Despite the traditional Swiss caution in terms of entrepreneurship, the start-up sector has experienced strong growth in recent years. These young companies promote Swiss innovation internationally and create many new jobs every year. However, a giant like Google is unlikely to be born in Switzerland, says industry expert Jordi Montserrat.
This content was posted on July 20, 2018 – 12:15 PM
In Switzerland, the entrepreneurial spirit is not particularly developed: there are already many successful companies of all sizes that attract investment and young graduates. In recent years, however, there has been a considerable increase in the number of start-ups, that is, companies that are characterized by a high degree of innovation and a business model designed to achieve rapid growth.
Between 2012 and 2017, investments in start-ups nearly tripled and are now approaching the threshold of one billion francs a year. This development is favored by the good framework conditions in Switzerland and by new programs to promote the creation of start-ups in the public and private sectors, in particular around higher education institutions. Jordi Montserrat, co-founder and co-director of the start-up program Venture Lab, is among the promoters of this sector.
swissinfo.ch: When we talk about start-ups, we often think of young people who have graduated from Swiss higher education institutions but are a little lost in the business world. Does this profile correspond to reality?
Jordi Montserrat: It’s a very typical profile, but it’s not the only one. It is true that they are often young people who have graduated from higher education and have an excellent technological level, but who need tools and a network to evolve in the business world. However, among those who come to us, there are also entrepreneurs who already have a good experience, but who, for example, need help to face a new market, such as the Chinese one.
What are the priorities for anyone who wants to launch their own start-up?
First of all, it is important that your start-up is quickly exposed to the market: you must therefore configure your business model from the beginning based on business opportunities and not just based on the technological point of view. To do this, they must know how to start and run a business. Next, they must learn how to present their product to potential customers and, before that, how to convince investors. Finally, don’t forget to have a plan to ensure your business grows.
How much should you invest to launch a start-up?
It really depends on the sector. In biotechnologies and medical technologies, to launch a decent project, between 5 and 10 million francs are needed for the first phase, then between 20 and 50 million francs and even, in some cases, 100 million. In IT, especially in the area of software, it is possible to start a project with just 1 million francs and do great things. But any project with fast-growing, international ambitions needs outside funding.
More than 80% of investments in Swiss startups come from abroad. Is it difficult to find investors in Switzerland?
I would say that here, too, a distinction should be made between the sector of activity and the volume of investment required. For a first fundraising, say two to three million francs, there are now many options and solutions in Switzerland with local investors. On the other hand, in the case of larger funds, a few tens of millions of Swiss francs, it is often necessary to turn to foreign investors.
However, I don’t believe this should be interpreted negatively, particularly as Swiss investors generally appreciate the participation of foreign investors. The success in raising foreign funds demonstrates the quality of our start-ups. Also, when it comes to high-growth start-ups, their promoters voluntarily look abroad to network and attract people to their businesses who can help them grow into new markets.
Switzerland – the most innovative country
This year, Switzerland once again occupies the first place among the most innovative countries, according to theGlobal Innovation Index 2018external linkreleased on July 10 by the World Intellectual Property Organization (WIPO).
Here is the ranking of the top 10 countries:
- Switzerland (2017 index: No. 1)
- Netherlands (3)
- Sweden (2)
- Great Britain (5)
- Singapore (7)
- United States (4)
- Finland (8)
- Denmark (6)
- Germany (9)
- Ireland (10)
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Isn’t the Swiss market too small for our start-ups?
Yes, of course, without a doubt. I would say that 10% of our start-ups manage to start and achieve a positive turnover in the local market. However, the vast majority of them are expected to open up very quickly to markets in other countries. As for the startups I personally support, most sell maybe two products in Switzerland and the next ten abroad. But the fact that we have to quickly position ourselves internationally must also be seen as an advantage for our companies.
What are the other advantages and disadvantages of the Swiss location for start-ups?
The Swiss place is certainly a very fertile ground for the creation of companies. The main disadvantage is the high level of wages. But other than that, we generally have good framing conditions. Think about the presence of excellent secondary schools, the quality of the work, the good infrastructure, the very dense network that allows people to be intimately connected to each other and to work together. Conditions are also good in fiscal terms, but in this area it must be said that many countries now offer increasingly favorable treatment to start-ups.
Compared to other countries, however, Switzerland does not have a strong propensity to take risks.
Yes, I would say that the Swiss don’t like to take big risks, that is, to focus on big opportunities that require big resources. When a start-up in which 50 million was invested goes bankrupt, which has happened before, a debate about lost money is easily started. On the other hand, we talk much less about the failure of projects in which large companies invested 50 or 100 million, as was the case with Swisscom. But if we want to have successful startups, we also have to invest a lot.
When high-growth startups start to have 200, 300, or 400 people, they quickly drain an entire ecosystem around them and create significant economic momentum.
Among university graduates, the proportion of those who launch a start-up is slightly lower than in other countries.
In fact, most of these young people have great possibilities of finding a good job in existing companies and therefore are not encouraged to start a start-up. But it has to be said that in recent years the Confederation, universities and individuals have created countless programs, like ours, to provide interested parties with the knowledge, tools and financial resources they need to create their own company. If we compare the current situation with that of 15 or 20 years ago, we can undoubtedly be satisfied with the work done to promote innovation and the creation of start-ups in Switzerland.
Could a giant like Google one day emerge from a Swiss start-up?
That would obviously be fantastic, but I don’t think it’s very possible. That’s not even desirable in a small ecosystem like Switzerland. Imagine a company capable of quickly creating 12,000 jobs: where would we put it? Take for example Google itself, which quickly created 1,700 jobs in Zurich: there was a great deal of discussion about absorbing a large number of engineers. It is a matter of critical mass for our country.
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