Blogpost
Start-ups don't need to be coddled

Start-ups don't need to be coddled

Portrait of Tijo Collot d'Escury
Senior Partner, Managing Partner Netherlands
Amsterdam Office, Western Europe
+31 20 7960-600
August 3, 2016

From Amsterdam to Berlin, Stockholm to Rome: there's not a single factory or office building that stays empty for long. Centers for start-ups quickly take over. Must-haves: a café, but also accelerators and incubators – the nurseries to support budding entrepreneurs.

The start-up hype is by no means unique to the Netherlands. Across Europe, cities and regions are hoping to become the next Silicon Valley; initiatives are springing up everywhere, with the symbolic zenith, the incubator for incubators, in Barcelona. We should take this "nursery for nurseries" as a wake-up call: partly because entrepreneurship has become a lifestyle, the founding of start-ups is in danger of becoming an end in and of itself. But start-ups, at their best, can be a means of bringing successful products to the market and creating new jobs.

"With their experience, large companies can be an 'exubator' for start-ups."
Portrait of Tijo Collot d'Escury
Tijo Collot d'Escury
Senior Partner, Managing Partner Netherlands
Amsterdam Office, Western Europe

This can and should be different. Our suggestion: let start-ups and the established manufacturing industry work closely together. This kills two birds with one stone. For one, such cooperation will stimulate entrepreneurship among both parties. For two, infant companies, rather than constantly trying to copy Silicon Valley, will link up with our unique industrial tradition and strengthen it along the way.

To begin with the first: the incubators, accelerators and many start-up awards should be stimulating entrepreneurship, but do they? Eight out of ten start-ups don't make it. Would the two successful ones not also be successful without an incubator? Paradoxically, all of the help on offer distracts from actual entrepreneurship: entrepreneurs spend the majority of their time applying for subsidies and chasing prizes rather than working with clients and exposing their business ideas to the forces of the market.

But there's also a paradox with established industry. While large companies are in the best position to innovate – they have the capital, the strong brands and the product launch experience – they simply do not innovate enough. If they're willing to create their own competition, they often approach new initiatives in the same way as their old products. This makes real innovation difficult.

With their experience and no-nonsense attitude, large companies can act as excubators for start-ups: tough business support that helps launch products. Existing companies can also help start-ups think bigger. This is predominantly the task of incubators, but, at least in Europe, this is not their strong suit. According to a study conducted by Erasmus University, the percentage of fast-growing companies halved between 2008 and 2014. Only a quarter of Dutch entrepreneurs expect to have more than five employees within five years, according to OESO. That is not enough, by far.

And the flexibility and innovativeness that characterize successful start-ups? Aren't such traits in danger of being stifled in a large organization? Of course the risk is there, but established companies have the biggest reasons to keep such strengths alive. We have landed in an era of smart industry (Industry 4.0, according to the EU), where machines, their software and big data are tied together through smart, digital solutions. Many companies will change shape in the coming years as a result. A machine manufacturer will sell software that connects machines, an automobile manufacturer will become a supplier of mobility – in the broadest sense of the word. Large companies often lack the flexibility needed to handle such transformations, but for start-ups this is second nature.

So start-ups: leave the comfortable, warm nursery where you can still turn back. Industry: take a more flexible attitude, dare to support innovations that you're not yet sure come with future growth – and do this without imbedding the upgrades in your current way of working.

Successful cooperation between start-ups and established companies can significantly contribute to the Dutch economy. The service economy receives a quarter of its work from the manufacturing industry. Cooperation can also help bring the share of manufacturing in our GDP (now at 12 percent) back up.

This is important for the social fabric of our society. The service and tech industries offer predominantly well-paying jobs for the highly educated and minimum-wage jobs for those with less education. The manufacturing industry offers jobs across the entire spectrum and is therefore vital to the continued survival of the middleclass, which is the backbone of a healthy economy. Modernizing this industry must therefore be high on the agenda.

In our attempts to imitate Silicon Valley, we often forget how good a position the Netherlands (and all of Europe) is in. It is easier to begin a business here; wages are lower and offices cheaper. Let Silicon Valley focus on software and chasing the next AirBnB and Uber. Europe is the continent where software meets hardware.

How do you build cooperation between start-ups and established companies? Be stricter with start-ups rather than coddle them. Let entrepreneurs run the incubators. Develop alternative pay structures within big companies, like offering stock in start-ups. Introduce new personnel policies: make seniority less important and steer on competences; replace managers with entrepreneurs and stimulate corporate venturing; allow your employees who are far away from headquarters work together with start-ups. Management would largely facilitate this.

Incubators and gathering points are popping up everywhere for young entrepreneurs, who need to be in each other's company. But now it's start-ups' and the established manufacturing industry's turn: let's put an end to the era of head-to-head opposition between start-ups and corporations – find each other. Before incubators for incubators also start to arrive in the Netherlands.

Portrait of Benno van Dongen
Senior Partner
Amsterdam Office, Western Europe
+31 20 7960-600