How Dutch facilities and procurement budgets can be leveraged for startups and scaleup growth

TNO Vector orchestrates value from brilliant ideas. Not an easy task. In my work I focus on the venturing path to reach this task. I bring scientists together with potential customers to smoothen the road for Space Tech to enter the market, I coordinate national ambitions by industry to scale public-private innovation, or host round tables for the Minister to learn about our high potential entrepreneurs. My favourite part of the day? Meeting inspiring entrepreneurs, doing out of the ordinary things. TNO Vector’s position? Enable ecosystem players to see the value in our next generation technology and act on it. Upcoming year we want grow our understanding of the framing of investing versus procuring. How can the Netherlands strategically position it’s public and private procurement budgets that trumps innovative investments dozens times over?

Why should the Netherlands be interested in strategically positioning its procurement budgets for startups and scaleups?

Founders go through a long journey of risk, hurdles and growth. I previously shared with you the deeptech founder journey from my time at Techleap.nl and the continued research we did on this topic. These works show the changing business needs for a founder when she goes through stages of idea, valorisation, early business development and growth such as a visionary founder, supporting investors and facilities or a path through the jungle of market validation. So to get a business to an exit that benefits society one needs a ‘secret’ recipe of talent, market, technology and capital.

However, if that is found economic and societal benefits flourish. Deep tech and Life Sciences spinouts from European universities are now worth nearly $400B, and created over 160.000 jobs across thousands of startups. They have impacted every one of the UN’s SDGs. The last decades show an acceleration in the value creation both economically and societally. Not surprising then that the Netherlands aims to quadruple the number of knowledge-based spin-offs, and more importantly: enable the pipeline for future exits. Hurdles of capital, talent and tech position remain, but when new technologies successfully enter the market they can disrupt value chains.

At the moment of exit the investment made in a startup benefits society through liquidity in funds (threefold through taxability of the business, its initial investors and the company employees). The compounding benefit to society is clear. So how to get a business to an exit?To keep the business afloat towards financially stable times a founder needs budget. However, often they have little yet to sell.

Future Dutch control points need a strong customer base that’s willing to take risks to build on

Indeed, selling at a late stage requires significant production and financial wiggle room. But who’s willing to take the risk? The supporting ecosystem plays a big role here. For example, Erasmus MC used an innovative approach to procure a smart solution for cleaning hospital beds, engaging innovative suppliers rather than traditional vendors. One can imagine that this is not a cheap or insignificant endeavour, so a willingness to take risks is not evident. However, it will enable new players to grow in this market and beyond. With a renewed focus on governmental and military spending, the questions rise if there is more potential for the Netherlands to take that role in their innovative tendering requests.

Far beyond the benefit of a one-off investments, or one-off purchases is that of year-on-year revenues. Selling product and shaping your value proposition to the market. For a long time the growth of the business is ‘invisible’ with guess-based valuations and built on investor’s belief in the founder and their team. So there is no 1 answer to how a company stays financially afloat. That belief can be eased by government subsidies, but far more by multi-year government contracts. It may also cause ripple effects for the image of a founder if they are backed by government. Or it creates a ‘Fear of Missing Out’ with private investors.

How can the Netherlands encourage private sales from risky-by-design startups and scaleups?

Often, at this point founders will go internationally in the search for large sized customers & investors with a large risk appetite. Nearly 50% of late stage funding for European Deep tech and Life Sciences spinouts comes from outside Europe, mainly from the US. It is therefore no question that US corporates and funds acquired most of the spinouts value, nearly $24B since 2019.

A unique potential is held by a Dutch scaleup called FSO. This company has an out of the ordinary position to bridge this late stage ‘valley of death’. Backed by VDL and Demcon their access to production capabilities is clean and significant in a phase where many innovators can’t compete. So how can we make Dutch public facilities and budgets succeed for them and similarly become available to more founders?

What happens if the Netherlands purchase not through a lens of price reduction or short term quality, but for long term strategic growth?

In the new year RVO (PIANOo) and TNO Vector will put our heads together to see if we can find new pieces to the puzzle. However, the risk for the receiver of products is clear. We need creativity to find the channels that make procurement more innovative. Not an easy task, but what would happen if we would procure through the glasses of value creation?
We don’t have yet have a clear answer to the benefit Dutch startups have from the local public market compared to their American competitors and the number of jobs this creates in our private sector. We’d be rich to know the generated revenues by startups that serve the government and find ways to benefit this.

Do you understand the total public procurement budget for the Netherlands, how it compares internationally, and the policies that shape it? For the full image we need your help! Reach out to me if you have an opinion about (un)successful private and public procurement effects.