THE BETA CITY THE CITY AS A BUSINESS MATCHMAKER AND TESTING GROUND

INNOVATIONS CASE NARRATIVE: ,

BART DE WEVER AND EVERT BULCKE

Antwerp, Belgium was the winner of the 2015 Startup Nations Award for Local Policy Leadership. Through our work, we have come to the conclusion that nurturing an entrepreneurial mindset in a city has a very healthy effect on economy and society. With industrialization and the subsequent rise of the service economy, the 20th century witnessed the introduction of a new center of gravity—the corporation. Inventions were no longer strictly the domain of science and academia. Corporations became hubs and drivers of innovation and have been instrumental in virtually all technological breakthroughs since the 1950s.1 These advancements led to ever more generations of consumer products and electronics.

The rise of the corporation over this period Alphabet (Google), Apple, Microsoft, and also had a tremendous social impact. With Facebook. With a combined stock value corporate dominance came corporate life: four times that of the four largest firms just the way we defined work, the way we 20 years ago, these companies are the most defined time off, the educational choices we valuable in the world.2 Whether it concerns made, the roles we attributed to youngsters new products, new ventures, new kinds of and to the elderly, the way we balanced life, jobs or job titles, we tend to observe and fol- work, family, and leisure. In short, almost low their every move. every aspect of life was fundamentally influenced by the way people functioned within the corporate structure. NOT ONLY INDUSTRIES GET DISRUPTED This gravitational pull has culminated today in the global dominance of a small number However, this 20th-century corporate logic of very large technology companies, such as ends there, and it ends abruptly. The young

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21st century has already seen wave after business with one goal in mind: to create wave of change: cloud storage, mobile, the value in the new digital world where a few Internet of Things. The very technologies Goliaths fear a multitude of Davids known that sprang from corporate Silicon Valley as startups. have given birth to a new business culture that is establishing entirely new standards Startups, spinoffs, spinouts, scaleups— in what we call the age of disruption. although these terms have been around for ages, they’re now in the spotlight across the Information technology, or IT, has evolved globe. Perhaps due to the lack of heavy hier- from being just one of many industries to archical structures and corporate agendas, become a paramount factor in innovation. the founders and employees of these new Digital technology in the age of disruption firms sport a highly creative mindset and an has fundamentally altered advertising, ability to think outside the box. While they media, retail, travel, and, more recently, implement scalable new business models banking, insurance, health care, logistics, based on state-of-the-art technologies, the human resources, consulting, education, tools of their trade are simple: a couple of and government services.3 laptops and basic IT skills.

If we zoom in to consider this disruption These small emerging companies—let’s call from a macroeconomic perspective, we find them startups—behave differently on many one common denominator across the new levels. They tend to have a slight structure, business landscape: while the underlying often starting out as projects, and avoid technologies hail from large academic or classic organizational hierarchies.5 Team corporate innovation centers, disruption chemistry is a critical asset and is often thrives in individual cells and among select regarded as more important than the choice groups of people. This is largely because of what product to develop. These compa- small companies find it easier to exploit the nies’ endeavors have less to do with pursu- possibilities of swift technological change.4 ing a passion than with the opportunities available in a particular sector, and are The digital revolution has dramatically low- increasingly the result of a deliberate busi- ered the cost of technology and product ness-building process within a university or development, which in turn empowers private incubator. Founders and team small companies to develop new products members are totally committed to their and new platforms, and to alter the domi- companies, making themselves available at nant business model. In fact, a whole new all times. They often retreat to bars during entrepreneurial generation is looking to do

ABOUT THE AUTHORS Bart De Wever is the Mayor of Antwerp, the largest city in Flanders, Belgium. He has been General Chairman of the New Alliance since 2004 and has served as a representative in several of the country’s parliaments. De Wever studied history and has worked as an assistant at the University of . Evert Bulcke currently serves as Chief Strategy Officer at Rombit, a smart city and smart industries technology company based in Antwerp. He is the former Project Manager of Antwerp Startup City. © 2016 Bart De Wever and Evert Bulcke innovations / volume 11, number 1/2 39

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work time, where they contemplate compa- local governments can turn a city into a ny and other related issues. This is not a startup haven, and Antwerp is proof of this case of laissez-faire; it is simply a different idea. We will offer examples of how way of doing business, sparked by the Antwerp—known for its diamond trade, younger generation’s disregard for formal port activities, and one of the world’s largest structures.6 petrochemical clusters—has cultivated its startup culture and entrepreneurial net- In media mentions of startups, the cliché of works. the 20-something male developer often appears to be true, but the startup hype has With leading cities such as London, inspired other businesses and demographic Amsterdam, and Paris within a 200-mile groups to adopt this new culture. Large radius, Antwerp was not exactly the go-to companies are now opening their own incu- place for innovative business development bators, sponsoring startups, and supporting or smart city activities until recently. In fact, innovation camps and “hackathons.” startups and innovation were hard to find in Sometimes they even house small groups of our city, and other Belgian cities such as staff members in the immediate vicinity of Brussels and Ghent were well ahead in pro- creative hubs in the hope that the startup viding a hospitable startup atmosphere and way of life might rub off on their own claiming a place in the second tier of inno- employees. vative cities in Europe.

However, it’s no longer just industries that The scales started to shift in 2013, due to the are being disrupted but the whole economic media buzz about the successful introduc- ecosystem. We are witnesses to a paradigm tion of two privately owned incubators in shift in which the formal corporate society Antwerp’s city center. The new city council is making way for a complex informal net- that came to power at the same time work society that consists of these small renewed local interest in economic develop- cells. This paradigm includes the belief that ment, and it formed a small team within the anyone of any age can do business, regard- public service administration called less of his or her academic background, Antwerp Startup City. This group was thanks largely to the immediate availability charged with stimulating and nurturing of affordable digital technology. entrepreneurial activity within the city. The approach was simple yet unique: (1) facili- tate whatever initiatives may spring from ANTWERP: THE CITY AS A the private sector in the Benelux region; (2) BUSINESS FRAMEWORK promote their activities to the broader busi- ness community; and (3) fill in the gaps From a government perspective, the natural wherever necessary. question is what the ideal environment is for this emerging business culture to thrive. This is an entirely different approach to the usual workflow of local governments, which Enter the city. tend to meticulously plan and map out From our experience in Antwerp, Belgium, future activities without much flexibility. we are convinced that cities are the ideal Moreover, most local governments set out breeding ground for cultivating startups to own the projects, often ignoring more and inducing a startup mentality in differ- effective and cost-efficient initiatives. ent groups of people. Cities essentially func- Considerable time and effort were invested tion as dense networks of cells, and by offer- to help Antwerp Startup City become a ing these cells the right “ingredients” a city knowledgeable and supportive partner to can create a thriving environment for entre- local entrepreneurs and, more importantly, preneurship. In fact, we are convinced that

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to its becoming a business matchmaking which reinforces the vibrant atmosphere platform. When a lot of different initiatives and makes the need to reach the incubators arise and many small companies seek to do by car largely irrelevant. Ann Mettler, for- business, they want an unbiased, credible mer executive director of the Lisbon partner. The city’s startup team happily Council, noted that “all the cool companies filled that role, carefully anticipating and in Silicon Valley are moving up from the monitoring any competition issues startups valley into the center of San Francisco. might face in the market. The expertise and There is a similar evolution in Europe.”7 objectivity of the city’s team was immedi- Antwerp is a striking example of this move- ately recognized within the entrepreneurial ment. landscape, and its endorsement of a project became a valuable asset. The city adminis- Although incubators usually compete for tration unknowingly had become a match- both talent and venture capital, the city of maker and kingmaker amidst a complex Antwerp emphasizes that some form of informal network of small cells fueled by cooperation is necessary between incuba- dense urban activity. The city government tors. We have come to understand that the essentially functioned as the main hub that success of incubators in Antwerp depends connected the small and big dots. on two primary factors: (1) Is there a great enough influx of entrepreneurs, startup staff, and quality business ideas? (2) Do we THE STARTUP PYRAMID: adequately nurture and scale our top start- STIMULATING up successes? ENTREPRENEURSHIP, We also encourage consistent involvement INCUBATION, AND GROWTH from the academic community and contin- Historically, incubators in Europe are gov- ued government support to ensure our ernment owned, and their aim is to capital- startups’ future success. In 2014, the city ize on academic intellectual property. They formalized the main principles and frame- are usually built in anonymous business work for the development of Antwerp parks on the outskirts of a city, reachable Startup City in a memorandum of under- only via highways. standing. It included three principles that form a pyramid to demonstrate how Antwerp’s privately owned incubators have Antwerp Startup City cultivates the ecosys- a different focus. They are designed to form tem: startup teams and produce working proto- types in a short period of time. The large 1. Stimulating entrepreneurship. The bot- companies that sponsor these programs are tom of the pyramid forms the foundation actively involved by making investments where incubators, government, and univer- and offering business expertise. This creates sities cooperate to promote Antwerp as a a win-win scenario: startups have access to creative startup haven—a goal that was not resources and potential first customers, recognized until recently. while corporations gain access to entrepre- 2. Incubation. The center of the pyramid neurial talent and a wide array of new dis- represents the playing field of privately ruptive products. owned incubators and the role they play. Antwerp’s incubators are located near the Everyone is free to develop their own activ- city’s fashion district, university campuses, ities and attract whatever startup and per- and cultural and nightlife facilities, and thus sonnel they like. are able to tap into the creative scene in the 3. Growth. At the top of the pyramid, incu- city center. Many incubator employees in bators, government, and universities coop- the Antwerp ecosystem also live close by,

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erate in housing, promoting, and attracting So what do we do next with our startup suc- venture capital to help scale and grow cesses? At the top of the pyramid we Antwerp’s startup successes. encounter a different set of challenges. The city center location, for example, presents The broader the base of this pyramid, the one disadvantage: office rent is high and the higher the top, and the city laid a founda- real estate market is not yet accustomed to tion for stimulating the ecosystem by the specific demands of startups and grow- investing in student entrepreneurship pro- ing companies. As a result, many of these grams. It began by increasing the number of companies scatter to the outskirts of the city student entrepreneurs through awareness or to locations abroad. campaigns and the launch of TakeOffAntwerp, a pre-incubator that In response, the city has focused on redevel- enabled students at all universities and col- opment, turning old administrative build- leges to explore their entrepreneurial ings into affordable office space to anchor dreams. With only 1 percent of students growth-stage companies. These buildings currently starting a business during or just are available to startups that are graduating after their academic career, we still have a from incubators or coming to Antwerp in a long way to go. Leading cities such as later stage of their development. Contracts Amsterdam currently have three times the are flexible, with a three-year maximum. number of entrepreneurs flowing into their One example, the two-building site of ecosystems as Antwerp does. Investing in StartupVillage, offers 3,000 square meters of students was important to building interest growth space within walking distance of the in entrepreneurship and planting seeds to evolving incubator ecosystem in the city grow the startup culture. center. A committee of city officials and serial entrepreneurs screens and selects the However, Antwerp does not want to rein- tech companies by considering their sector force the cliché of the young entrepreneur, profile and potential scalability. and students are just one demographic the city serves. If cities want to thrive in the Growth-stage companies in Western future they must unlock the innovation Europe often lack the global ambition dis- potential of all their citizens, not just the played by their U.S. and Asian counterparts. young ones. To do this Antwerp focuses on Therefore, the city emphasizes projects that diversifying the base and engaging other involve internationalization, as internation- populations. Every aspiring entrepreneur al business contacts provide a firsthand now can turn to the city for advice on all market benchmark and individual compa- kinds of issues, from regulatory problems to nies grow much more confident in terms of one-on-one business counseling. The city early sales, too. We encourage growth-stage serves as a portal to its dozens of private and companies to take their business abroad as governmental partners in business incuba- soon as possible in order to gain a better tion and business coaching, the result being understanding of the global marketplace that our incubator ecosystem sports a high and to lay the foundation for future sales. number of seasoned professionals, many of We coach startups on sales events being whom have pivoted to the startup ecosys- held worldwide, organize trade missions led tem after long corporate careers. Matching by the mayor, and partner with other start- these people with younger tech enthusiasts up organizations, such as Startups.be and often makes for a successful startup mix. Flanders Investment and Trade. This out- Early data suggest that these startups gener- ward thinking is matched by local promo- ate the most revenue in their early stages tional activities. For example, the city mon- and are most successful in terms of attract- itors the activity of the world’s top venture ing venture capital investments. capitalists and is an eager host of tech- investor tours and other investment semi-

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nars, where venture capitalists are matched Antwerp is proud that it supports the start with Antwerp’s finest young tech compa- of new businesses by offering advice, nies. These activities are small-scale, highly expertise, and brick-and-mortar structures, business-oriented meetings that focus on but it has a great deal more to offer in terms closing investment-deals. of digital technology. Inspired by the con- cept of the beta city, Antwerp’s digital con- Within a mere three years, Antwerp has tent, web, and open sensor network are an become a magnet for business incubation. ideal breeding ground for digital businesses, Seven new incubation initiatives have which of course need platforms to grow on. opened in the city, a couple more are under- This kind of “virtual incubation”—using way, and more than 200 startups have open digital infrastructures—is an essential already sprung from these incubators. Our part of the Antwerp Startup City program. tallest office building—which houses 60 startups on 18 floors—is a testament to this However, the number-one thing a govern- renaissance. Last year, 22 digital startups in ment can do to help startups develop is to Belgium raised a million euros or more, up buy their products. Antwerp’s Buy From from just six in 2014. Eight of them are Startups program provides developers and based in Antwerp. startups with a massive platform, a city operating system through which the city invites companies to develop new products THE BETA CITY on top of the existing digital infrastructure. In this essay we have described how The Antwerp operating system offers open Antwerp evolved into a haven for startups data, open interfaces and software kits, and and corporate incubators. We now offer is open to any startup that sees an opportu- some advice for cities that are contemplat- nity. Our approach is accessible to every ing growing a startup ecosystem. Two fac- potential user in the city—citizens, students, tors were key to Antwerp’s international businesses, and visitors. success: the vision of Antwerp as a digital Since local governments have to comply enabling platform, and the city’s size. These with EU regulations and others that involve two components helped us create what we tendering, the city devised a compliant legal call a beta city—a city that stimulates and framework in which employees help start- facilitates the development of highly inno- ups administer their tendering.9 More vative products and projects.8 importantly, we offer large city IT projects The term beta refers to the digital world, that are divided into different parts, which where unfinished products are tested by a allows multiple small companies to work in large number of potential users. The results a more agile manner. The Buy From give developers valuable data to help them Startups program is equally beneficial for refine the products and services they aim to the city, as IT projects get delivered sooner generate. The new generation of digital and the city staff learns from the creative products are interconnected, and every type approaches used by startups. Since the pro- of software and hardware has the potential gram’s launch in June 2015, more than one to communicate with another. This phe- million euros have been spent on 23 proj- nomenon is known as the Internet of ects through Buy From Startups; this num- Things. Where hardware testing is involved, ber is expected to climb steeply in 2016. a physical infrastructure is needed. The beta Much as entrepreneurship programs pro- city offers both infrastructure and a large vide new startups for our incubators, the number of users, which makes it possible to city tries to promote the digital platform to experiment with both business and city other demographics. Apps from Antwerp, development led by the local government. for instance, offers a series of events at

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which city problems such as mobility, ener- do so in Antwerp. It goes without saying gy storage, or social inclusion are pitched to that this dramatically lowers costs and the public, urging them to come up with improves the speed at which companies can solutions. This is also a matchmaking plat- “go-to-market.” The City of Things, which form where student developers, for is set to launch in the summer of 2016, will instance, meet knowledgeable pensioners, be Europe’s largest urban living lab. and where solutions are funded and built by the city. This approach enables the entire community to participate in creating the THRIVING CITIES CONNECT city of the future while bridging multiple AND ENABLE SMALL CELLS digital divides along the way. This remains a In the era of disruption, wave after wave of work in progress in Antwerp, but the initial globalization and digitalization have put a experiences show it is working. strain on the Western European economy Antwerp certainly cannot outpace London, and society. Small emerging business cells Berlin, and Paris as a tech capital, as it has are exploring opportunities in the wake of only a half-million inhabitants, but the these rapid changes and creating value city’s small size can be an advantage in using the cost-efficient tools offered by dig- terms of the beta city concept. Antwerp has ital technology. But due to their small size, that particular beta city quality: it is big they lack the business networks and credi- enough to generate relevant data and small bility that eventually create sales and enough to quickly equip with state-of-the- growth. Thriving cities can create opportu- art infrastructure. Combined with its diver- nities for these emerging business cells. We sity—the population includes at least 175 believe that facilitating these cells, both nationalities—creative atmosphere, and startups and other projects, is the key to the industrial port, Antwerp is a perfect loca- future success of today’s cities in terms of tion for digital experimentation. business development, smart city develop- ment, and citizen engagement. Our goal in the beta city is to create added value using the new and existing city infra- In Antwerp we have tried and succeeded at structure. Within this framework, we con- this using a bottom-up approach, what we tinue to experiment and push the frontiers refer to as the startup pyramid. This simple of what cities can do to promote an entre- idea and framework have activated the preneurial culture. A new government- entrepreneurial potential of a large number funded project called the City of Things, of people, and by stimulating entrepreneur- which offers a living lab for everything and ship among people of all ages and demo- everyone to do with the Internet of Things, graphics we create a sufficient flow of proj- is all about creating added value. This joint ects into our incubator ecosystem. These venture between the city of Antwerp, privately owned programs have excelled in Flemish innovation institutes IMEC and building the right teams for the right prod- iMinds, and a few leading telecommunica- ucts and have brought in corporate expert- tions and tech companies converts the ise when needed. The result is a win-win whole city into a massive testing ground for scenario: startups have access to resources new smart city products. and potential first customers, while corpo- rations gain access to a wide array of new The City of Things offers a citywide net- disruptive products and entrepreneurial tal- work of sensors and beacons, and a test ent. panel with over 50.000 people willing to participate in the development of new As successful as they might be, to build their mobile products. Startups that want to test a businesses the top startups that graduate product or a piece of technology can freely from these programs need to produce rev-

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enue and platforms early on. This is where a that are inherent to software and hardware facilitating government sets the tone10: development. TakeOffAntwerp, StartupVillage, the Buy 9 From Startups program, Apps from . Tendering is the process of choosing the best Antwerp, and City of Things are all exam- or cheapest company to supply goods or do a job by asking several companies to make ples of what we offer in Antwerp, the beta offers. See city. http://dictionary.cambridge.org/us/dictio- nary/english/tendering. 10. The city of Antwerp was awarded the 2015 1. Clarke, S. H., N. R. Lamoreaux, and S. W. Startup Nations Award for Local Policy Usselman, eds. The Challenge of Remaining Leadership. Innovative. Stanford, CA: Stanford Business Books, 2009. 2. Clark, J., and A.Satariano, “Google Parent Overtakes Apple as World’s Most Valuable Company,” February 2, 2016. Available at http://www.bloomberg.com/news/articles/2 016-02-02/google-parent-to-overtake- apple-as-world-s-most-valuable-company. 3. Schwab, K. The Fourth Industrial Revolution. Geneva, Switzerland: World Economic Forum, 2016. 4. Engel, J. S. Global Clusters of Innovation, Entrepreneurial Engines of Economic Growth around the World. Northampton, MA: Edward Elgar, 2014. 5. Feld, B. Startup Communities: Building an Entrepreneurial Ecosystem in Your City. Hoboken, NJ: Wiley, 2012. 6. Dorsey, J. R. Y-Size your Business: How Gen Y Employees Can Save you Money and Grow Your Business. Hoboken, NJ: Wiley, 2010. . The Lisbon Council for Economic Competitiveness and Social Renewal is a Brussels-based think tank and policy net- work. Established in 2003 as a nonprofit, nonpartisan association, the group is dedi- cated to making a positive contribution through cutting-edge research and by engaging political leaders and the public at large in a constructive exchange about the economic and social challenges of the 21st century. 8. In Antwerp’s view the beta city is one of con- siderable scale that harbors and actively stimulates experimentation, innovation, and the testing of new products in the fields of smart city and smart business. The term beta refers to the extensive testing phases

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