For the first time since years more than half of SME’s in the Netherlands show a growth. The growth of young scale-ups, startups that grow into a scale-up, comes to a halt.
This shows the ScaleUp Dashboard 2018, published by the Erasmus Centre for Entrepreneurship (ECE) and Rotterdam School of Management, Erasmus University (RSM).
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The ScaleUp Dashboard is an annual research looking at the growth of SME’s in the Netherlands. Prof. Justin Jansen, professor Corporate Entrepreneurship at RSM and scientific director at ECE leads the research. ECE is the expertise centre on entrepreneurship and does multitudinal research on the factors that lead to fast growth at companies.
A fast growing company, a scale-up, is a company with an average annual growth in employees greater than 20 percent per annum over a three-year period, and with more than 10 employees at the beginning of the period. The most important outcomes of the ScaleUp Dashboard 2018 are:
- The absolute number of scale-ups has again increased; from 2.285 in 2016 to 2.695 in 2017, which is an increase of almost 20 percent. It is the 3rd consecutive year in which the growth in the number of scale-ups exceeds 15 percent.
- The growth of young scale-ups has halted in 2017. In the period of 2014-2016, the growth of scale-ups could be attributed to the increasing number of start-ups becoming scale-ups. However, in 2017, this no longer seems to be the case.
- Dutch ‘top sectors’ host only 30 percent of all scale-ups in the Netherlands. Most scale-ups are active within the High-tech Systems and Materials. Industries with the highest number of scale-ups are business services (20,7%), retail & wholesale (16,2%), and professional services (11,4%) (consultancy & applied research).
- Although the Amsterdam region hosts the most young scale-ups (45), the number of young scale-ups in the Rotterdam region has quadrupled to 20. The Hague completes the top three with 15 startups that have been able to scale up rapidly.
Prof. Justin Jansen explains: “Our research shows that the number of scale-ups increased strongly again with almost 20 percent. This number is pretty high. Interesting though is that this increase is largely created by the growth of existing companies. Not per se the young, innovative startups with new technologies and business models. Of course supported by the economic growth we experience right now, existing companies are able to change their own business models and using new technologies themselves to reinvent themselves and grow”.
Fast growth among established companies; growth in young scale-ups halts
After the decrease in number of fast growing companies in 2014, the last 3 years we saw a tremendous growth among Dutch SME’s. Last year the amount of scale-ups grew with almost 20 percent to the total amount of 2.695. Since 2014 this number increased with even 70 percent. During the period of 2014-2017 the total amount of new jobs within these scale-ups lead up to almost 47.000. Besides this scale-ups are an important driver of implementing new technologies and business models. For the first time since 2010 the amount of SME’s that grows exceeds the number that is stable or in a shrinking phase. “Our numbers show that a broad group of SME’s are able to grow and adapt to the changing market conditions, and they do this in rapid pace” Jansen says.
Growth in young scale-up halts
Even though in the past years there were much more startups capable of scaling up, this trend has not continued to 2017. In fact, the increase of start-ups scaling up has even flatlined. Jansen: “Startups seem to have more trouble with scaling. It is becoming more difficult and complex. In talks with these start-ups, it became apparent that the fast growth was only achieved after a long initial operating period. On average, startups need at least 7 to 9 years to scale the technology, business models and processes to achieve exponential growth.” This stagnation raises questions marks on how these startups and young businesses are supported in their endeavours. “A lot of these supporting activities usually do not last very long. Growth programs are aimed at the validation of the business ideas and achieving a company’s first sales, but assisting in scaling and achieving exponential growth requires long-term investments and support”, as said by Martin Luxemburg, director of the Erasmus Centre for Entrepreneurship.
The ECE is continually collecting more in-depth insights on the characteristics of companies that become scale-ups. With this knowledge the ECE creates programs to help (young) companies to scale up.
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