The Netherlands Is Taking Aim at One of America's Fastest-Growing Sectors

One of the fastest growing and most important pieces of the American economy is also often one of the most overlooked. Despite accounting for an estimated $324 billion in GDP in 2012 -- over 2% of the total economy -- growing at annual clips that exceed 10%, and accounting for over 5% of the total economy's growth from 2007 to 2012, the biotech sector doesn't get the policy attention it deserves. 

While Uncle Sam has taken a hands-off approach to nurturing one of its prized economic drivers, the tiny Netherlands is doing things quite a bit differently. I recently had the chance to meet with representatives and entrepreneurs from Holland at the BIO World Congress on Industrial Biotechnology in Montreal to learn more. Turns out, the United States could learn a thing or two.

Image source: Getty Images.

Europe vs. Uncle Sam

The biotech sector, or bioeconomy, is defined as all revenue generated from genetically modified microbes, plants, and cell lines. Although the word "biotech" is often used interchangeably with "biopharma", that's an insult to the power of biology. And in fact, biopharma is the smallest part of the biotech sector!

The bioeconomy spans biopharmaceuticals, agriculture, and industrial chemicals and materials, which contributed an estimated $91 billion, $128 billion, and $105 billion, respectively, to American GDP in 2012.

The numbers show that the United States is clearly doing something right, which is supported by the fact that it boasts leading global companies in each subsector:

*NOTE: Revenue for industrial biosciences segment. Source: Google Finance.

But the Netherlands -- with an economy that is one-20th the size of America's -- punches well above its weight class. It's home to leading biobased chemical companies such as Avantium, Corbion (which just scooped up Silicon Valley's TerraVia out of bankruptcy), and Royal DSM.   

Data source: Company presentations.

Royal DSM is actually a great example of the country's dedication to the bioeconomy. While it's impressive that it tops DuPont as the leading industrial biotech company in the world today in terms of revenue, it's even more so when you consider its former focus: coal mining. "DSM" literally stands for "Dutch State Mines." Today, it's entirely focused on biobased chemicals production.

The crown jewel of Holland's bioeconomy is helping to drive success, but there are many other attractive characteristics that make Holland a great location for a world-leading bioeconomy:

• The Netherlands is home to 19 of the top 25 chemical companies in the world including Dow Chemical, Neste, and Royal Dutch Shell.
• The country is also home to the Port of Rotterdam, which is the world's third-largest port and leading processor of petrochemical products for Western Europe.
• Northern Europe is home to the lowest cost sugar (the primary input for biobased chemical manufacturing) in the world. While the industry has raced to America's Corn Belt and Brazilian sugarcane, a Deloitte report concluded they're actually more expensive than sugar beets from the Netherlands.

So, what is the tiny European country doing to nurture its biotech sector specifically? Creating industrial complexes that have all the amenities a chemical manufacturing start-up needs to get off the ground.

From idea to scale-up, entrepreneurs have access to government funding, leading academics, and technical know-how from some of the world's leading chemical manufacturers -- all in one place. There's nothing quite like it in the United States (more on that below).

Start-ups can work in research and development labs for proof of concept, move to pilot-scale facilities to begin working on manufacturing processes, and work with government and industry leaders to ultimately commercialize new biotechnologies. It could prove to be a huge long-term advantage.

What America can learn from the Netherlands

Put another way, Holland is investing to create biotechnology ecosystems. That's a lot easier to do with the Port of Rotterdam, cheap sugar, and top companies. Then again, the United States isn't lacking in those areas.

To be fair, Uncle Sam's way of doing business isn't completely misguided. DARPA is the world's leading investor in synthetic biology. The United States has a network of national labs investigating various scientific questions. And several large biotech companies have established their own venture capital funds to fund new start-ups.

Image source: Getty Images.

But it could be even better with a government- and industry-supported industrial complex or two (or 10). After all, the timelines of industrial entrepreneurs and venture capitalists -- who too often decide the fate of American hard tech start-ups -- are rarely aligned. It takes significantly more time and money to be successful in manufacturing than it does with an app. Just ask Elon Musk.

At the end of the day, there is no national policy that acknowledges the importance of the American bioeconomy and encourages investment and innovation in the sector. We don't even track its contribution to the economy -- all numbers provided here were from one individual who's taken on that mammoth task.

That means the United States -- and investors -- are missing out on some big opportunities, even though biotech revenue rivals other huge economic sectors such as mining and semiconductors. Thanks to new biotech tools and platforms, there's no reason the bioeconomy can't continue growing at 10% per annum for the foreseeable future. That's especially true as biology can and will be used to make everything from DNA-powered data centers to metallic nanoparticles for next-generation lithium-ion batteries. But these new technologies will be severely delayed -- or developed in other countries -- if the United States continues with neglect as the status quo.

The Netherlands understands that innovation can be bolstered with intelligent policies that involves all stakeholders. Uncle Sam would be wise to learn that.