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The city of Amsterdam has always been known for its charming canal houses, tulips in full bloom, intricate canal system, vibrant art scene, beautiful architecture, and welcoming people. However, of late, the city has been gaining recognition for being home to numerous elusive unicorns — Adyen, Elastic, MessageBird, Mollie, among others. 

This has been reiterated by a recent report by Dealroom, according to which, in Europe, Amsterdam ranks #4 by the number of unicorns, with its unicorn tally hitting 12. Also, as per the latest Startup Heatmap Europe report, there were 6 “unicorn” ecosystems in Europe in 2020, and Amsterdam joined the list for the first time since 2014.

The city’s startup ecosystem has also been making quite a splash globally. According to a recent report by Dealroom, Amsterdam’s tech ecosystem hit €100B in value (€187B if you include Booking), making it the third most valuable hub in Europe.

In order to better understand the contributing factors behind this milestone, and figure out what more can be done by the city to achieve the top spots on the list, we caught up with a few key stakeholders of Amsterdam’s startup ecosystem. 

Crossing the century mark

Dealroom reports that Amsterdam’s tech ecosystem has hit €100B in value, compared to €10B in 2015, making it the third most valuable hub in Europe. Darya Krasilnikov, director, Amsterdam Center for Entrepreneurship (ACE), believes that the reason behind the success of the Amsterdam Tech scene is the accessibility of the tech and business talent that allows companies to build stellar teams and accommodate demands of their rapid growth. 

“Amsterdam knowledge institutions attract and train tech talent that is competitive on a global scale. This strong educational foundation is reinforced by entrepreneurial experience acquired through ACE, allowing students and researchers to build startups or work on tech challenges from leading companies. The city’s continued support will help this system flourish and scale,” she adds.

According to Reinder Lubbers, founding partner, No Such Ventures, “Amsterdam caters startups by being a compact city with good infrastructure. Biking from one side to the other takes less than an hour, whilst our train stations and airports provide connections to anywhere in the world. English is our second language and the Dutch provide a subsidy- and tax-friendly environment with a relatively low amount of “red tape”.”

Third most attractive city in Europe to start a company in 2020

According to the latest Startup Heatmap Europe report, Amsterdam was the third most attractive city in Europe to start a company in 2020. In 2019, the city was in the 5th position. This is based on a survey that reveals the Top 50 cities where founders would like to start a company if they could choose freely. 

Silicon Canals reached out to some Amsterdam-based founders to understand their perspective. According to Jeroen Ten Haave, CEO of Roamler, “The ecosystem in Amsterdam has improved significantly over the last years. VC’s became more active and professionalised (sometimes pushed due to VC’s coming from overseas), successes of others have been a big inspiration for start-ups to invest in growth and to think big.”

“Besides that, Amsterdam is an attractive city for people from abroad to live in. This gives access to a larger group of talent and at the same time makes start-ups think internationally from the start,” he further adds.

Dr. Els van der Helm, co-founder and CEO of Shleep, exclaims, “Amsterdam is a city with a very high quality of life – we Dutchies know how to work hard play, play hard and still get enough rest.”

Amsterdam – the emerging unicorn hub

As per Dealroom, in Europe, Amsterdam ranks #4 by the number of unicorns, with its unicorn tally hitting 12. Also, the latest Startup Heatmap Europe report reveals that there were six “unicorn” ecosystems in Europe in 2020, and Amsterdam joined the list for the first time since 2014. So, what are the key factors that are enabling the city to churn out so many unicorns?

Lubbers believes that Amsterdam provides fertile ground for starting a business. “Dutchies tend to have a “borderless” mindset, implying that entrepreneurs start looking outside the Netherlands relatively fast as the country itself is too small to build a unicorn business. Also, Amsterdam scores high on its ability to attract international talent because of favourable living conditions and attractive income tax rulings. Lastly, Dutchies think open-minded and are direct, which both improve innovation and speed.”

Krasilnikov is of the opinion that, in addition to the talent accessibility, Amsterdam offers a vibrant community of successful founders, top investors, leading startup experts in various domains that constitute a stimulating network. Such supportive network allows companies to scale fast and expand to global markets.

Lucien Burm, chairman of the board of the Dutch Startup Association and founder of Amsterdam-based 10X, explains how the Amsterdam startup ecosystem has evolved over the years. “Traditionally, Amsterdam has been a startup hub for years. Especially, during and after the financial crisis of 2008, a new wave of startups flocked to Amsterdam, including the first accelerators, etc. In the next 10 years or so some of them had come to full fruition. Some of them being founded by second-time founders also helped, another key element for success in startup ecosystems. Startup Delta’s arrival, Techleap.nl predecessor, was well-timed to provide some tail wind, by helping to scale internationally and by connecting all the emerging hubs of the Netherlands together as a potent ecosystem.”

Talking about why the city is fast emerging as a unicorn hub, Burm opines, “The startup ecosystem in Amsterdam is very strong and focuses on collaboration. Founders are very keen on helping others, accelerators are very well connected and as Amsterdam is very centrally located, it is a convenient hub for upcoming unicorns to set up with their teams. Also, Amsterdam functions as the capital of The Netherlands when it comes to the startup ecosystem, for many companies there is the urge to be located there, which allows them to be part of the local network and meet with investors and VC’s in a very low key environment. This helps accelerate companies. Also the influence of TechLeap (former StartupDelta) to help startups grow into scaleups with unicorn potential shouldn’t be underestimated.”

“Unicorns make Unicorns,” says Ten Haave. He believes that, in general, more capital and talent come to cities that have launched Unicorns. “Further these Unicorns have people on their teams that experienced the journey of building a Unicorn. So, they launch own companies or can be of help for other businesses trying to achieve the same. Based on this my thoughts are that Amsterdam will see more Unicorns in the coming years.”

Low number of future unicorns

Although, currently, Amsterdam has an impressive unicorn population, its future unicorn tally is quite low. The Dealroom report suggests that the visible unicorn pipeline is a little thinner for Amsterdam. In terms of the number of future unicorns (companies valued over €200M but less than €800M), Amsterdam ranks “only” joint sixth of European hubs (with eight future unicorns), when London, Paris, and Belin have 81, 38, and 30 future unicorns, respectively. 

“Other cities benefit from better tax regulations and encourage investments, in The Netherlands startups and scaleups in general are not (yet) a priority in economic policies. When scaleups have unicorn potential, it is very likely they receive funding from abroad and the step to move there where the money flows is made often. Keeping startups and scaleups here in The Netherlands/Amsterdam is where opportunity lies,” opines Burm. 

According to Lubbers, there’s a bit of an “absolute value bias” here, with the relative number of future unicorns per inhabitant or per active business being more in line across these cities. However, he believes Amsterdam can work on stimulating entrepreneurship at universities, improving conversion from startup to scale-up by creating more diverse and inclusive communities, bundling skills and by making sure that the companies are better found by VCs, preferably Dutch ones, so that the proceeds of potential successes, trickle back down into the Dutch ecosystem. 

“Furthermore, the downside of the vibrant international Amsterdam scene is that startups can move away relatively easily when going for a US or globally renown accelerator program,” he adds. 

Krasilnikov, however, believes that Amsterdam is on the right track. “Rome wasn’t built in one day; it requires a significant amount of time for the ecosystem to mature and churn greater numbers of global market leaders. For example, ACE is only 8 years old. I believe Amsterdam is on the right track to become one of leading unicorn hubs in the future.”  

Low domestic participation in funding rounds

The Dealroom report also highlighted that 2020 witnessed very low domestic participation in funding rounds, as a number of megarounds were dominated by international investors. 

Talking about the low domestic participation, Burm says, “In part this shows the need to make investing in Dutch startups and scale-ups more attractive. For seed and angel stage but also in larger rounds. So creating fiscal measures that make that possible ought to be a priority for any incoming Government.This will stimulate more investment in The Netherlands, leaving potential to grow within our own boundaries.”

Lubbers believes there are two things at play. Firstly, be believes entrepreneurs sometimes do have the tendency to go for a “renown” VC name, as that looks good in the press and in their pitch decks, causing instant global brand awareness. “A bit of “ego stroking” at play, perhaps. However, having an international investor who barely has time for you as you’re relatively insignificant to them, and the international exposure you might gain at the funding announcement, might not be worth that much. They might be a better fit at the next funding round.” 

Secondly, he avers that there needs to be more domestic VCs that can fund larger tickets. VCs need to be able to connect with more investors, raising more capital for the right investments.

What more can be done

Talking about what more can be done by the city to achieve the top spot on the list and overtake key hubs such London and Berlin, Lubbers says, “To continuously improve ourselves as “startup city Amsterdam”, we can further stimulate vibrant and multi-disciplinary communities through making available workspace, knowledge, and coaching,”

“The government could also improve our lagging stock option tax regime, which currently makes it harder to make employees shareholders and ii) help VCs increase their funding power, by lowering their increasing administrative burden,” he explains.

Moreover, he believes, “we can adopt the American “failing is learning” attitude even more, as going bankrupt or having a bad idea still is a bit of a “taboo” in this country. Also in our political system, whereby politicians are punished for making a mistake, not celebrated for successes, making them operate slow and very prudent, the very thing that value-creating startups do 180 degrees differently.”

Talking about the Dutch startup ecosystem as a whole, Burm  says, “Nationally we need to ensure the right policies are in place to stimulate growing the Dutch tech ecosystem of which Amsterdam is a key component.”

Burm also shares some key advises that the Dutch Startup Association offers the Dutch government: 

1. Making investing in startups and scale-ups fiscally more attractive like in the UK and Germany. “For example income tax relief when investing in innovative companies but also postponement of income tax when reinvesting. We believe that investing in startups could and should be so much easier.”

2. Ensuring share options for employees are worthwhile: so an internationally competitive share option policy like in Israel or the UK where there are tax exemptions for a part of the options when they are sold or vest.

3. Schooling more people in digital skills: most off all through programming schools and getting these recognised by the Dutch government. Broadens the opportunity and makes economic sense.

4. Putting concrete action in place on diversity and inclusion.  “For example D&I targets in Government tenders and in financing by Government.”

Ten Haave is of the opinion that affordable housing will be key for Amstersdam to attract more founders to start their companies in the city. “Young people need to be able to live in the city at affordable prices. Amsterdam is an international city which makes it easy for European citizens to move to Amsterdam because they will integrate and feel at home quite easily. But with pressure on availability of affordable places to live this might change and become a challenge. Maybe create and promote “big Amsterdam” as a lot of Cities are within 20 minutes of travelling distance.”