has been published in leading international academic journals. He has been named as one of the top 100 leading professors in the field of entrepreneurship who play a crucial role in the development and guidance of future entrepreneurs.
Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s top-ranked business schools. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who can become a force for positive change by carrying their innovative mindset into a sustainable future. Our first-class range of bachelor, master, MBA, PhD and executive programmes encourage them to become critical, creative, caring and collaborative thinkers and doers. Study information and activities for future students, executives and alumni are also organised from the RSM office in Chengdu, China. www.rsm.nl
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