Corporate obstacles in the Netherlands

I talked with Max Whitney at 25C3 for a bit to learn about how NYC Resistor came to be. The story seems to go something like this1:

They find a loft in New York.
They find 9 people willing to plunk down some cash ($1000 each).
They setup a Limited Liability Company.
The LLC subleases the loft from the current leaser on a year contract.
Membership dues and workshop money (and the occasional party) pays the rent on the space.

This story is a stark contrast with what you would need to do in the Netherlands to setup something similar. I know because I’m in the market to expand our current coworking space both because we will be kicked out in April and because we could use some more space for stuff and projects.

So how is this different and much more difficult to setup in the Netherlands? There are a number of factors which contribute to this difficulty.

Zoning

Zoning laws prohibit using something like a loft for commercial/office-like purposes. If you’re doing a startup, the boundary of what is your house and what is your place of work may blur, but in the Netherlands an office is an office and a home is not an office.

Municipalities especially will not want livable houses to be extracted from the housing market and occupied by businesses because a lot of them already face a housing shortage.

Personal investment

People just dropping in some cash to get a space started is probably easier in New York too. One factor Max mentioned was that leases are ridiculously expensive anyway so people are used to paying a lot of money.

But a more important factor probably is that there is a bigger culture in the US of personal investment. What is annoying to startups here is that there are so few European angels. There has hardly ever been a significant internet cashout in the Netherlands and neither do we see a lot of reinvestment happening. On both coasts of the US there seem to be more people with money who are willing to invest it into cool stuff. The vast majority of people with money in the Netherlands are more boring than anything.

Liability

Limited liability companies in the Netherlands are called a B.V.2 and they require a seed capital of €18’000 to start. This money does not have to remain there but it is still a sizable hurdle. In comparison a British Ltd. costs €100 to setup3.

Setting up a Ltd and using that to enter into a lease agreement in the Netherlands would be frowned upon because Ltds have a historically bad reputation.

Another way around this may be to setup a voluntary association or a foundation but to be able to shoulder liability, these would need statutes which need to be acquired from a notary and require a significant fee.

Subleasing

Subleasing spaces in the Netherlands is usually frowned upon especially when the sublessor makes a profit. This is because a lot of houses in the Netherlands are rent controlled and are rented out at half or less of their market value.

This means that a lot of houses are not being utilized to their full market value and that the supply in houses is far too small (and the supply of officeplexes too big). Rather than having the market clear this mess up, we are stuck with this heavily entrenched real estate system.

Lease agreements

Office leases are usually agreed upon for a period of 5+5 years, which mean you get a five year contract with the option to extend it for another five years. This five year contract is in fact meant to protect the lessee from fickleness on the part of the lessor but it does not take into account the fact that businesses may not want to be tied down.

This would not be so much of a problem if limited liability companies were easier to setup (the company would then take on the lease) but I treated that above.

Critical market

To be able to partially fund a space on workshop and party revenues, it helps if there is a large pool of potentially interested people. With the scale of something such as New York that may be possible, it’s a bit harder for us in Delft. We are at the moment somewhat pressed to find a fourth coworker let alone people who’d be willing to pay money to support us.

Concluding

None of the things I mention above are insurmountabel but I think they do in large part explain why Dutch business and venture culture is not as dynamic and booming as that in the US.

  1. Maybe a useful recipe if you want to start your own hacker space.
  2. Literally: a limited partnership
  3. €1 for each share.

5 thoughts on “Corporate obstacles in the Netherlands”

  1. Great post! We’ve been having some difficulties in this area as well with http://stikk.nl. We’re in the process of creating a foundation as you suggest and talking to a lot of other parties (housing development agencies, the city, etc.) to overcome certain hurdles you mention.

    In that light, I would really like you to give Amsterdam a try and think about teaming up. You’re absolutely right: Holland isn’t big enough to do this all over the place.

    By the way: the problem with the lack of angels can be solved if we are all just successful in the future 😉

  2. What would you guys be using the foundation for?

    We are definitely on board the STIKK train (among others), but I don’t know yet if or when I’ll be moving to AMS. I am definitely going to cowork there one day in the week though starting next Tuesday, so can I drop by you guys then?

  3. If you want to rent a space, you don’t need a BV. You could get an english LTD, or a dutch Stichting. The Stichting can’t make a profit, but it doesn’t need to to work.

  4. I discussed both alternatives. A Ltd. would probably be frowned upon and a lessor would (rightly) demand additional collateral. And a stichting/vereniging does circumvent the €18’000 but you stil need to draft documents at a public notary which I’m guesstimating at somewhat over €1000 (I’m having this checked).

    So yeah, that is a lot more doable and is probably the way to go. Our problem has deferred itself from April until June so it’s not so urgent anymore, but bootstrapping the Dutch creative climate is.

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