Can Amsterdam even better support growth of its startup ecosystem?

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This post is the third and last in a series of articles about the startup ecosystem in Amsterdam Delta (Amsterdam metropolitan region). The first dealt with the dual challenge for start-ups to become socially and environmentally sustainable and to empower employees to be entrepreneurial through shared leadership. The second one was a review of the strengths and weaknesses of the Amsterdam startup ecosystem by the authors of the 2021 Global Startup Ecosystems Ranking.

Weaknesses and strengths

The 2021 Global Startup Ecosystem Report revealed several weaknesses in the Amsterdam startup ecosystem, which – I accentuate - should not overshadow the city’s position of Amsterdam as the world number 13 startup ecosystem. In terms of market reach, the overall score is satisfactory (7), but the Amsterdam Delta startups are primarily focused on global markets and score low on the local market. In the field of talent, the overall score is more than sufficient (7), due to the quality of technology students and graduates, but their number is inadequate, resulting in high vacancies and salary costs. Partly related to this, the growth potential (scalability) of the Amsterdam startup ecosystem is also insufficient, due to a limited reservoir of experienced entrepreneurs. Overall knowledge success is assessed as poor (1!) due to the unsatisfactory number of life science patents.

Amsterdam Policy plan 2019 - 2022

Most of the underlying data of the 2021 report is from 2019 – 2021, a time frame that coincides with the start of the new policy plan for startups in Amsterdam in the period 2019 - 2022. The inventory of challenges in this report mirrors several weaknesses mentioned above. Looking at the future, the report states: We have reached a point where growth of the local ecosystem does not have to mean that the local government wants to encourage as many companies in Amsterdam as possible but encourages activity that adds value to the city in new ways. In the coming years, we must also lay the foundations for a more inclusive society, in which the local startup and scaleup ecosystem also plays a role. A step towards inclusiveness means significantly increasing the business sector’s ambitions for social responsibility. In other words, a focus on quality in general that is aligned with at least the first challenge in the first post I referred to above.

How cities can support their startup ecosystem?

Below, I discuss highlights from the policy report 2019 - 2022 within a broader vision of possibilities for municipalities to support start- and scale-ups, partly based on an earlier edition of a The Global Startup Ecosystem Report.

Financial support
According to the 2021Global Startup Ecosystems Report, the funding of new businesses is not a big problem in Amsterdam Delta, also because of the generous tax facilities(!) in the Netherlands. However, investment relies heavily on local investors and governmental grants: 54% of the capital flowing into the ecosystem comes from domestic sources, 25% from the rest of Europe, and just 21% from the rest of the world.
The City of Amsterdam subsidized the Innovation Center for AI (ICAI) at Amsterdam Science Park, requiring that at least 20% of its revenues will be reserved for innovative SMEs and startups.
While funding is not an overriding problem, Amsterdam can improve its coordinating role in providing financial support, as for example Seoul has done by the creation of the Dream bank, a one-stop agency for all financial matters.

Growth of markets
The market position of Amsterdam start- and scaleups can be improved, especially in the home market, but also internationally. Besides, every new startup must start from scratch by creating a market. An agency called Amsterdam Trade and Innovate has commissioned trade developers to organize domestic and international activities that support promising companies in clusters such as technology, health, life sciences, and creative industry.

Expanding the reservoir of entrepreneurs
Amsterdam focuses on women and young people with a migration background, most of whom never received tech-related training. Initiatives such as House of Skills, Action Plan W&T, House of Digital offer a range of technology-based courses to make up for these shortcomings, alongside startup schools such as BSSA, Growth Tribe and The Talent Institute.
In December 2020, the City of Amsterdam announced it will invest yearly US$ 856,500 in RISE, the Female Hub Amsterdam. There is a high demand in sectors such as artificial intelligence, blockchain, robotics, life science and energy storage, while relatively many university students in technology seem to prefer media studies and gaming and the fintech market is almost satorized. Studying will become more attractive by combining study and jobs and affordable (co-)housing and childcare options, both of which are both are seriously lacking.
In addition, the ‘Warm Welcome’ program aims to attract ambitious tech talent from abroad. Unfortunately, the pandemic has significantly reduced the influx of potential talent from abroad while market opportunities for innovative tech startups and scaleups were improving.

Campuses
Innovative and research-oriented start-ups prefer the proximity of comparable small and medium-sized companies in campuses.  They also prefer locations in mixed urban environments. A campus offers space for complementary companies, large and small, and facilities to collaborate, such as shared laboratory spaces. Amsterdam develops urban innovation districts through regional development and transformation. These areas that can accommodate rapid growth and opportunity for clustering ‘anchor companies’, leading (knowledge) institutions, startups, scaleups, incubators and accelerators. The main areas are: West Innovation Park, Amsterdam Sciencepark, Marineterrein , AMC-Amstel III and VU-Kenniskwartier/Zuidas.

Participation in the network of incubators and accelerators
Startups and scaleups need support. Incubators help companies to settle, accelerators help them to grow steadily. One of the best things any city can do is actively participation in these incubators and accelerators. They can become a one shop-stop for all prospective participants, providing virtually all the support start- and scaleups need. 31 of the 89 incubators and accelerators in the Netherlands, are active in the Amsterdam metropolitan area. A rich pallette of incubators and co-working spaces such as TQ, WeWork, Spaces, Startup Village, Rent24 and B.Amsterdam have been set up. Accelerators are Rockstart, Startupbootcamp, Fashion for Good, ACE and Collider.
Within an incubator or accelerator, the municipality can be primary responsible for legal matters, offering work- and living spaces (initially for free and later rented out at attractive rates), trade missions and procurement.

Internships
In some cities, startups can practice aspects of social and environmental sustainability in public administration. An example is the Startup in Residence program that started in Amsterdam and has now been spread over 20 other Dutch cities, regional governments, and ministries. The program is open to both Dutch and foreign entrepreneurs. Professional coaches provide intensive training and support. Workspace is available too. Under certain conditions, local, regional, and national governments become launching customers or partners. A report provides a detailed overview of the program in Amsterdam and its impact on the participants and the community.

Taking care of starters in general
Only a small but previously unknown part of all starters becomes a startup. Moreover, the number of starters outsizes that of startups and some can become valued companies too In the Netherlands, each year more than 100.000 starters are registered with the Chamber of Commerce.

Short evaluation Amsterdam policy plan 2019 - 12022

I doubt whether the current Amsterdam policy on start- and scaleups will result in a better ranking next year, also because in many cities startup ecologies are growing faster. Personally, I believe that consolidating a position in the top 20 is the best possible and still admirable result. This certainly applies if Amsterdam can achieve its ambitions in the field of qualitative rather than quantitative growth. Amsterdam wants to become an inclusive community and the first circular city in the world. The city wants that start- and scaleups becoming forerunners in reaching these objectives. I am partly disappointed in the content of the policy report 2019 - 2022 regarding this ambition. Indeed, becoming a more inclusive community is reflected in supporting the growth of the number female entrepreneurs. However, I looked in vain at policies encourage activity regarding developing start- and scaleups that add value to the city in new ways for instance contributing to the development of the circular economy. These businesses will make the difference in the future startup ecosystem.

I will regularly share ‘snapshots’ of the challenge of bringing socially and ecologically sustainable cities closer using technology if useful. These posts represent findings, updates, and additions to my e-book Humane cities. Always humane. Smart if helpful, chapter 4 in particular. The English version of this book can be downloaded for free below.

https://www.dropbox.com/s/kfywoszhrn4xi5j/Looking%20for%20the%20city%20of%20the%20future.pdf?dl=0

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