Significant increase in start-ups evolving into scale-ups
After several years of decline, the number of fast-growing companies in the Netherlands is on the rise. What’s more, there is substantial growth in the number of start-up companies that can evolve into scale-ups. These are the latest findings of the ScaleUp Dashboard 2016 at Rotterdam School of Management, Erasmus University (RSM) and the Erasmus Centre for Entrepreneurship (ECE).
The ScaleUp Dashboard is an annual study of fast-growing companies in the Netherlands carried out under the leadership of Justin Jansen, Professor of Corporate Entrepreneurship at RSM. A fast-growing company, or scale-up, is a company with at least 10 employees that has grown by at least 20 per cent per year over a three-year period. The main findings of the ScaleUp Dashboard 2016 are:
- After seven years of decline, the number of fast-growing companies in the Netherlands increased to 3,070, up 7.3 per cent compared to last year.
- The increase in fast-growing companies occurred primarily in the commercial services sector. At the same time, the proportion of fast-growing companies within the Netherlands’ nine ‘top sector’ industries decreased. Top sector industries receive government support for innovation.
- The increase in the number of fast-growing companies can be largely explained by the ability of more start-ups to evolve into scale-ups. One in 20 fast-growing companies has evolved from a start-up, representing an increase of 60 per cent compared to last year.
“There appears to have been a reversal of the trend, and there are now more companies that can grow by over 60 per cent over three years. The Netherlands has therefore reinforced its position in Europe as a start-up and scale-up nation,” said Jansen.
First increase in seven years
“Despite the fact we are still way under the level of 2008 when there were almost twice as many fast-growing companies in the Netherlands, it looks like we are now beyond the low point of last year,” he commented.
“Fast-growing companies play a crucial role in the vitality of the Dutch economy and in the creation of jobs, so it is a positive sign to see the number going up again,” says Jansen.
The ScaleUp Dashboard identified and analysed all the fast-growing companies in the Netherlands. During the period 2012-2015, these companies achieved an average growth in turnover of 107 per cent, and the number of people employed by these companies increased by 133 per cent. On average, the number of full-time employees in a fast-growing company has increased to 42 over the past three years.
Strong commercial growth but ‘top sector’ share is down
The increase in the number of fast-growing companies last year took place primarily within the commercial services sector, where general growth in recent years has translated into an increase in the number of fast-growing companies. They are quick to make use of the new possibilities offered by smart automation and ICT, such as commercial services offered online through new revenue models. Furthermore, the increasing flexibilisation of the labour market has created opportunities for rapid growth within the employment services sector.
But the relative decline in the number of fast-growing companies within other top sectors is significant. An exception was the Agriculture and Food sector, which saw an increase in the number of fast-growing companies. The greatest decline was in the Energy and Chemicals sector.
Although there was a general increase in economic activity within the top sectors last year, this did not translate into more fast-growing companies. “In addition to the emphasis on stimulating innovation within start-ups and existing companies, top sectors industries also need to focus more attention and resources on increasing and accelerating the opportunities for new growth.
More start-ups evolve into scale-ups
The ScaleUp Dashboard 2016 showed that the number of start-ups that evolved into fast-growing companies went up by 60 per cent. Last year, 98 fast-growing companies had been active for less than five years, this year, there were 156 of them less than five years old. “This means a lot more start-ups were able to achieve rapid growth: one in 20 fast-growing companies evolved out of a start-up that had been in existence for less than five years.,” commented Jansen.
The climate for start-ups in the Netherlands has been getting more attention in recent years,, reflecting the role that start-ups play in the development of the Dutch economy, and it seems to have resulted in more fast-growing companies. “These figures show how valuable a healthy start-up climate is for the continued development of fast-growing companies within the Dutch economy.
“Up until now, it was unclear how far the policy in relation to startups and the schemes to finance growth had actually resulted in more fast-growing companies. We are now able to show that stimulating start-ups creates a significant breeding ground for the creation of more scale-ups,” said Jansen.
Start-ups that apply new technologies have a scalable revenue model, and those which are selective when entering new markets are more likely to develop into fast-growing companies. First, they look for a good match between their product or service and a future customer base before they launch their proposition on the market. In addition, they often adopt a structured approach towards their growth ambitions, with the aim of guaranteeing substantial growth for the long term. “In other words, no hasty decisions, but a sound approach based on insight and experience,” explains Jansen.
Seeking rapid growth for more companies.
With the apparent reversal of the negative trend of recent years, further attention and measures will be necessary to maintain and even accelerate the upward curve. “The vast majority of companies in the SME sector, for example, have either stopped growing or are shrinking. There also seems to be a growing divide between companies that apply new technologies or launch new revenue models, and which are able to achieve rapid growth, and those companies that have difficulty in adapting to the rapidly changing economic conditions,” said Jansen. This latter group, which still represents 70 per cent of companies in the Dutch SME sector, includes many that might have ambitions to grow, but which are still unable to translate that ambition into actual growth due to limitations in terms of leadership, financing, or an inability to modernise their portfolio of products or services.
The full report can be downloaded here: PDF
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For more information about this press release you can contact Ramses Singeling, Media Officer for RSM, on +31 10 408 2028, or by email on email@example.com; or Justin Jansen, Professor of Corporate Entrepreneurship, on +31 612 760 872 or firstname.lastname@example.org