An in-depth look at the Dutch scale-up market with Edwin Hengstmengel

We’re delighted to have had the opportunity to sit down with Edwin Hengstmengel, Partner at Endeit Capital, a Dutch Venture Capital firm. In this engaging conversation, joined by our Head of Partnerships, Beer Zandt, they collectively explore Edwin's experience and unique perspectives, offering invaluable insights into both the salary landscape and the current state of the Dutch scale-up ecosystem.

Let’s start by giving Edwin a proper introduction

Edwin Hengstmengel is a seasoned veteran in the world of venture capital, with an impressive career spanning over two decades. His journey in finance began on a different path, as he started as a public equity investor for a large family office early in his career. This role, characterised by its analytical thoroughness and strategic thinking, provided Edwin with a solid foundation. Yet, he craved more dynamism and action.

With a drive to explore new horizons, Edwin took a step down the ladder and ventured into the realm of private equity. However, he soon discovered that the world of financial engineering didn't align with his core strengths and passions. It was clear that his true calling lay elsewhere. Edwin explains, “The next logical step in my career path was venture capital, and it turned out to be the perfect fit.” Edwin leads the Amsterdam office of Endeit Capital, placing him at the forefront of supporting Dutch companies with international aspirations. The firm's DNA is rooted in helping these companies and their entrepreneurs expand beyond Dutch borders and establish a strong presence in several larger European markets.

Balancing act in the face of capital scarcity

Over the past three years, the Dutch scale-up market has been a rollercoaster ride of unprecedented proportions. It started with a massive influx of capital pouring into scale-ups, leading to soaring valuations and an insatiable demand for top-tier talent. The job market was red-hot, with companies aggressively competing for skilled professionals. However, the tides turned last year, and the market witnessed a dramatic shift. Capital flows tempered significantly, mass lay-offs became intensely common, and the once tightly squeezed talent market began to loosen up. 

Something Edwin has experienced first-hand, noting, “It's clear that there's a noticeable scarcity of capital now. The days of securing large sums, indulging in lavish spending, and rapidly expanding teams, often without a solid strategy for achieving profitability, are now a thing of the past.” He also points out that, “Companies are now more cautious about their hiring strategies. Many have undergone reorganisations, and the pace of recruitment has slowed. The result is a more balanced playing field.” While the competition for top talent remains fierce, it's arguably somewhat easier to attract individuals who align with your company's culture and vision. The emphasis has shifted toward building a culture that fosters growth and retention, where early-stage companies serve as stepping stones in employees' careers.

Company culture and competing with tech giants

It's essential to emphasise that despite the ongoing volatility, the quest for suitable talent remains a challenging attempt. Given this ever-changing landscape, a closer examination of your hiring and talent management policies becomes crucial. Edwin consistently underlines the significance of focusing on company culture. From his perspective, “Your company's brand is paramount—defining the kind of company you aspire to be is vital. And question whether this vision resonates with you personally and/or with your core founding team. Starting with this foundation, you can gradually build your brand.”. Adding that, establishing a compelling brand towards (future) employees is perhaps the most effective form of organic advertising or marketing your company can employ to connect with potential talent. 

Additionally, Edwin emphasises the importance of defining a bold and ambitious company goal. This entails assessing the associated risks, potential downsides, and the types of individuals you would like to have on board for this exciting journey. He recognises,  “Not every company should aspire to reach the scale of industry giants like Adyen or Takeaway, as they may not align with the preferences and aspirations of every talented individual. Therefore, if your company has a smaller or less audacious ‘big, hairy goal’, you can align your recruitment efforts with individuals who resonate with that specific purpose.”

For early-stage companies daring to compete with industry giants, Edwin offers some valuable advice. “These startups may not be able to match the same level of compensation as established players. They could focus on offering alternative incentives, such as Employee Stock Ownership Plans (ESOPs) or bonus options, which can come into play down the road.” However, Edwin underlines, “The ability to compete often rests on the dynamic nature of early-stage companies. It isn’t a path suited for everyone. If someone enjoys the thrill of navigating uncharted territory, it can be a significant advantage compared to, for instance, a junior account management role at a more mature company. It boils down to what an employee values most.”

For instance, “Does the individual prefer a structured environment with established training, learning, and development programs already in place? Or would they thrive in a young organisation where the path is still being carved out, mistakes are made, and directions can change on a weekly basis?” Edwin has encountered many individuals with impressive CVs who take leadership roles at younger startups, only to discover after a year that it isn’t an ideal fit. “It isn’t a matter of lacking skills; rather, it's about whether they can roll up their sleeves and handle the unpredictable nature of the job. Thus, personality and drive are potentially even more crucial than technical skills when it comes to hiring decisions.”

Edwin highlighted another striking trend, “Purpose is becoming more and more important in today’s market. A lot of talent is increasingly drawn to purpose-driven industries such as healthcare and climate technology.” Interestingly, these sectors aren't just short-term fads; they promise a bright future extending far beyond the next few years – up to two decades or more. This shift has led to a surge in talent-seeking roles that align with their sense of purpose, as well as a compatible company culture. Consequently, nurturing the right organisational culture becomes crucial. However, Edwin acknowledges, “Crafting a purpose-driven culture may be more challenging for those in financial technology compared to those in climate tech. For entrepreneurs in finance, this could present a unique challenge, whereas purpose-driven companies naturally embody this dynamic.” Nevertheless, Edwin adds, “Regardless of the industry, topics such as diversity and inclusivity have gained prominence in boardrooms and management teams. I believe this shift is both necessary and commendable for all the right reasons.”

The Dutch startup scale-up ecosystem

Regarding the Dutch ecosystem's current position and international perception in the talent markets, Edwin offers his insights. “Outsiders might envy the creativity and open-mindedness prevalent in the Dutch work culture. However, they might also sense a lack of urgency compared to markets like Asia or the US, where goals often seem more ambitious, focusing on building unicorn companies.”

Besides that he adds, “From an outsider's perspective, there may be questions about whether Amsterdam and the Netherlands can truly foster the development of major new companies. However, I’m not concerned about this. I believe that the Dutch ecosystem is strengthening, driven by a few determined individuals who are committed to achieving success.” Besides that Edwin mentions, “The Dutch scale-up ecosystem is maturing rapidly. There's an influx of investors with deeper pockets and organisations offering operational support. Along with this, entrepreneurs more often bring prior experiences from other startups or larger scale-ups, enhancing their ability to navigate the entrepreneurial landscape.” So, geographical location, whether in the UK or The Netherlands, is no longer a pivotal issue when it comes to building a company, as long as you can find the right talent.

Regarding improvements needed to make the Dutch ecosystem more attractive to employers, especially from a talent perspective, Edwin points out some areas of focus. “Constantijn van Oranje and TechLeap are working really hard to facilitate international talent coming to the Netherlands through visa and fiscal policies, making it easier for scale-ups to hire international talent. Which is great, however, housing remains a potential challenge that could discourage talent.” Edwin suggests that government support in addressing housing issues would be highly beneficial. Additionally, “I believe that pension funds could adopt a more purpose-driven approach by allocating some of their assets to venture capital. While it's essential for pension funds to consider the attractiveness of various asset classes, finding a balance between these factors is crucial.”

Advice for talent looking to build their career in tech

Let's take a moment to highlight some precious advice that Edwin wants to share with all the talented individuals out there. “When I finished my studies, the common path was to join established giants like Shell, KLM, or other large corporations. But nowadays, there's a surge of talented individuals who are eager to build their careers in the tech industry, thriving in youthful and dynamic environments. It's a different world”.

Edwin mentions that talent is now also competing on an international level, so it’s important to really rethink your capabilities and goals, early on. Bring focus to whether you’d like to be in a few years. Which he understands is really difficult, “If you're young, it's tough to have a precise roadmap for your future. Take a chance. You aren’t tied down, so dare to explore different paths and strive to learn on a regular basis. Seek out an environment that nurtures your growth. If the company culture isn't contributing to your learning journey, move on.”.

Besides that, soft and social skills are increasingly more essential and a way to differentiate yourself from others. “As an investor, I'm always interested to learn about companies being able to help people in soft and power skill development. Because it’s the hardest part, you can be very smart, but do you fit the team? And how do you know that beforehand, when you're speaking to an interview candidate? So, make sure that you think this through.”