Start up businesses in Switzerland are being stifled by a lack of investment at the critical early funding stages. This message came across loud and clear at the Innovation Forum conference on Science and Technology this week at EPFL.
Entrepreneurs who start new ventures often fund them with money from friends and family. But as their business begins to grow they require more funding. Typically this comes from angel investors – people who know something of the business sector and who are looking for high returns within five years. Finding business angels however is rarely easy. They are few and far between and available funding is soon sucked up by a thirsty market that is particularly under supplied in Switzerland. According to Jane Royston, a member of the Federal Commission for Innovation (CTI), and a former Business woman of the year, Switzerland is rated number one in the world for innovation. If this is the case, then it is quite probable that proportionally more start-up companies in this country are looking for funding than elsewhere. The gap is big and the pressure is high on entrepreneurs whose time would be better spent developing the venture rather than endlessly seeking funds.
Most entrepreneurs in the high-tech sector (and possibly in general) are foreign and this may have a dampening effect peculiar to Switzerland. Foreign entrepreneurs are likely to have weaker networks and fewer assets in Switzerland than their counterparts operating in other countries.
The panel of experts at the Innovation Forum were in general agreement that while the Swiss government (and indeed any government) should not set investment policy or actively fund start-ups (since the market is more efficient than any government can hope to be), some form of tangible encouragement of innovation is necessary.
Antonio Gambardella, Director of Fongi (a Swss start-up incubator), told the conference that when the British government identified the funding problem facing start-ups, it introduced tax breaks for investors. This idea has great merit and given the tax system in Switzerland this idea could be easily implemented here. Let’s face it. You invest money in a risky venture in Switzerland that if successful is going to return a huge benefit to the country, yet if it fails, you lose money that the government has already taxed you for. It’s a win-win for the government and a win-lose for the investor and not a good formula for encouraging investment.
The Innovation Forum has once again organised a cutting-edge event. Highly relevant to anyone interested in innovation on any level, the take-aways were clear. For Switzerland to maintain pre-eminence in hi-tech innovation, the country needs to enhance returns for investors in start-ups. As importantly, the country’s politicians need to encourage high calibre foreign entrepreneurial students to stay in Switzerland by introducing measures – such as one suggested by Jane Royston – granting automatic work permits to newly qualified PhDs at Swiss universities. And lastly, on a political level, efforts need to be made to negate the potentially negative effects on innovation that will result from the UDC’s 2014 anti-immigration initiative. This initiative is widely considered highly counter-productive and could diminish Switzerland’s innovation capability by chasing away the majority of talent that is currently responsible for much of Switzerland’s innovation.