Season #1 of the Scale Lab featured 12 top founders with extremely inspiring stories and lots of crucial learnings that we’re excited to have shared with our audience. While we work hard on releasing season #2 of our podcast, our hosts Constantijn & Joe have reflected on their 2021 podcast learnings by looking back at their conversations with the scale icons from season #1. Alongside this, they also pinpointed what ‘delights’ and ‘frustrates’ them within the current state of things in the Dutch ecosystem.

What will we talk about?

Constantijn [00:00:36]: In this special 2021 wrap-up episode, I think it would make sense for us to touch upon some of the best insights we’ve gathered throughout the last 13 episodes and spice them up with our own reflections. We obviously both have been very active this year with identifying some of the key issues faced by Dutch founders that we can support the community with, so we’d like to share them in this episode. We covered a variety of topics within our discussions – we talked about investment strategies, operations, hiring strategies, product-market fit, leadership, etc. Also, we reflected on what’s typical in the Dutch ecosystem. And maybe we can start there actually. You are an embedded American in the Netherlands. You have seen quite a lot in how entrepreneurialism in the Dutch tech scene is evolving. Maybe you can give us some of your high-level reflections on that?

Joe [00:02:33] After over 18 months of in-depth work with Rise companies and with Techleap.nl in general, I’d say I’ve got three or four areas of big frustrations and two or three of pure delight. And I’m not trying to be nice. I’m just saying I don’t feel like I have to balance it, but that is true. So I will start with the frustrations, not the delight. 

Joe’s ‘frustrations’ about the state of things in the Dutch tech ecosystem: frustration #1 – Ambition level

So one of the things that, I’d say, is bugging me and I don’t know the navigation around it is the concept of ambition in this country. I have a couple of flavours to that. One is I meet too many entrepreneurs who are afraid to think: ‘Oh, this is going to be a big thing. It’s going to be global. It’s going to be a multibillion-dollar enterprise’. They’re afraid. They almost think it’s ridiculous to consider that as an outcome, and I’m not sure what drives that. But in parallel to that, I run into people, such as some of our guests, who are criticised and yet they go out and they build something incredible.

Constantijn [00:03:56] In a way success is being discounted.

Joe [00:03:59] Yes, in a way, Dutch entrepreneurs are fighting against their own culture when they’re trying to go do something pretty extraordinary. And I don’t know if this is some leftover from days gone by, but maybe I can return this question back to you – what do you think is the source of this?

Constantijn [00:04:22] I think that’s a very fair point. We actually have measured the ambition levels of Dutch entrepreneurs in our research and have seen that they typically tend to be less ambitious than their European counterparts. But we are more entrepreneurial, funnily enough. So we tend to have more startups than other countries, because we tend to favor independence and autonomy – that’s why we become entrepreneurs. Independence is our cultural trait. We are very much on the conceptual side of things. But when it comes to building a whole organisation – the processes around it, etc – we tend to be less interested in that part.

Ambition is part of being an entrepreneur, of getting capital for your business, etc, which means that you need to convince people to invest in you. Having the right people around you is essential, if you get people asking you ‘why are you so greedy’, that won’t particularly help.

That said, all of our podcast guests so far have been very low-key & humble, they came to the studio on their bikes, and you wouldn’t have said that they are super successful entrepreneurs unless you knew it.

So another side to the coin is that a lot of Dutch entrepreneurs prefer to stay under the radar and build their businesses, instead of being placed on the pedestal

Frustration #2: No organic connection between Dutch entrepreneurs

Joe [00:07:58] The second frustration of mine relates to the organic connection of founders not happening in the Netherlands. When compared to the US, we see that American founders tend to connect with each other organically. So the question is why do we have a third party like Techleap.nl that connects entrepreneurs with each other? Why don’t they just reach out to each other and get together naturally – say every other Tuesday night to discuss what it takes to get through different businesses phases?

Constantijn [00:08:54] I think this is one of my frustrations too. It’s not just about getting together locally, which is obviously the easy thing to do but also reaching out to people within the same sector on an (inter)national level.

While we do not know the exact reasons why there is a lack of interest in organic connection/networking, we do know that the ecosystems that have well-connected entrepreneurs benefit from it a lot.

Maybe it’s somewhat odd that Techleap.nl is driving the idea of establishing a founder community since it’s founders who ideally should be in charge of that. Nonetheless, we are strong believers that learning within an engaged community is much faster and more efficient. However, it’s not to say that no one within the Dutch ecosystem organises dinners and founder-focused events – that’s untrue. We don’t want to be completely critical here, as there are proactive people with a lot of initiative out there.

Frustration #3: It’s too complicated to be an investor and too conservative to be a founder

Joe [00:11:05]: I think from a money perspective, it seems to be both too complicated to be an investor as well as it seems to be too conservative to be a founder – you’re negotiating valuations & your round in a twice more complicated way than you’d need to – when compared to US or Israel. They’ve found their way to simplification at least within the early rounds. Investors at the same time try to push the valuations down, so there is almost a combative situation there between investors and founders. Just to give an example without giving any names, there have been at least 5-6 companies in the last 6 months who were hesitant to raise money in the Netherlands. They much want to go for UK & US investors because – 1) they will get better valuations; 2) they’ll be getting more money continuously, round after round; 3) they think they will get a fairer deal. While the first 2 are accurate, for the third one – I am not so sure if it’s fairer or less fair. But there is a specific perception there that Dutch VC are making it too hard to raise money in the Netherlands.

Constantijn [00:12:42]: Agree. I also think it has to do with maturity and supply & demand –  demand for capital & limited supply. Also, there is a lot of competition from funds & VCs outside the Netherlands, which will drive better service & terms of getting investments in the long term. What we hear a lot is that investors want a lot of control. Data shows that early rounds are relatively small, though the volume of investments has been continuously rising. Therefore, the largest share of the money is being raised in the later stages. A lot of the founders are made to be looking beyond their local investors. The limited supply of investors in some parts of the country and the terms applied have created an environment where people feel that venture capital is a bad thing. So they will shy away from even having capital conversations because they don’t want to give away control. They know that investors want board seats in the company instead of supporting founders. However, I don’t want to generalise here, as I also don’t know the situation in other countries. I assume a lot of this stuff is out there in other countries as well.

One thing is clear – we need to identify those practices that you do not want to experience – both as an investor and a founder. I remember during our podcast with Pieter van der Does, he said that the terms are more important than the money. You have to enter into a good relationship with your investor and know that you’re aligned on the shared purpose, otherwise, it will cause a lot of stress. We saw founders that were unhappy with the investors’ terms but still went for it for the money without thinking about the consequences and the next rounds that they are going to raise. I really do think that more learning is needed from the founders’ side and more responsibility from the investors’ side.

Joe [00:16:44] I think founders need to be smarter about it. You cannot just go into your series A without knowing your investment bread and butter. There is a lot of information online, just go to the Y Combinator website and you’ll get insights from A-Z, such as signing safe agreements, valuations, etc.

Constantijn [00:17:08] Absolutely! But a lot of that knowledge comes from experience. ‘You own your board’ is what a lot of our podcast guests, who are the more experienced entrepreneurs, would say.

Joe’s three ‘delights’ about the Dutch tech ecosystem: Delight #1 – Infinite source of good ideas

Joe [00:17:33]: There is almost an infinite source of good ideas. We’ve got a deeptech sector, a bio, sustainability, we got universities supporting those sectors with funding, a remarkable SaaS industry. There are many great sources of ideas, though a lot of that innovation cannot be capitalised on.

Delight #2: The number of very capable Dutch leaders

Joe [00:19:00] The second delight I have – I am suprised by the number of remarkable leaders that I meet. There is a lot of leaders in the Netherlands who are able to lead their companies to impressive growth. There is a natural democratic approach to running a company, a more modern approach to leadership. It seems to be a Dutch way of seeing the potential in your team and letting everyone do their job in the best way possible. There is also operational expertise in most entrepreneurs I meet, which means that they can look down at the operations they run and adjust the process when necessary.

Delight #3: The product-driven approach to business

Lastly, a great delight is that most of the founders in the Netherlands tend to be product-driven first, as opposed to adopting an ‘oh, it’s a great business idea, let’s make a businessy thing and put tech underneath it’ – kind of approach. Those are the leadership traits that I think a lot of companies would like to have.

Constantijn [00:20:42] We also recently discussed the techiness of founders, seems that you can find that more in the US or Israeli entrepreneurs. Meantime, here in the Netherlands a lot of the founders seem to have a more business background.

Joe [00:21:11] Looking at all our past podcast guests, we see that a lot of founders with breakthrough businesses tend to be technology-driven.

Constantijn [00:21:46] Technology-driven but not coders themselves.

Joe [00:21:49] Definition of tech has changed a lot in the past years though, it’s not all about coding anymore. It’s more about the appreciation and understanding of the technology itself. Take Pieter van der Does as an example, he doesn’t code himself, but he is so focused on the role the technology plays at Adyen. And so are all the other guests that joined our podcast – they are all basing their businesses on strong technology.

Constantijn [00:23:25] We have a lot of these discussions at Techleap.nl as well – how much tech does a company actually need to be considered tech-driven?  What criteria should you apply to measure that? We see more often that it’s becoming more challenging to qualify what’s a tech company. If you apply tech logic to creating the best vegetable-based pizza (referring to Manon van Essen episode), why wouldn’t you be considered part of our tech community? That said, can you maybe elaborate on how founders can get their tech right?

Joe [00:26:47] Throughout my journey as an entrepreneur-in-residence at Techleap.nl, I got to talk with a lot of different companies. And step by step, I got to differentiate a variety of founder archetypes – the ones who’re going to build the minimum tech to be able to secure the company, as opposed to the ones focused specifically on building the greatest product possible. I think we underinvest too often in technology. I believe that if you don’t have 50% of your staff focused on product building and developing the best technology, you’re missing out. So that’s partially an answer to how you can get it right.

Constantijn [00:28:14] In this podcast we talk a lot about ‘momentum vs. precision’, and all of our guests so far have chosen ‘momentum’. What are your thoughts on that – is it really an unequivocal decision?

Joe [00:28:55]The choice of ‘momentum’ over ‘precision’ seems a consistent one with all the guests of our podcast. Not sure if it’s a firm belief or if it’s nostalgia speaking, as in ‘when looking back, we always went for ‘momentum’. In any case, I don’t think there is perfection with any product. You’re always taking a chance you’ll never know. All those wonderful success stories we’ve heard so far have 3 pieces to them:

  • A product-focused organisation;
  • Enough capital (fuel) to get there;
  • And they all seem to hit that window of timing;

So I assume that you at least want to de-risk the timing problem. And the best way to do that is by being a product-focused company.

What other ‘delights’ are there to highlight? Listen to the full episode

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