I find something very intriguing about members of a royal family working to further the startup scene for a particular country.
In a magnificently frank conversation, I spoke with HRH Prince Constantijn, fourth in line to the throne of the Netherlands, at CES earlier this month. We discussed the Dutch ecosystem, the role of government in stimulating innovation and the challenges the country is facing in helping companies to go from startup to scaleup.
[Editor’s note: This interview has been edited for length and clarity.]
TechCrunch: Why are you here at CES?
HRH Prince Constantijn: I think I can help. I want to continue to build a relationship with the CTA [the Consumer Technology Association, which organizes CES] and help some of these companies by introducing them to corporates.
Some of the companies meet with me just for the selfies. That makes me think, “Maybe cut the crap; I know what you want, so let’s just take the photo and get over it.”
On the whole, I’m here to support companies. In the Netherlands, we have support programs for scaleups or companies that are a bit further along, so a lot of what we do is to build connections, introducing them to founders or investors in the Bay Area, supporting them in as many ways as I can. And [CES] is just one of those outlets.
Why is CES important to the Netherlands in general?
The Netherlands is a small market, and Europe is quite fragmented. The U.S. is an important market. Most companies — depending on the sector — have to go to the U.S. at some point in time. The U.S. is the biggest health market, for example, so for most of those companies, it’s important to get there early and build some relationships. The U.S. is probably the biggest automotive market, too. CES is relevant to us because it is so big and brings together a lot of different industries. Most of the big players are here.
CES is not a bull’s-eye for some of the companies we have, especially the software companies, but there’s such a density of tech companies here that you find relevant contacts are really high. So that’s most important.
You seem to have taken an interest in the Dutch startup ecosystem. Why is that a focus for you?
I used to work in digital policy at the RAND Corporation. Then I joined the European Commission, and from there we started looking at ambassadors for our agenda. Back in 2010, we started developing the first startup manifesto for Europe and built a group of founders, ranging from Skype to Spotify, to show that Europe could actually build some serious tech companies. It just evolved from there, and the government asked me if I would take on this role.
Does the Netherlands have areas where the country particularly stands out?
Yes, I think so. This is a country that wouldn’t exist if it wasn’t for innovation. About a third of the country [was] underwater, and it innovated itself into existence. That is a spirit that’s very much in the country.
The country is very egalitarian, and people will always challenge the status quo. It can be very annoying, you know, you say we want to do something, and it was always going to be a Dutchman who is going to ask, “Why?” And the “why” question is very good for innovation because you always want to challenge the common understanding, try to do something better. Or maybe we are just lazy and we want to do things more efficiently.
There is a basic innovation drive, which I think is also in government. Intrapreneurship is really widely spread. So our challenge is really to build big companies. So people are entrepreneurs because they like independence and autonomy. That’s great for starting companies. But to grow companies, that’s when you lose your independence because then you get an investor on board, and you have to start to build your HR capabilities and all that. Then the hassle starts, and many people don’t want the hassle. They just want to build a company, do something new.
To keep people in the businesses and grow them, we need role models. So companies like Adyen, and some of the others that have grown really big, are the role models for the next generation of entrepreneurs that are actually sticking with it. Taking a growth perspective from the beginning is the way to go.
The capital is now available, and that wasn’t there before. The talent is available. It has become much easier to grow companies into global players.
Actually, if there’s anything that’s a challenge in the Netherlands, it’s that we are slightly over-organized. There’s no real urgency. Urgency drives innovation or at least is a good feeding ground for innovation. In the Netherlands, we have a very low unemployment rate. People can work with larger corporations or the government for very decent salaries. To want to start a business and then go the extra mile, out of just pure personal drive, is a different matter altogether.
If you’re in Silicon Valley, you know that if you don’t make it, you have to leave; the cost of living is too high. That kind of urgency doesn’t exist in the Netherlands. We do feel that only a limited number of entrepreneurs will be aggressive enough to want to go international to actually move their families to the U.S., to grow the companies assertively.
So what’s the ecosystem like in the Netherlands?
The Netherlands has a very innovative old industry. Our agriculture is the second biggest exporter after the U.S. If you look at the productivity per square meter, that’s massive. So there’s a lot of innovation, but it doesn’t disrupt the sector.
You see the same in water production, civil engineering and energy. So what you would want is to have more outsiders coming in, mostly data driven or software driven, to disrupt these existing industries.
The problem is that in a very small, very organized country, these sectors are pretty organized and they don’t allow that kind of innovation to happen. There are innovations happening in the industry, but they do not come in from the outside. That’s a challenge. The universities are also not very keen to disrupt that order. If you want to go further, if you want to go and really connect with these big technology trends in the world, you’d need to disrupt the existing order. And that’s something that we are really trying to do. I think people understand that on a rational level, but emotionally, you know — the vested interests are not too keen to be disrupted, and there is tension there.
You mentioned civil engineering and reclaiming the country from the volatile North Sea. Is that driving innovation at all?
Most startups here are climate startups who are related to the whole idea of climate change, emissions and circularity. Climate is very big in the Dutch startup scene. We don’t see big companies resulting from that yet, but it’s growing. And we’re seeing much more capital going there. Actually, last year, I think one-third of the VC investment went into that [the climate sector]. Most of the job growth was there as well.
I don’t think the ocean is felt as an existential threat to the Netherlands because it’s a much bigger problem. And the solutions are not just Dutch. We can build a few extra dikes, but that’s not what we’re doing here. It is much more about controlling emissions. We have a tire company that creates tires that produce much less microplastic and will have a much longer life, so you’re reducing the pollution and increasing the energy efficiency of cars, for example.
I think the drive is much more intrinsic with the entrepreneurs wanting to do something good. So we’re seeing that our main categories of startups are in climate or in long health. I think you can say that the Dutch entrepreneur overall wants to change the world or do something for the better.
There’s always a pretty strong motivation for impact, which I think is more important than that we believe we are going to be drowning soon.
What is the role of government in stimulating that?
I think it depends on the maturity of your ecosystem. In the beginning, the government can do a lot, for example, in financing. I think that the more mature you get, the less public money you want. You want private money to invest.
I think education obviously is a big thing. Human capital is a big challenge, given that our new industries require new skills, and they’re often understaffed.
We also need the basic fiscal structures to allow investment to happen and to allow ownership shares options to be an integral part of the remuneration packages for employees. And then we need the legal frameworks to allow innovation. That’s not true in some markets.
Innovation is sometimes kept out because of old-fashioned laws. We saw that with the taxis when Uber came in, or when laws are not adjusted to these innovations. So you would want the government to be more agile and to allow these easy innovations to happen. We’re seeing it now in fintech and especially in DeFi, our regulators find it pretty hard to cope. But you want as a government, you want to at least keep an eye out on innovation, not just regulation.
You mentioned blockchains and DeFi; has Holland made specific efforts in that space?
In the 1990s, the Netherlands was a front-runner in the internet, and we are seeing that repeat itself. We have a lot of developers in blockchain and a lot of bottom-up enthusiasm. But from there, it needs to consolidate somehow. You need company formation, investors that believe in it, and after a certain time you need a government that follows up. Then you can really develop a new industry.
What tends to happen is you get all the bottom-up enthusiasm and then at a certain point there’s always the first deceptions with the technology because it’s not going to deliver all the promises. You need to bottom out that first valley, and then you can start the real climb. At that time, you have to have investors that actually believe in it, and then you add the government as well. That’s where we sometimes fail, because then old skeptics say, “You see! It didn’t work!” Then the follow-through doesn’t come, and most of these developers and their companies fail. Then they either join American companies, or they kind of regroup, but really, they miss the crest of the wave, and they end up following.
We’ve seen that, for instance, with companies like Booking.com. There was no investment and then, when the crisis hit, they had to sell out for a hundred million. That was a big deal at the time, but they couldn’t find the Dutch venture capital funding to back them up. Many companies have seen this, and it continues to be a challenge.
I am curious if the seven- to 10-year cycle of venture funds is a challenge when climate change needs both short- and long-term investment. Is there a role for the government there?
I think governments should look 30 years ahead. Some institutions of government do. I think the electoral cycles can be quite disruptive. There’s sometimes a lack of institutional memory, but what you actually want in these situations, is that you want budgets earmarked and set aside, and make sure that budget is guaranteed.
Governments tend to be pretty short-sighted about that because there’s always money there. And they say, “Well, we invested in that and it didn’t work,” or, “Oh, now we’re going to do something else.” We use fiscal instruments to stimulate the use of renewables or the installation of solar panels or wind and then suddenly say, “OK, now we want to do something else.” The market doesn’t forget that. That signals to the market you can’t rely on the government.
So for new development, the market will ask how long they can expect support. If they say, “We’re going to support you for 20 years in terms of positive fiscal treatment,” and you think, “Well, it might just last five years, so in my analysis, I’m going to put in some scenarios where the government is not going to be supportive,” and then you have a problem because the business case might not work out.
Governments should be much more long-term thinking and signal that to the market, and then actually follow through on that.
What are you personally most excited about right now?
I’m excited about the opportunities that arise because we now see the challenges in the world pretty clearly. They’ve become very obvious. I mean, just look at the ski resorts. They’re green! It’s a very sad view. But there’s now no doubt anymore that climate change is a real issue and that we should accelerate our search for solutions. That’s the exciting part: The solutions are actually there! They just have to find the business models and the financing models to be able to execute them at scale. But that’s an exciting part.
So what do you expect the government to do next?
We had our struggles to get the government to engage in things like fiscal matters. I hope to make it much more interesting for wealthy individuals to invest in the startup community. In the U.K., they have a fiscal system where you can basically write off your investments in startups and retain much of the upside if you reinvest in the next [wave of] startups. I think it’s an incredible flywheel and the ultimate result of a working ecosystem is us no longer having stimulation programs anymore. In the U.S., you have this flywheel of entrepreneurs becoming investors and mentoring the next generation and entering new companies. Once you start to see that going, the system starts attracting a lot of private capital, a lot of talent. We are getting there, but we’re not there yet. I think a fiscal incentive like that could be really instrumental in getting that work.
Government writes dumb money checks. And dumb money is good, especially in that later growth phase, and especially if it’s non-dilutive. Governments can be real accelerators. I believe there’s a role for government, but in that early stage, it’s very hard for the government just to give away money. Individuals are willing to do that if it’s financially interesting. In the U.K., something like £200 million a year flows into the system in small investments. It really powers up that first phase of these companies.
Comment