Pre-Incubation and Incubation Stages in the Netherlands
Netherlands From an Entrepreneur’s Perspective
The Netherlands is one of the startup-friendly countries making a difference in Europe. This dynamic country, where many creative people live, is on its way to becoming a startup center and community. The Netherlands is a dream country for entrepreneurs because of the technical infrastructure, access to talent, proximity to markets, tax reductions and ease of communication. Entrepreneurs can easily connect with stakeholders, incubators and investors in this city. The Netherlands is an open and progressive society with a diverse workforce that supports creativity and innovation. One in every five people in the Netherlands society has a parent born abroad. Amsterdam welcomes people from 180 different nationalities. 90% of the Dutch speak English, and most are multilingual.
Non-EU/EEA citizens who wish to start a business in the Netherlands can start a business with a Dutch Startup Visa. New entrepreneurs are given the option of a one-year session extension to launch their business idea. The fast-track immigration process for highly skilled non-EU migrants benefits employees and employers.
The Entrepreneurship Action Plan supports startups. The Dutch government offers competitive tax breaks, refunds and financial support, as well as providing a level of clarity that companies can rely on in the long term. An effective corporate tax rate of up to 5% is one of the R&D and innovation advantages offered.
The Netherlands is known for its excellent transportation and telecommunications network that makes doing business much faster and easier. The country has one of the fastest broadband speeds in Europe and is the birthplace of Bluetooth and WiFi connections. The Netherlands is one of the 5 most competitive economies in the world. The Netherlands is a functional, democratic, law-abiding society that tends to create a safe environment for business activities. The Dutch strive for consensus on essential issues, have advanced social services and promote safety. Situated between Germany, Belgium and the North Sea, the Netherlands is ideally located to reach anywhere in Europe and the world. The Port of Rotterdam is the largest in Europe.
Netherlands Startup Ecosystem
The Netherlands Startup Ecosystem is one of the World’s Leading Innovation Hubs, ranked at 11 globally. There are 27 cities ranked in the top 1,000 in The Netherlands, and the top-ranked city is Amsterdam at 27 globally. The Hague follows Amsterdam at 154 and Eindhoven at 176. The Netherlands also ranks number 5 for startups in Western Europe.
Neelie Kroes founded Startup Delta to unite the Dutch startup ecosystem in one connected hub, removing barriers and improving access to talent, capital, networks, knowledge and markets. According to research conducted at more than 60 locations in Amsterdam, Startup Delta initiatives directly contribute to supporting the startup culture and growth across the country.
The StartupBlink Global Startup Ecosystem Map shows a sample of 1283 startups, 12 accelerators, 40 co-working spaces, 15 organizations and 3 leaders in The Netherlands. The StartupBlink 2022 Startup Ecosystem Rating Report measures each ecosystem with key criteria of quantity, quality and business environment. The total score is calculated on a comparative basis. The report rates ecosystems and provides insight into the gaps between these ecosystems. Investments in startup companies in the Netherlands grew nearly fourfold between 2020 and 2021, reaching their highest value in the last few years.
In 2019, there were over 4,000 startups in the Netherlands. Nearly 700 of these startups were active in enterprise software. 490 companies were involved in the health industry. The Netherlands is an ideal place to locate for Fintech and Energy startups. There is a sample of 431 Fintech startups, 361 Energy startups and 335 Marketing startups in The Netherlands.
Incubation Centers in the Netherlands
When realizing a project or business idea, entrepreneurs face numerous problems in different subjects such as legal, economic, technological, etc. It is challenging for entrepreneurs to cope with these problems alone and to establish and successfully maintain their companies. However, successful entrepreneurs who find solutions to significant issues in our lives are also contributing to the national economy. Recognizing this critical economic and social contribution, public and private organizations have started to solve the problems of entrepreneurs in different processes and support entrepreneurs in many ways by establishing pre-incubation centers, incubation centers and acceleration programs. The main feature that distinguishes pre-incubator, incubator and post-incubator (accelerator) from each other is that they are suitable for entrepreneurs in different processes.
Pre-incubation involves startups that start working alone or with a team, usually applying a technology-focused business idea or project but not yet incorporated to bring that idea to life. Entrepreneurs in the pre-incubation stage need special training, mentoring and consultancy services to understand whether their ideas are feasible, commercialized and scalable. Pre-incubation centers provide entrepreneurs at this stage with physical spaces such as open offices and co-working spaces.
Entrepreneurs create an accurate and applicable business plan by clarifying their ideas with the support they receive from pre-incubation centers. At this stage, the number of entrepreneurs who move on to another, more viable business idea benefiting from the knowledge and experience of mentors and advisors is relatively high.
The important thing in the pre-incubation phase is to build a team that can do the job and make the right business plan to save money. At the end of the pre-incubation process, entrepreneurs are ready for incorporation with a detailed business plan. The next stage is the incubation process.
At the end of the pre-incubation phase, the entrepreneurs who complete the business plan and are ready for incorporation move on to the incubation phase. Entrepreneurs in the incubation stage continue to need physical space, training, consultancy and mentoring services as in the pre-incubation period. Incubation centers meet these needs of entrepreneurs.
In the incubation phase, entrepreneurs establish their companies and produce their minimum viable products. Incubation centers provide technical support to entrepreneurs in terms of product development. After product development, one of the most challenging stages, commercialization of the product, begins. The main reason why this stage is problematic is that commercialization efforts are costly. Due to the costs incurred, the financing needs of the companies increase, and the entrepreneurs need to find new supports. This process proceeds differently depending on the sector of entrepreneurs are in or the product they are developing. For example, licenses and certificates create severe costs for entrepreneurs providing services in the field of health.
It is easier for startups to receive investment from angel investors and venture capital funds during the incubation period compared to pre-incubation. Incubation centers organize meetings and demo days for companies to be visible, find investment, and support companies in investor search processes.
It is believed that startups significantly contribute to the Dutch economy and employment. This is why many incubators in the Netherlands offer services to entrepreneurs. Big cities with universities also provide a lot of support for innovation. Many factors determine success in establishing and operating incubators. However, the role and support of stakeholders is a critical factor in the successful establishment and operation of an incubator. Key stakeholders such as partners, connections, networks and service providers directly contribute to an incubator’s success if they are well implemented.
Public institutions generally establish incubation centers, companies that want to advise startups, and educational institutions. Many startups also come directly from school and discover a gap in the market during their training. These entrepreneurs create jobs and innovation relatively quickly. That’s why local governments like to cooperate with these entrepreneurs. A real incubator’s income mostly comes from government subsidies or education subsidies. These Incubators are usually located in business parks where the government is willing to invest.
For example, the Dutch incubators YES!Delft and New Energy Docks work with subsidies from the government, universities and companies. BViT, on the other hand, earns a small portion of its income from subsidies and consulting work, while the bulk is from startups. They buy shares in a startup in exchange for bringing in investors or customers.
The first step when establishing an incubation center is a fully equipped business area. Incubators buy a building and divide it into several small workspaces. Thus, multiple entrepreneurs share unit costs. As the center grows, it expands by adding new spaces. Office space in incubators is usually fully furnished. Cleaning, security, internet and heating services, as well as cafeteria and meeting rooms, are provided. Sometimes plants, phones and computers are also included in these services. It is advantageous for entrepreneurs to rent an incubation center where they can focus on their own business using this readily available infrastructure.
Funding sources, company and industry partnerships, university cooperation, connections with government agencies, and networking activities play an essential role in creating a good ecosystem for the incubator. Incubation centers offer attractive advantages to entrepreneurs with a wide network of advisors and workshops. The network of angel investors, venture capitalists, associations, corporate forums, and investment arms an incubator provides ease the accessibility problem for startups.
In addition to these connections and partnerships, an incubator provides secretarial, legal and audit support to startups. It incorporates professional legal, accounting, secretarial, business modelling, strategic planning, sales and marketing, finance, human resources, tax consulting and other service providers. By joining this network, the entrepreneur can consult service providers with international experience, find investors or look for partners.
An incubator aims to remove barriers to the growth and development of young companies and create a safer environment for them. The support and guidance service offered to entrepreneurs during the establishment phase is very important for the continuity of the companies. An incubator is asked to increase the success rate of new entrepreneurs to 100 per cent. In practice, however, if one in ten companies participating in an incubator succeeds, the incubators consider it a success. According to the research, while the chance of survival of newly established regular companies within three years is 50%, this rate is 85% for businesses in incubation centers.
Key Organizations and Initiatives
Social Enterprise NL increases the visibility of social entrepreneurs. Supports entrepreneurs by providing advice and assistance through its affiliate program. It creates a community of like-minded people who support each other.
The 28 selected entrepreneurs participate in a two-month entrepreneurship program that includes workshops, e-learning modules and coaching sessions.
Participants campaign to collect as many votes as possible from Amsterdam residents. The jury and Amsterdam residents choose the prize winners of €2,500, €5,000 and €7,500 in the digital final.
The aim of the event is to introduce people to the innovative world of social enterprises and show them the possibilities of social entrepreneurship.
PhD students, researchers, and entrepreneurs can start their IT startups in the UtrechtInc incubator at the Utrecht Science Park. Founded in 2019, UtrechtInc ranks among the top 10 university-affiliated incubators in the world. To date, the center has supported 301 startups. 70 per cent of the supported startups are still active at the end of the 5th year. The investment amount attracted to the businesses supported by the incubation center, which generated 318 million Euros in revenue in 2021, is 3.3 billion Euros.
Utrecht Inc. It focuses on innovative IT initiatives with a predominant focus on Health, Climate and Learning. The guidance process consists of a three-month program focusing on coaching, interviewing, financing, education and housing. Entrepreneurs start an accelerated Pressure Cooker program here and work intensively with experts throughout the program. They get support from their mentors for extra guidance. Entrepreneurs can take various training courses such as ‘Cold Calling’, ‘Customer Development’, ‘Agile Management’, ‘How to Pitch’, and access different events and facilities. At biweekly meetups, entrepreneurs present their progress and exchange advice. Entrepreneurs are encouraged to talk to as many customers as possible during this period. The community offers a rich network and motivation for fast progress. Entrepreneurs focus on their commercial business without engaging in secondary office work.
Startups work with the media relations department of the incubator for free promotion and receive critical information about entrepreneurship. After the 3-month program, the License2Build event is organized. Entrepreneurs present their business models to an advisory committee to earn good credit. The advisory board and the community decide to grant a startup capital of €18,000. If the venture gets the loan, it is used for a follow-up program focused on growth and market entry.
The amount of repayment depends on the success of the enterprise. If the company has sufficient turnover, the amount is repaid up to 2.5 times. The loan must be repaid after five years at the latest. Repayment starts after two years. The higher the turnover, the higher the refund. The same applies in reverse. If the startup fails and bankruptcy occurs, there is no need to repay the loan. In this way, the entrepreneurial risk is shared. In addition to this initial capital, startup can borrow €50,000 through the Rabo Pre-seed Fund. This loan is also not dependent on individuals and has a flexible term.
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