Recently I visited San Francisco and Silicon Valley with the Director of StartupDelta, Sigrid Johannisse and part of my team. Our goal was to strengthen the connections between StartupDelta, Europe’s West coast for startups, and the Valley.
It definitely wasn’t my first visit, because my grandchildren live over there. But also in my former role of Vice-president for the Digital Agenda in the European Commission I was in close contact with all the mayor IT players. The internet is a global business and all the large IT corporates are based over there. A fact no one can deny. They need us, as much as we need them.
Perhaps it was one of the most effective visits of its kind. This tells you probably something about the readiness to do business from both sides.
From the StartupDelta team we went over there with clear goals: Putting the Netherlands firmly on the map as one of the most competitive ecosystems within Europe; rolling out the Orange Carpet for US startups ready to conquer the European market and use the Netherlands as the innovation gateway. And last but not least, develop investment opportunities for Dutch startups and scale-ups, and build connections between organisations.
For several reasons we noticed there is a growing interest in what Europe has to offer. To be honest; Europe can provide a good alternative to the bubble-effects of Silicon Valley and San Francisco. To name a few: the increasing quality, ambition level of our startups and availability of affordable talent and workspace makes us attractive. Talent in the Valley has become scarce and over expensive, including the living costs. As a beginning employee you will earn a nice $150.000, but your rent of a one-bedroom apartment can exceed $5000 a month. A signing bonus, even before you get started, could be $500.000 just to get you in. This is why US companies are now considering Europe as a place for R&D operations (and not only head offices or marketing and sales) and that is the moment for the Netherlands to step in pro-actively. Both the UK and Germany have visited on the highest political level to present their business case. And I am positive we will do the same soon.
We also noticed that the Valley is moving from a focus on just software to integration with vertical technologies and clearly aiming to tackle societal challenges as a business opportunity. The big IT-platforms are moving on and looking for new opportunities. Healthcare, fintech, mobility, you name it. However, you cannot develop everything within the same limited geographical area called Silicon Valley. The European research agenda H2020 has defined the same areas. A huge prospect for Europe to profile itself much stronger in these fields and become the frontrunners in areas where we have our natural strengths!
And not only that. At this moment within Europe we are working on groundbreaking technologies, which will make the difference in the future. From integrated photonics, to graphene, to nano electronics and quantum computing. The Netherlands holds strong positions in many of these tech fields and we should share this story with the world and look for excellent partnerships. Be good and tell it! This again is a huge opportunity for Europe to make the difference. We need to invest in these technologies and explore market opportunities at the same time. Scientific research and applications go hand in hand, also in Europe, and startups and scale-ups hold the key to this. The valuation of European startups and scale-ups is relatively low compared to the US, so another good reason for investing into EU based companies. The EU and the US have a lot to offer each other.
During our journey we were also confronted with the terrible and devastating drought in the Valley. When we look at societal challenges nowadays, such as climate change, water management, aging, congestion, we are facing issues, which are almost unreasonably large. These cannot be managed anymore by normal –reasonable- solutions or normal scale operations. We need to tap into this ground breaking potential of new technologies and new idea generators.
We need unreasonable solutions, to solve unreasonable problems by unreasonable innovators! From both sides of the Atlantic we have brilliant minds we should foster and who can provide these solutions.
We also have our clear differences, when thinking of privacy and Safe Harbor regulation. The US and the EU clearly have to resolve this in a manner which is 21st century both in technological reality and the fundamental rights of its users. As soon as possible. Because trust is key to the future of the internet.
Why am I committed so strongly to startups and scale-ups? Recently Sherry Coutu proved that scale-ups generate 3 times as much jobs as corporates. Marianna Mazzucato has made clear that the proactive role of government is key to the success of Silicon Valley. This would be my key-message for the Dutch EU-presidency in 2016. Our agenda should be based on the fact that Europe wants to become an innovation leader, instead of a follower. The opportunity is there, if we work on our mind-set, intensify cooperation and increase public-private investments in R&D, dare to excel and have a focus on the potential of scaleups in making this difference.
Why do I keep mentioning Europe, when I am actually the Dutch Special Envoy for startups and working on strengthening our StartupDelta ecosystem? Because for the Netherlands our biggest asset is our European Single Market, especially the Digital Single Market with 500 million users and customers. A startup in the Netherlands has to think and act global to become a scale-up, because our local market is just to small. It is the scale-up that creates the jobs and changes business models. Too often I see them looking at the US to realise the potential because of funding or the mindset. We have to provide them with solid ground to flourish in Europe.
Silicon Valley has not much to do with just Silicon. It is more of a mindset which coincides with the qualities of the internet. They mutually reinforce each other. A very fruitful match. It is a mindset of wanting to move forward rapidly and change the world with new concepts for societal challenges and business models. Being at the forefront of developments is key, but also the open minded attitude to one another. When you meet people you quickly learn how important it is to present your ‘unique selling point’ in five minutes. A meeting doesn’t need to take an hour, preferably not. People are tremendously curious about what the other has to offer and share key information. People ask positive questions and are encouraging initiative. You will never hear cynical remarks about what you are doing, or people finding reasons why something cannot work. It is all about making things possible and helping each other to do so. They use their time to help and improve each other and in this way creating the strongest and most growth reinforcing ecosystem. It is about opening networks and information to each other with the speed of light.
The mind set is also about a love for taking risks and rewarding people to do so. Only then you can make a difference. Failing is seen as valuable experience. A founder who hasn’t failed, has no track record.
It is this attitude which companies and investors are looking for most. And then it doesn’t matter if you’re European or homegrown North American. Fiscal incentives, subsidies, excellent conditions around infrastructure are important to look at Europe, but even more so the eager and ambitious attitude of people in a country. Investors care less about the product of your startup, but more who you are as a founder. Do you have stamina; are you focused and do you want to be at the top globally? We do not want to copy Silicon Valley, which is pointless, but we can definitely learn a lot from their mindset.
We spoke to inspirational leaders such as Marc Andreessen from Andreessen & Horowitz. Also to NEA and Index ventures. They all thought the StartupDelta concept of rolling out the Dutch Orange Carpet for their scale-ups in Europe was a great idea. So we will work on this together with the NFIA. And they were impressed by our initiative to launch an EU-startup visa under the Dutch EU presidency in 2016.
They also made clear that there was no capital problem in Europe. Because of the quantity of start-ups, global competition is strong and only the best get there. I do, however see a difference: it is relatively easy to get 5 million in the Valley being a challenging startup. This is less obvious in the Netherlands. Also when you need bigger rounds of investments to scale up, it is very difficult to find European VC’s to invest. We still tend to follow the size of the country sometimes, when doing business. Both as a startup, as well as an investor. Time to think and act big!
NEA also mentioned as an idea that the Netherlands could take the Canadian C100 as an example: identify the best Dutch startups and scale-ups with global potential and attract attention of investors and networks. To speed up growth. We are going to take up on that idea. We have some awesome startups, which are well known over there: Adyen, Dezima Pharma, Mendix, HackerOne, Shapeways, GitLab, Elastic Search etc etc. “Be good and tell it!”, was their advice. The Dutch are far too modest, unlike the UK. Role models, role models and again role models, make the difference both in the Netherlands and abroad.
We had a meeting with Salesforce at board level. They are going to expand their activities for startups in the Netherlands. Something we will tell more about very soon. Google, PaloAlto Networks, Yaunt suggested to organise internships for Dutch students. Because of this enthusiastic proposal by them, the Dutch consulate in San Francisco is going to pick up on this. A great opportunity for students to get experience in The Valley during their study and develop a network. A day later Salesforce announced $100 million venture investment for European startups to participate in cloud technological development.
The fastest growing, next generation cyber security company, Palo Alto Networks, also offered to create an incubator for Dutch startups and help to develop ‘up to date’ curricula within higher education for cyber matters in the Netherlands. We will work together with The Hague Security Delta to make this work. Perhaps Dutch companies could do the same and we could organise and interchange between students. A type of internship AirBNB, so to say.
We connected Yes!Delft and Utrecht Inc. to Y Combinator, the global top accelerator in the Valley and hope that more Dutch startups like Gitlab can accelerate over there and grow globally. It is a misunderstanding that staying in the US will mean that the startups will leave the Netherlands. We should see it as an important part of strengthening international connections; speeding up the learning curve and stimulating the feedback loop into the Dutch ecosystem.
We also visited impressive startups, such as Flexport, Planetlabs and Grom and listened to all their experiences and ambitions and offered our assistance in many different ways to further invest in the Netherlands.
Last, but not least I launched a mentoring network in the Dutch consulate in San Francisco. Founders with a Dutch origin and background are willing to help startups who are looking for support in that region. That already is a good example of a positive feedback loop.
The conclusion is simple: if we really are serious about reaching the top, if we want to solve unreasonable global societal challenges, we need to cooperate much stronger, faster and with an open mind towards each other; increase investments with triple digits, dare to excel, take risks and see failure as an advantage. Sharing and joining to create the strongest, most connected startup ecosystem in Europe and providing the gateway to Europe for transatlantic cooperation. The small size of the Netherlands is our biggest asset here! One Single Hub for a kickstart into Europe.
Neelie Kroes & Sigrid Johannisse