Switzerland government raises investment funds to support Swiss startups

https://www.swissinfo.ch/eng/economic-impetus_swiss-start-ups-to-enjoy-huge-cash-boost/43303776

by bontoJR • 9 years ago

68 64 9 years ago

swissinfo.ch

valentinebm• 9 years ago

87% of investment in Swiss start-ups comes from abroad.

Wow. Definitely time to give a cash boost.

mirimir• 9 years ago

So what are the major sources for SV capital?

likelynew2• 9 years ago

I will not be very surprised if just 2-3 international start-ups started in Switzerland gets 87% of the funding.

malthaus6• 9 years ago

It's not for the lack of capital though.

The capital is already here, it's just not used for VC investments due to reasons on both supply and demand side.

mschuster912• 9 years ago

The main problem for Switzerland is not a lack of venture capital, but rather the Swiss Franc.

Cost of living in Switzerland is extremely high, which means a company has to pay huge salaries, and thus command bigger prices for its product. While that works fine when the product is luxury watches, diamonds or highest-quality cheese, it does not work out for "mass production goods" as any product (be it a physical product or a web service) can be cloned in the EU or in China for way less and then sold to Swiss people...

pulse7• 9 years ago

Cost of living in Silicon Valley is not lower than Switzerland...

siscia5• 9 years ago

I dont think that Switzerland is more expensive than say San Francisco...

While it is true that is one of the most expensive European countries the cost of living is very close to the one in the bay area...

fla3• 9 years ago

It is not much a matter of cost of living but rather cost of the Swiss Franc versus other currencies.

Currently, the swiss Franc is very strong, therefore making any Swiss product expensive to the exterior.

It can become a huge problem for an economy based on trading with neighbors.

sebgr• 9 years ago

I can confirm. Just moved from Zurich to San Francisco. Pretty much everything except rent is cheaper in San Francisco (food can be up to half price of what I paid in Zurich) but rent being such a major expense, it ends up being similar. Salaries are a bit higher in Switzerland though so one would save more on average there.

geff82• 9 years ago

Relative to the average income, Switzerland has rather unexpensive rents. Of course, in absolute terms, cost of living might still might make your runway on the same budget shorter compared to Berlin.

matttproud• 9 years ago

CH is cheaper cost-of-living-wise than Bay Area at-large. I formerly lived in the Bay Area and now live/work in Zürich. When you throw having a child into the equation, Zürich is hands-down cheaper and better than West Coast. No more worrying about what zip code you live in for a decent school district, etc. Your earnings go much further here.

This is an expensive place to visit as an outsider but cheap place to live and work. Let's not forget tax efficiency, either.

But, hey, the Helvetic Confederation isn't for everyone, and I'm OK with that.

elmar• 9 years ago

do you have any link to a study comparing Switzerland tech salaries with Silicon Valley?

hocuspocus• 9 years ago

They're lower. Not by a lot if you just look at the median, especially relative to CoL (lower rents, lower taxes), but on average, the Bay Area has some 300k tech workers (?), several companies that make over $1m in profits per employee and drive the salaries up.

In Zürich Google will make you a 250k offer, and if you aren't happy, too bad for you, nobody else is going to pay that in Europe :)

csomar• 9 years ago

This is not correct. Internet services are considered high yield businesses and their ROI is very high. Google, Facebook, Apple, etc... pay high salaries even comparing to swiss standards.

The problem is that a startup is, eh, a start - up. You are using mainly your skills and as much resources you have to start. An expensive place should not be ideal for that, but hey, san francisco is super expensive and is still the startup hub.

So maybe there is something else...

s3nnyy• 9 years ago

Switzerland and Zurich is cheaper than you think, here my two-year-old blog post about living costs here: https://medium.com/@iwaninzurich/eight-reasons-why-i-moved-t...

From a employer's perspective there are advantages in Switzerland compared to the rest of Europe: Labour laws are not as strict, so it is possible to fire people (unlike in Germany or France where employees are like your children, you can't get rid of them). Although salaries are high, in Switzerland you pay 20% on top of the salary of the employee to the state, in Germany like 40%.

craigvn• 9 years ago

I would suggest the main reason they leave is the US is the largest single country market that is accessible. China is probably a bigger market going forward but for western companies a bigger cultural change.

tmsldd3• 9 years ago

Although it is nice to have more funds available, which increases the competition among VCs, the main point is not lack of funds. I used to say that a good VC brings you two important things: money and market. Money alone doesn't bring you much (don't get me wrong ..). In my eyes that is the main issue in the startup scenario in Switzerland: lack of market. Having a population of about 8 million people means that your startup has to focus in exporting products & services since the beginning... which adds some layer of complexity/bureaucracy ... Startups tend to establish themselves as close as possible to the client market to simplify as much as they can their initial operation..

bontoJR3• 9 years ago

Although it is nice to have more funds available, which increases the competition among VCs, the main point is not lack of funds.

I agree on that, on the other hand I don't see the lack of market as a big problem. I like to take Spotify as example, it started in Sweden, which is a market comparable to the Swiss one in terms of size, but after the first prototypes and early versions, it went global almost immediately.

Schneider-Ammann said that a change of mentality is required in Switzerland. He noted that while in the US, business failure is greeted with a “better luck next time” or with a similar attitude, on the other hand, in Switzerland, “if you fail with your business idea here everyone points the finger at you. You are branded a looser”. This seems to be the main goal and I totally agree with him.

IMHO, a company can move to a global scale from the start with the right plan, but it's the mentality and the fact that Swiss VCs care more about patents and product protection preventing Swiss Start-up to compete with the rest of the world, instead of caring about quality of the actual product and picking the right time to enter the market.

I heard some stories about companies collecting 500-800k in seed investment, spending 50% of it in legal fees protecting a product they still have to develop, failing later in execution for lack of cash... this is what, I think, needs to be fixed in Switzerland.

tmsldd3• 9 years ago

I understand your point. Yeah.. this is king of a ecosystem.. which needs to be balanced. The good news about the report is that it shows a mindset shift.. Switzerland is stable, warm (people) and radiates freedom .. for sure it is a good candidate to become the next hub.

malthaus6• 9 years ago

Switzerland aims to position itself as a FinTech hub though, where location is a huge issue due to regulation. E.g. if you're based in the EU you a 'passport' which lets you use your banking license in other markets; in Switzerland you don't.

In general the FinTech market is not (yet) cross-border friendly which is why the current prime startups here are either high-margin insurance brokers or our friends in the cryptovalley.

ueroc• 9 years ago

Those Swedish startups didn't form out of nothing. Not only was Sweden early when it comes to things like personal computers, internet access and English, but also notable in many other areas. Almost all successful Swedish companies are at least partly related to gaming, music or telecom. That stems from a rather long organic history of the demoscene, artists and industry. Attitude might have something to do with, but few people would say that the Swedish attitude is anything like what people commonly think is needed for entrepreneurship.

wslh• 9 years ago

I don't thunk so. You can find counterexamples in startups from Israel that almost always target markets in other countries. At the end you would need to move but you can start almost anywhere.

mhroth• 9 years ago

Market size is always a problem in Switzerland. But you could say the same of startups in Israel, which seem to be doing just fine. As a Swiss startup (or a startup starting in any small market), you know from the beginning that you will have to internationalise. You don't start with your local market, you start with the global market in mind.

bogomipz3• 9 years ago

Spotify did it and they started in a in a European country of a similar size. A lack of market didn't stop them. Can you say why Switzerland would be different?

tmsldd3• 9 years ago

Hopefully it won't be different. All I want to say is: a startup here has to internationalize from the beginning, assume costs and expose itself to early competition. But if you see the funding history of Spotify [1], they got quite a lot of foreign funds. In the end, for the business side it doesn't really matter where the money comes from ;)

[1] https://en.wikipedia.org/wiki/Spotify#Funding

xkr• 9 years ago

It's not clear from the text how they define "Swiss startups". For example, being a foreigner, can I start a company there and ask for an investment?

bontoJR3• 9 years ago

A "Swiss Startup" is a startup actually based in Switzerland. As far as I know, foreigners with permanent residence in Switzerland have the same rights of Swiss people, plus more than 25% of population is actual foreigner in Switzerland, so that should not a problem at all.

eps• 9 years ago

Can I start a company?

Depends on where you are from exactly.

If you are an EU national, then you can. Otherwise you will first need to get a work permit (against a promise to start a company, reviewed and approved by the canton) and it's generally a slow and expensive hassle requiring an experienced attorney. Whether this will make your company eligible for a startup loan is an open question, but I'm pretty sure that it will.

gpresot• 9 years ago

If you have a Resident Permit (type B or C), you can start a company. That means you should already be in switzerland with a regular employment contract (or as a spouse of a swiss citizen or swiss resident). What I do not know is if you can ask for a permit in order to then start your company (i.e. come to Switzerland for the specific purpose of starting a company), although apparently Swiss authorities are very helpful if you choose to move your already existing company to Switzerland.

malthaus6• 9 years ago

There are a lot of political initiatives, corporate accelerators etc going on at the moment but they don’t fix the inherent problem here in Switzerland: Cost of living is absurdly high, unemployment is low and life is just really convenient. Why risk it all for a startup when you can just cruise through life with a 42h-week and long lunches at a bank and save a ridiculous amount of money doing so.

Because of this cultural issue and the fact that a overproportional number of very large corporates are based in Switzerland, the whole ecosystem is geared towards that. One part is certainly that there is basically no VC money available but just throwing a bunch of money at it won’t fix the underlying issues.

sschueller2• 9 years ago

I don't see anything wrong with that. We don't need an Uber here. There are still a lot of startups and yes things move more slowly and carefully but for the better of everyone.

The culture is what makes Switzerland such a nice place to live.

malthaus6• 9 years ago

Spoken in a true Swiss way... slow change :)

An Uber would actually be nice to have as the (eventual) exit would maybe create a scene of true local angel investors.

louisswiss• 9 years ago

I hear this argument all the time whenever people talk about the lack of a startups scene in Switzerland and I think it's way off the mark.

People who want to found companies will always found companies - and in Switzerland we are really lucky to have a solid (personal) financial base to build on and the knowledge that, if the startup doesn't work out, there will be a great job to go back to. I'd almost go as far as to say that a lot of people start companies in Switzerland who otherwise wouldn't be in a situation to start a startup anywhere else in the world.

The real problem we have in Switzerland is the 'investor-incest' which dictates where the significant amount of available capital is invested. It is a horrible old-boys club of epic proportions, focussed on back-slapping and box-ticking instead of innovation and potential (and I say this as someone who benefits from the fact).

Aside from this problem, investors in Switzerland are generally less sophisticated than SV investors (especially at the angel/institutional levels) and tend to focus on the solution not the problem when making investment decisions. This leads to most of the Swiss capital in Switzerland being invested into technologically advanced university spin-offs with no market or use case, while teams with a real product-market fit have to go abroad to find investors with the right mindset.

literallycancer• 9 years ago

Cost of living is absurdly high, unemployment is low and life is just really convenient.

My understanding is that the cost of living is very reasonable, with what the average person gets paid. Almost everyone else in Europe spends a bigger portion of their income on accommodation, food, clothes, commuting etc. while the cost of electronics, cars, vacations and so on remains the same.

malthaus6• 9 years ago

Of course it's in sync with wages, you live comfortably even as a waiter - but it requires you to have a steady income. The threshold for ramen profitability is a lot higher than elsewhere which makes it harder to spend significant time on a startup without funding.

kyledrake3• 9 years ago

Liberalizing their immigration laws that prevent availability of talent for startups (and everyone else) is a better solution to this problem than just throwing together a giant pile of dumb money. But that's going to require some pretty existential changes to Switzerland that I sincerely doubt they're actually interested in making.

raverbashing2• 9 years ago

They can have anyone from the EU and getting a visa is not hard (with sponsorship)

kyledrake3• 9 years ago

Switzerland has 8 million people that can work without nasty visas and their related problems. California has 321 million.

aezell• 9 years ago

I immigrated to Switzerland from the US back around 2000 for a technology job. It was actually fairly easy to get a temp worker's visa which was valid for 3 months. Once I was there, my employer went with me to the "Bureau d'Etrangers" to get my actual work visa which was valid for one year. It would be renewable each year as I proved I was still employed.

It's possible it's much more difficult now 17 years later with lots of political and social change around the world. But, I think the Swiss love for people to think it's a lot harder than it is. It requires diligence and some paperwork on a regular basis but if you are skilled technology worker, they tend to let you right in...in my experience.

Switzerland government raises investment funds to support Swiss startups

Related Stories