Startup Hubs Around the World: Amsterdam
The sudden emergence of Amsterdam onto the tech startup scene caught many people off guard. With a population just under 1 million people, the (relatively) small city never indicated that it was quietly garnering the tools to launch an attack on the startup market. Suddenly, however, the city erupted onto the global market and is continuing to innovate while the world watches.
To determine how Amsterdam developed into a contender in the startup market, we’ll explore 1) the location, 2) the tax incentives of the city, 3) legal incentives, 4) investors, 5) local resources, 6) Amsterdam’s specialization, and 7) startups to watch.
Amsterdam is the Netherlands’ capital, and is their most populated city. With the population hovering around 1 million people, it experiences an international culture through its transient population and its proximity to a port. Established in the early 1300s, Amsterdam has a rich, historical culture yet has remained current as the financial center of the Netherlands.
The city of Amsterdam is located in northern Holland, surrounded on three sides by water. Situated near the North Sea, it is connected by three canals that transverse the city. A system of 90 islands, Amsterdam is sometimes referred to as the ‘Venice of the North’. The islands are connected by a network of over 1200 bridges. People are encouraged to use the recreation areas and enjoy the beauty of Amsterdam, a facet of Amsterdam that will help entrepreneurs briefly escape the pressure of their startup.
The city is served by a seaport, an airport and a system of roads and trams, and is one of the Europe’s leading tourist destinations. There are several parks and recreation centers in the city, and newcomers to the city will be delighted to wander through the historic architecture while heading to the park. A day can be spent wandering through the historic architecture, checking out the local museum or participating in any number of activities that are going on throughout the city. As a smaller city, it is easy to navigate from one end to another without getting too far off course.
Advantages of choosing the city
There is much that draws people to Amsterdam; for entrepreneurs the attraction lies in the benefits the city can offer their company. One of the largest pulls to Amsterdam is their apparent lack of restriction. As a company, having fewer restrictions to manage is beneficial to everyone involved. The lack of strict requirements, the close proximity to Russia, it has many benefits going for the entrepreneur who wants to explore new technologies without fear of reprisal or corruption.
The transient nature of the city can be an advantage – it is easy to scrap an idea that doesn’t perform successfully or needs to be reworked – without much fear or guilt. Chances are good that within a few years, the startup market will have completely been revamped as new ideas and technologies are developed. Entrepreneurs in Amsterdam should look at this as a unique opportunity to explore the business market without much fear of repercussion.
Amsterdam has a surprisingly easy tax structure. The process of starting a business in Amsterdam is simple, with almost story-like descriptions of the process of registering a corporation. Similarly, tax incentives are minimal, but are impressive in their scope.
The 30% ruling affects highly skilled migrants who move to Amsterdam and are wishing to seek work. Offering a 30% tax reimbursement to the employer, who can then offer the reduction to the employee, this tax program is an extra incentive to seek out skilled workers. As an extension of the program, this offers additional resources to the expat who is seeding camaraderie and feedback. Bringing the tax incentive to the corporate level, the employee is able to retain more of their income, without causing additional headache for the corporation.
Finding ways to generate additional tax incentives for entrepreneurs is another opportunity for the government to encourage entrepreneurs. The development of a startup collaboration that works to provide guidance and resources for entrepreneurs could help increase success of startups, as well as offer insight into the tax strategies of the system. Seeking the advice of a trained tax professional is advisable for foreign companies, primarily to overcome any language barrier and potential misunderstandings.
Establishing a company in Amsterdam is a painless process. The government has established a step-by-step guide to setting up a business designed to walk entrepreneurs through the process. Filing for the proper permits and licenses is simple and easy to understand, however it is recommended that you seek legal counsel to ensure that everything is taken care of properly.
Many resources are available at the government’s startup page, including walking through a business plan, how to choose the right business, contacts to the chamber of commerce and more. Using the provided links give entrepreneurs the basics for getting their company off the ground quickly and begin generating income.
There are a few regulations that govern the establishment of a company by foreigners, and the distinction between work permits are details that may change the type and scope of business a foreigner is allowed to have. Nevertheless, the process is easy and simple to navigate.
One angel investor firm, Amsterdam Angels, has a $3 million average valuation. While $3 million is a substantial amount of money, for a startup trying to scale and go global, $3 million may as well be next to nothing. There is a substantial difference in funding amounts between the larger startup hubs and the Netherlands. To generate large scale exits, the companies need large scale investors. It is not a requirement for the investors to live in the city, but it is interesting that of the almost 5,000 members of the fund, only 125 people actually live in Amsterdam.
Amsterdam must begin to attract higher level interest for investors by showcasing the startups that have successfully launched. There is no guarantee that bigger investments mean more big name startups, however, the biggest ‘breaks’ came when they were least expected. By having investors already in place, Amsterdam can be prepared to invest when successful startups are ready to scale their companies or move to the next phase in growth.
Establishing a Hub Zone within the business district, or within an entrepreneur zone would be an excellent way to attract not only startups, but their investors. Creating a centralized location provides a means of quickly and easily finding the resources necessary to grow the startup. Investors seeking to invest would be able to identify the startups, and startups would be able to connect with investors. A centralized location would also serve to establish co-working zones, work share opportunities and other entrepreneur specific benefits that help the entire city.
Since World War II, Amsterdam has been home to over 176 different nationalities – they truly embrace the concept of tolerance. Amsterdam has made a global name for itself in the area of ‘live and let live’ – they have taken steps to reduce racial tension and diversity; a must in a city that has over half of its population claiming immigrant ancestry.
Entrepreneurship education is an area that is lacking in Amsterdam. Courses at the college level that focus on entrepreneurial topics are typically based on outdated methodology and materials. Increasing the number of classes and trainings that are available to entrepreneurs will help attract students to the area of entrepreneurship. One suggestion for increasing organic growth in entrepreneurship is to introduce the concept of startups and economic business earlier – as early as in elementary school classes. By engaging students in the concepts of self-sufficiency, self-reliance and innovation, students are more likely to develop an interest in the startup marketplace. Following up on those initial experiences would be building on the concepts covered by early teachers, and cement them in to their brains. Giving middle school students a bit more leeway in the development of ideas for a startup will again encourage the students to turn towards a tech career in an area where this is not common.
Amsterdam must reinvent itself as a city that is attractive to the creative types necessary to generate excitement and innovation. One writer describes the city’s vibe as “a city filled with Yuppies”. To truly compete on the world stage in the startup market, there must be a distinct drive to attract entrepreneurs. Seeking advice from other cities that have successfully become startup hubs, Amsterdam would be wise to take counsel from cities such as Paris, London or Rio. Embracing the buzz of startups, Amsterdam needs to allow entrepreneurs to create, innovate and inspire themselves – as well as encourage others to do the same.
Housing is another area of concern for the city of Amsterdam. In the last few years, the city has begun to build ‘container blocks’ for students to live in. These containers, stacked on each of each other, have been transformed into apartments and offices. With housing already in a shortage, many claim the city needs to develop a creative hub where entrepreneurs can live. By providing entrepreneurs with low-cost housing, office space and share spots, the city would be encouraging additional workers to become startup techs.
Several startup events are hosted throughout the month: startup weekends, Pitchrs and Hackers and Founders, to name a few. Increasing the number of events specifically geared towards entrepreneurs would increase the understanding of the specific needs of startups, as well as create opportunities for collaboration and connection. Showcasing successful startups would generate interest in the startup market, as well.
At times, Amsterdam seems to be at a disadvantage to other cities seeking to become a startup hub. As a port city, their population is constantly being turned over and startups that reach success typically relocate to a larger city. In some regards, however, this sense of renewal – of reinventing itself every several years – can be an advantage for a city that is seeking to create a new identity. This balance between stability and renewal is especially difficult to navigate when determining what, if any, specialization that Amsterdam startups veer towards. In its present configuration, Amsterdam is embracing the technology market and has been making clear strides to encourage more entrepreneurs to pursue these endeavors.
New and innovative technologies such as 3D printing have made their way to the northern European nation, and Amsterdam has seen an increase in the number of startups based on using the new technology. In addition, new companies have emerged that embrace cloud computing, and the city has welcomed data centers to its corporate culture.
Another specialization area that Amsterdam is developing is in the financial technology (fintech) market. Focusing on the innovations in services and technologies that are geared towards the financial sector, fintech deals with banking processes. By investigating innovations that change the way customers and companies interact with financial processes, fintech offers new tools that impact both the banking industry and the way banks engage with customers.
The diverse city offers a range of startups that can vary in scope from file sharing to music playlists. It should not be surprising that the city which is constantly changing is always adding depth to their startup roster. Perhaps the only thing that should surprise the rest of the tech startup market is that more entrepreneurs have failed to take advantage of the benefits of Amsterdam.
STARTUPS TO WATCH
Squla: A global growing trend has made its way to Amsterdam in the form of Squla – an online, subscription based service that offers educational resources. Designed to supplement the Dutch school program, Squla includes games, videos and quizzes for students to use at home. Currently used by more than 50,000 students, the program uses virtual instruction to deliver content and is partnered with the national testing agency.
3DHubs: Capitalizing on the newest printing technology, 3DHubs is a platform that connects individuals with 3D printers. This localized program matches customer need (material printed in 3D) with resources (the owners who have 3D printers) and is quickly gaining momentum. With over 100,000 printers sold worldwide, the demand for 3D printing technology is increasing and 3DHubs is looking to be on the forefront of the industry.
Silk: Blogging has become a part of the internet experience, and Silk is taking that experience a step further. Similar to other blogging platforms, Silk allows users to build a blog around their interests. Silk, however, has added a data-search function for both writers and readers. Providing users with simple, beautiful designs, Silk makes it easy to share data online with ease. Each Silk is centered on a specific topic, and users create interactive experiences.
SkyNRG: Sustainability and bio-fuel are both part of the growing movement towards a greener planet. SkyNRG is combining the two concepts with their RSB-certified fuels for aircrafts. The only airplane supplier with certified sustainable bio-fuels at every airport in the world, SkyNRG is exploring new technologies and processes to keep air travel safer and cleaner.
Adyen: Fintech markets are growing globally, and Amsterdam has a strong contender in the marketplace with Adyen. Financial transaction processor Adyen processed more than $10 billion in 2012 for Indiegogo, and is on track to handle even more international currency payments this year.
The mysterious city of Amsterdam wants to shed some of its mystique and propel itself to becoming a startup market leader. The city has the necessary tools already in place to do so: relaxed legal requirements, easy registration process and local resources. It is simply a matter of will now – does the city have the drive and the willpower to do what it takes to become their dream?