The Netherlands is not exactly a surprise to Red Herring. Two years ago, we chose e-buddy, a startup based in Amsterdam that uses a web client to aggregate instant message services, for our Red Herring 100 Europe list. But an invitation from a Dutch software company to join several reporters and analysts in a survey of the high-tech scene in Amsterdam was one I couldn’t refuse.

Our host was Servoy, a seven-year-old company that makes software tools to convert enterprise applications into web-based services.  In the course of several days with Servoy and other companies, in addition to some very rich meals, several museum visits, and pleasant walks along the canals of Amsterdam, I came away pondering the difficult situation of startups in the European environment.

Servoy, based in Amersfoort, outside Amsterdam, has a lot going for it. It has good technology, good positioning, and hard-working managers. The seven-year-old company has been pitching its software tools to independent software developers, the small shops that are hired to build and maintain the hundreds of specialized software applications that help run small and medium-sized businesses.  Servoy’s tools are especially easy to learn, says CEO Jan Aleman, who started the company with US-based managing director Bob Cusick. CTO Jan Block and  Maarten Berkenbosch in 2001. He says it is a smooth transition for developers who have worked with Microsoft’s Visual Foxpro, Delphi, Microsoft Access, and similar products.

Servoy says its software tools make it much easier to turn apps into software-as-a-service products than Microsoft’s complex dot-Net environment.  Companies can use Servoy’s tools to create standards-compliant Java applications that work both as traditional on-site applications software and as web services. The tools are compatible with a full range of enterprise-strength databases from Oracle to Sybase to Microsoft SQL Server.

Servoy has lined up an impressive list of customers, from Motorola to Sony to UCLA. Its products have been used to create everything from CRM applications to managing a medical practice. Servoy estimates that some 30,000 developers have written over a thousand applications with its software for some 200,000 users.

But how does a small company in Holland get big? How does it break away from the dozens of companies selling software to small and medium companies and independent software vendors?  And how does a startup like a Servoy convince software developers that hitching their stars to a small Dutch company makes sense when the safe bet is a big player like Microsoft?

“The key thing is increasing awareness,” says Mr. Aleman. He has invested in public relations by bringing on an experienced PR manager, sponsoring press events like the one I was on and made a concerted effort to get his story in the news media. Servoy has also been building its base by holding an annual user conference. The last one in August in Las Vegas drew some 200 attendees. The company was recently selected for DeLoitte’s Fast 50 Benelux list.

Servoy has also been busy repositioning itself as a platform, indispensable status for any software company with grand ambitions.  “The new version allows companies to create a platform, open their own environment for customers so they can create own applications and their own screens ,” he says.   Borrowing from the open source movement and from the success of Salesforce.com, Servoy has opened an app store to enable developers to showcase – and sell – the applications they have written.

What are the obstacles?  The biggest one for a European startup is raising money.  Even before the credit crunch made everybody tighten their belts, VC money had been hard to come by in Europe. Last year, venture capitalists in Europe invested less than a third of what U.S. VCs put up. Servoy raised its first round of money of 800,000 euros ($1.2 million) in 2006 from Dutch venture capital firm Newion Investments. Now it is going after a second round to fund the company’s expansion.

But Newion is in the throes of raising a new fund of its own. So Servoy must find additional investors at a time when money is increasingly tight and the markets are in turmoil. And it must find the right levers to gain attention while continuing to build its base. For Mr. Aleman and his colleagues, the path to the big time is not easy, but it is a route a European company with ambition must make.