An account of the foundation, constitution and early efforts of the Dutch East India Company has been already given. The date of its charter (March 20, 1602) was later than that of its English rival (Dec. 31, 1600), but in reality the Dutch were the first in the field, as there were several small companies in existence and competing with one another in the decade previous to the granting of the charter, which without extinguishing these companies incorporated them by the name of chambers under a common management, the Council of Seventeen. The four chambers however - Amsterdam, Zeeland, the Maas (Rotterdam and Delft) and the North Quarter (Enkhuizen and Hoorn) - though separately administered and with different spheres, became gradually more and more unified by the growing power of control exercised by the Seventeen. This was partly due to the dominating position of the single Chamber of Amsterdam, which held half the shares and appointed eight members of the council. The erection of such a company, with its monopoly of trade and its great privileges including the right of maintaining fleets and armed forces, of concluding treaties and of erecting forts, was nothing less than the creation of an imperium in imperio; and it may be said to have furnished the model on which all the great chartered companies of later times have been formed. The English East India Company was, by the side of its Dutch contemporary, almost insignificant; with its invested capital of L30,000 it was in no position to struggle successfully against a competitor which started with subscribed funds amounting to L540,000.

The conquest of Portugal by Spain had spelt ruin to that unhappy country and to its widespread colonial empire and extensive commerce. Before 1581 Lisbon had been a great centre of the Dutch carrying-trade; and many Netherlanders had taken service in Portuguese vessels and were familiar with the routes both to the East Indies and to Brazil. It was the closing of the port of Lisbon to Dutch vessels that led the enterprising merchants of Amsterdam and Middelburg to look further afield. In the early years of the seventeenth century a large number of expeditions left the Dutch harbours for the Indian Ocean and made great profits; and very large dividends were paid to the shareholders of the company. How far these represented the actual gain it is difficult to discover, for the accounts were kept in different sets of ledgers; and it is strongly suspected that the size of the dividends may, at times when enhanced credit was necessary for the raising of loans, have been to some extent fictitious. For the enterprise, which began as a trading concern, speedily developed into the creation of an empire overseas, and this meant an immense expenditure.

The Malay Archipelago was the chief scene of early activity, and more especially the Moluccas. Treaties were made with the native chiefs; and factories defended by forts were established at Tidor, Ternate, Amboina, Banda and other places. The victories of Cornelis Matelief established that supremacy of the Dutch arms in these eastern waters which they were to maintain for many years. With the conclusion of the truce the necessity of placing the general control of so many scattered forts and trading posts in the hands of one supreme official led, in 1609, to the appointment of a governor-general by the Seventeen with the assent of the States-General. The governor-general held office for five years, and he was assisted by a council, the first member of which, under the title of director-general, was in reality minister of commerce. Under him were at first seven (afterwards eight) local governors. These functionaries, though exercising considerable powers in their respective districts, were in all matters of high policy entirely subordinate to the governor-general. The first holders of the office were all men who had risen to that position by proving themselves to possess energy and enterprise, and being compelled by the distance from home to act promptly on their own initiative, were practically endowed with autocratic authority. In consequence of this the Dutch empire in the East became in their hands rapidly extended and consolidated, to the exclusion of all competitors. This meant not only that the Portuguese and Spaniards were ousted from their formerly dominant position in the Orient, but that a collision with the English was inevitable.