This week, startup & scale-up news website MT/Sprout featured Groningen as part of a series called Startup Hotspots, on the most important startup ecosystems in the Netherlands. It’s a great read, so for our international audience, we wanted to translate this awesome article. The original Dutch article, written by Jelmer Luimstra, can be found here. Enjoy!
Groningen is the ultimate Northern Dutch provider of successful growth companies, such as Chordify, Voys and Bencom. The city may be located at some distance from the Amsterdam Randstad metropolitan area, but in Groningen, they just see that as an advantage. After all, you don't have to compete for talent with thousands of other companies.
The office building called Het Kwadraat, a fifteen-minute walk from Groningen's city center, is a fine example of old and new industry. It once served as the printing office of the local newspaper Dagblad van het Noorden, but because parent company NDC Mediagroep decided to take its printing activities elsewhere, space became available in 2017. The newspaper company remained there with a smaller annex, but the rest of the 15,000 square meters is now rented to startups and scaleups, mostly active in IT and telecom, both sectors in which Groningen is strong. On the first floor, loud beats are blasting, coming from the included gym.
One of the tenants is the outgoing telecom entrepreneur Mark Vletter (41), whose office is located here on behalf of his company Voys and software startup Spindle. When the two companies moved in here a few years ago, he explains, the landlord wanted to provide a furnished office. “We said: give us the money for the furnishings, and we'll do a better job.” And so they did. The spacious office of Voys is decorated with all kinds of exotic plants, Star Wars characters, art and a playful wall with old telephones, 'to remind us of our product, business telecommunications'.
No shortage of students
Vletter, in true startup fashion, walks around in shorts and flip-flops. Currently, 160 people work for his companies, mostly fashionably dressed people in their twenties and thirties. Plucked straight from the Hanze University Groningen and the University of Groningen (RUG), according to the entrepreneur. Groningen is the youngest city in the country, Vletter points out. The average age is 36 and the city has 60,000 students. “There is a splendid isolation here. Groningen is far from the Randstad and some of the best students often tend to stick around, according to research done by the University of Groningen. They go on to work for local startups or start something themselves. So we have a big talent pool to choose from.”
Because of this "splendid isolation," the Groningen region has more than 600 startups and scaleups, according to figures provided by data platform Dealroom. Collectively, they account for 4,700 jobs, a growth of no less than 1,800 positions since 2019. Many of Groningen's fast growing companies are doing something in the IT and internet business. Successful companies like parking service Parkos and cloud service Payt (fintech) are from here. But what the city is traditionally strongest at, according to Vletter, is providing webshops and website builders, such as Belsimpel, Cookinglife and theFactor.e.
Empire of comparison sites
One of these savvy website builders is the Groningen entrepreneur Ben Woldring. Since the late 1990s he has been developing a series of comparison sites, such as Gaslicht.com and Poliswijzer.nl. His activities, clustered in the 50 FTE parent company Bencom, made him a multimillionaire. Quote Magazine estimates Woldring's assets to be worth around 40 million euros.
From his office on the Verlengde Hereweg in the southside of Groningen, Woldring talks about his initially bumpy road to the top. At the age of thirteen the entrepreneur started his first comparison site. At the time he wasn’t allowed to register with the Groningen Chamber of Commerce, because he wasn't eighteen years old yet. After a lengthy negotiation, the lady at the counter reached out to the 13-year-old wiz kid with a compromise: alright, Woldring could register as soon as he turned 17. The entrepreneur grins: “That was of no use to me at all! So the next day I came back with my mother and we registered the company in her name.”
Because he was successful at such a young age, the entrepreneur with his distinctive red curly hair quickly became a national celebrity. As a result, he regularly had "slick business types" knocking at his door. They wanted a stake in his company, while he could have gotten more for it later, or they offered him a license contract to internationalize, with the result that Woldring would never be able to do that on his own initiative again. His down-to-earth Groningen attitude helped him keep this type of scum at bay, says Woldring: “Groningers come from very solid clay, I think. It’s good that you don’t immediately fall under the spell of these types of guys. That you can say, without blinking an eye: I'll get back to you.”
The fact that his company is located so far away from the Amsterdam metropolitan area, isn’t a big disadvantage, according to Woldring. On the contrary, he says: “It works as a natural buffer. An appointment really has to be worthwhile. You're not going to travel two hours to Amsterdam and vice versa just for the hell of it. So when you have visitors, they’re always people who are serious about doing business.”
Natural buffer aside, Woldring does advocate faster public transport between Dutch cities. “I was once in Shanghai. When you land there, you float to the city center on a magnetic levitation train going 420 kilometers per hour. We almost had a magnetic levitation train like that between Amsterdam and Groningen, but Minister Camiel Eurlings shot it down at the time. If he had been a northerner, things would probably have turned out better.” Woldring is glad that the Delft startup Hardt Hyperloop decided to build the test center for its superfast vacuum train in the province of Groningen. “Please let that be an eye opener for the Netherlands.”
Groningen and Utrecht
The Groningen-based company Chordify, which developed an algorithm that recognizes chords in music files, is taking a different approach to location. Founded in 2013, the scale-up of Dion ten Heggeler, Bas de Haas, Tijmen Ruizendaal and Gijs Bekenkamp has offices in both Groningen and Utrecht. “Because part of the management is from Utrecht, that’s just how it grew”, Ten Heggeler (43) explains. Having two locations is also a big advantage, says the entrepreneur: "If we can find and hire a developer in one of the two cities, we will.”
Ten Heggeler walks through his office in the center of Groningen, where all kinds of guitars and ukuleles are displayed. No, he can't play the guitar himself, says Ten Heggeler, who proves otherwise as soon as he gets his hands on one. Laughs: “It was just a few simple chords!”
International music festival
For a music company like Chordify, it's convenient to be in a city that hosts the annual international showcase pop festival Eurosonic/Noorderslag. “You also have a conference there, for people from the music industry. We often participated in panels there. On top of that, two years ago we hosted one ourselves, about machine learning.”
Groningen, with its more than 200,000 inhabitants, is a compact city and most Groningen entrepreneurs know each other. Ten Heggeler recently went for a coffee with Voys boss Vletter to learn more about how a company can work with self-managing teams. “Mark is one of the leading experts in our country on holacracy (management style with self-managing teams, ed.).”
Groningen entrepreneurs unite in roughly two different clubs: the Noordelijke Online Ondernemers (NOO), for the larger, scaled-up companies, and the YES!, described by Ten Heggeler as "the startup club”. They meet up on occasion to learn from each other's experiences, and there’s also the group chat. Ten Heggeler: “We ask each other questions about pricing, legal structures or housing. Pretty handy.”
Startups in the skybox
The fact that Groningen entrepreneurs are so interconnected is also confirmed by Lusanne Tehupuring (37) of the publicly funded startup organization Founded in Groningen. Sitting in the office garden of Groningen's municipal building for Economic Affairs - Founded's doors are still closed due to Corona - she talks about the well-attended events that her organization usually organizes: all kinds of meet-ups "with pizza and beer", where entrepreneurs can learn from each other's experiences. Corona threw a spanner in the works for a long time, but since this month they’ve been carefully getting back to business as usual. And very necessary too, says Tehupuring: “I’ve got quite a lot of new startups calling me and asking: where can I join?”
To help the different worlds of old and new business to get better acquainted, Tehupuring sometimes has to get creative. For example, she recently managed to arrange a collaboration with local soccer club FC Groningen, where Founded in Groningen puts startup entrepreneurs in a skybox, so they can meet and chat with already established business club members. “And that leads to some very productive business conversations. It’s a great place to connect established companies with young startups.”
Tehupuring grew up in Friesland and moved to Groningen when she was eighteen to study business administration. She herself stayed in Groningen's capital, but she often sees talented students moving to the Randstad area. “They often end up working for the Zuidas companies. That's why we have to ensure that local startups here attract even more attention.” Tehupuring points out that the Hanzehogeschool is doing well in that area. “They try to introduce every student to entrepreneurship, for example by having them work out a case study for a family business or by having them do a year-long internship at a startup.” To simultaneously promote the creation of more growth companies, her organization wants to bring forty international startups to the Northern and Northeastern parts of the Netherlands through a visa program. This needs to be completed before August 2022, so still plenty of work in store for Tehupuring's organization.
Too few investors
One problem for Groningen, according to Tehupuring, is that there are few private investors in the region. Her organization is now trying to match startups with venture capitalists from the rest of the world, through a special matching program run by Amsterdam investor Ton van 't Noordende. Ideally, she would like to see more venture capitalists emerge in the north as well. 'There is mostly public money being invested, which doesn't always lead to the best commercial results. The pool of private investors and angels is limited, which is a shame, because funding aside, they can also offer an expert view and relevant experience to the process.”
At the local Investment Fund Groningen (IFG), good for 60 million euros, they’re being less traditional with their funding in the meantime. So far, the fund has realized 34 participations in Groningen companies. IFG doesn’t invest directly in startups, but instead prefers to give a bag of money to venture investors from the Randstad. This allows big VCs such as Borski Fund, Nextgen Ventures and TIIN Capital to join in with Groningen-based growth companies. “They invest from a market perspective and bring a network and sector knowledge,' fund manager Jan Martin Timmer explains over the phone. “For us, it’s important that the region is opened up to parties from outside. We see Groningen as part of the Dutch ecosystem.”
To Silicon Valley
It's initiatives like these that could be of real importance to the fledgling startups that are based in Groningen's co-working office Launch Café. The 'café' is housed in an old building on the centrally located Herestraat and has a distinctive startup rocket as its logo. Niek Huizenga (40) was one of the founders in 2013. Back in 2005, he and a group of about twenty young entrepreneurs rented office space in an old, converted power plant in Groningen. After a while they outgrew the place and in 2012 Huizenga decided to spend some time in Silicon Valley to do research on a then new phenomenon: incubators. It was there that he became inspired by the RocketSpace initiative, where startups worked side by side on their innovations.
Once back in Groningen he and his partner Koen Atema started Launch Café; a hip, orange-painted office building where freelancers and starting IT companies can rent office space. For years things went great, until last year the Covid epidemic caused an exodus and made working from home the new norm. The owner of the building then took over the operation so that the Launch Café could continue.
Huizenga is sitting in the lobby of his old office company. Around him are scores of young entrepreneurs, some not even graduates yet. The sacrifice was worth it, he says. What matters to him in the end is that proud feeling you get when one of the companies that once rented from you grows up. He saw it happen with startup Smartlocker, a company for securely sending online files. “Four entrepreneurs started that once here. They ended up going through a startup program in Berlin and are now a scale-up in Amsterdam.”
Huizenga doesn’t think it’s a problem at all that Groningen companies will eventually leave the city to head for the Randstad. “In fact, I think it's a good thing. The north is a good place to start, there is enough early-stage financing and talent available. If you want to grow further, it’s important to be close to your customers. Often those customers are found in the Randstad area.”
Tellingly, he points out the window, to a building further down the road. “Do you see that building? That's where startup HackerOne once started. They currently have their headquarters in Silicon Valley.”