The national innovation ecosystem in the Netherlands embeds dynamic and evolving entrepreneurial activities. This dynamic entrepreneurial ecosystem, defined by the interplay between businesses, knowledge institutions and policy makers, has created a path for the emergence of a new ‘class’ of companies: knowledge-intensive start-ups that have spun off/out from existing organisations. Although we see more knowledge-intensive start-ups emerging in the Netherlands, they seem to face difficulties in scaling up, especially in comparison to other countries such as the United States, Israel or the United Kingdom. Why is this the case?
The Advisory council for science, technology and innovation (Adviesraad voor wetenschap, technologie en innovatie) asked us to investigate Dutch knowledge-intensive start–ups to uncover the (growth) experience of these start–ups within the entrepreneurial ecosystems in which they emerge. In this article, you can find the main takeaways of our research. The full research report can be downloaded here and the resulting advice to the House of Representatives (Tweede Kamer) can be found here.
What are knowledge-intensive startups?
Knowledge-intensive startups refer to dependent venture foundation, i.e. the spinoff/out of a core technology from an existing organisation. In contrast to independently-founded ventures, spinoffs and spinouts are formed as a result of investment in knowledge-intensive activities (e.g. R&D or applied research) by the so-called parent organisations. Some spinoff and spinout examples from the Netherlands are:
- ASML (the semiconductor industry giant), that spun off from Philips (in this case, their corporate parent) in the 1980s
- Harbour Biomed (a global bio-therapeutics company), that spun out of Erasmus MC in 2016
Not all companies that originate within the environment of a university or another company are to be considered as knowledge-intensive start-ups, though. Coolblue, for instance, one of the long standing scale-ups in our Top 10 of our Top 250 Scale-ups, was founded within a university environment by Rotterdam School of Management students of the time, but is not a knowledge-intensive startup. This is because besides originating from the use of a hard piece of knowledge or technology developed in the parent organization, academic spinoffs or corporate spinouts maintain a formal or informal link with the technology transfer office (TTO) of the associated university or company.
In the Netherlands, there seems to be a great deal of attention to spinoff/spinout activities, as witnessed by the fact that almost all Dutch universities have established TTOs to aid in the knowledge transfer of technologies developed by researchers within a university. However, it seems that only few of these start-ups reach the scale-up phase. In other words, there is still room for growth in the Dutch innovation ecosystem when it comes to fostering the development of knowledge-intensive startups and bridging the gap between academia and industry. As these companies are known to bring a significant contribution to the market in terms of new technology and innovation, it is now more important than ever to foster the development and growth of knowledge-intensive start-ups. But how can we remove such bottlenecks?
We conducted a research into Dutch knowledge-intensive startups to uncover the (growth) experience of these startups at the different levels of the entrepreneurial ecosystem in the Netherlands. Here are the most important findings:
- Knowledge-intensive start-ups appear to struggle to keep up with early stage Dutch start-ups when it comes to sales and employment rates.¹
- At the micro-level (concerning the founding team): there seems to be a mismatch between scientific/technical skills and entrepreneurial/business skills
- At the meso-level (concerning the parent organisation): business-related vs. research-related goals and strategies conflict with each other.
- At the macro-level (concerning the socio-economic environment): the Dutch entrepreneurial ecosystem provides a supportive and conducive environment, especially at the early stages for market entry. However, there is room for growth especially when it comes to the Dutch venture capital funding structure.
Key research insights
Based on our research, it is clear that knowledge-intensive startups (especially those that have spun off from a university/knowledge institution) face difficulties in scaling up. This is particularly concerning, especially in light of the global health crisis that hinges on coming up with high-tech and research-intensive innovations to save not only humanity but also the economy. In order to ensure a healthy (economic) recovery from the Coronavirus pandemic, support measures have never been more important for knowledge-intensive startups to grow.
What we have learnt from previous crises is the value in diverting effort towards more intensive use of scientific and technological knowledge. New and younger firms are especially important to translate knowledge and ideas into jobs and wealth by exploiting opportunities that are often neglected by more established companies.²
There is an abundance of empirical evidence highlighting the importance of startups in the creation and preservation of employment. These economic growth and job creation effects of startups occur through innovation as venture creation and their subsequent growth increases productivity, especially in knowledge-based sectors.³
“Important lessons can be learned from the rapid response of science-based entrepreneurial businesses. COVID-19 has unleashed a wave of innovation as well as new innovation challenges. The evidence base and experimentation of science, coupled with the agility and risk-taking of entrepreneurs, are major elements of this wave and essential to ending the crisis and building a post-COVID-19 world.” — Gann & Dodgson, April 29 2020, WEF.
On the right track
Techleap launched the ScienceFinder in 2019 to ensure that the ecosystem in the Netherlands can help academia collaborate smoothly with non-academic partners from industry and government in an open innovation setting. Also, together with VSNU they organise the Academic Startup Competition to evaluate the best academic spinoffs of the year and offer them momentum to grow. On top of this, Dutch research institutions and Elsevier initiated the world’s first national Open Science partnership earlier this year to support the dissemination of knowledge by allowing public research output to be (re)used and enriched by all public and private organizations.
Although we are living in an uncertain and tumultuous period defined by a vast amount of unknown factors, the key insights from our research into spinoffs and spinouts reinforce the importance of the strategies and policies that are already in place to support (knowledge-intensive) startups. At the same time, however, it has never been more important to keep in mind that the growth conditions for spinoffs and spinouts are different and should be addressed as such, in order to fully leverage the value that they bring not only to the economy, but also to society at large.
¹ This is based on figures within the first 5 years of the ventures, where spinoffs and spinouts seemed to experience some initial growth but it was not sustainable over the whole 5 year period.
² Calcagnini and Favaretto (2012) in Small Businesses in the Aftermath of the Crisis
³ Arzeni et al., 2012
For more information about knowledge-intensive start-ups from the researcher’s perspective, click here.