Swiss innovation on a roll

In just 15 years, Switzerland’s government and universities have worked to make the country a leader in entrepreneurship.

It may be known for snow-covered mountains and cold-weather sports, but in terms of innovation, Switzerland is hot. The Alpine country with a population of 7.6 million is home to 61 technology parks, and its universities churn out dozens of science-based start-ups every year.

Consider the case of GlycArt Biotechnology, a spin-out from the Swiss Federal Institute of Technology Zurich (ETH Zurich). In 2005, the pharmaceuticals giant Roche acquired the biotech company, which engineers antibodies to produce new drugs, for CHF 235 million (around €190 million).

That sum – for a five-year-old company – caught the eye of global investors. “It put us on the radar for venture capitalists overseas,” says Silvio Bonaccio, head of ETH Transfer, the university’s technology transfer organisation. “There were even cold calls from venture capitalists.”

GlycArt’s success highlights how smart policies can create an entrepreneurial environment relatively quickly. Switzerland only began to develop federal and local programmes to support campus entrepreneurship in the mid-1990s.

Those policy efforts are paying off. “Today there is a nicely developed ecosystem with repeat entrepreneurs, role models and well-organised business angels, as well as state funds for seed financing,” says Christian Nagel, managing partner at Earlybird Venture Capital in Hamburg, Germany. “It’s not yet on a par with Silicon Valley, but they are on the right path.”

ETH Zurich alone has created more than 100 companies over the past five years. Since the late 1990s, its spin-outs have raised more than CHF 200 million in seed and early-stage funding. They have had an 88 per cent survival rate after five years, have created some 1,500 jobs, and have returned some CHF 500 million in capital gains to founders, angels and venture capitalists.

Coaching entrepreneurs

Another thing that Switzerland excels at is putting money into coaching entrepreneurs. In 2004, the Swiss Commission for Technology and Innovation (CTI), which brings together business angels, venture capital and universities, set up venturelab to provide free training for those who launch start-ups. Its goal: to help to increase student awareness of entrepreneurship and “trigger a new wave of Swiss entrepreneurs”.

Since its inception, venturelab has seen more than 13,000 students and other entrepreneurs develop start-up projects. “This is a very cost-effective initiative for the government,” says Walter Steinlin, president of CTI. According to a recent study, from 1998 to 2007, 130 ETH Zurich spin-outs generated estimated tax revenues of CHF18 million per annum.

Government stamp of approval

“One of the cheapest but most effective things government can do is put a stamp on something and say it is good. People will believe you and put their money on it,” says  Steinlin. While CTI does not invest in start-ups, it has strong connections to financial institutions and investors that can. “We just help [start-ups] find the money,” he says. “As you might have heard, there is money around in Switzerland. And not just in the banks.”

A national programme called Venturekick, which raises funds from private Swiss foundations to invest in national start-ups, offers campus entrepreneurs three phases of funding and coaching support, starting with CHF 10,000 to help them to develop a business idea. Founders compete, and Venturekick judges select eight winners a month to go on to a second phase, in which winners receive CHF 20,000. The final competition is for a company with a viable, ready-to-launch business plan. In addition to CHF 100,000, winners get coaching from a serial entrepreneur.

Alongside this national scheme, ETH Zurich launched its own funding programme for campus entrepreneurs in the 1990s. The so-called “pioneer fellowship” offers proof-of-concept funds, starting with a CHF 150,000 grant for the first 18 months of development. This money allows students to verify their research, particularly by contacting potential users of the new technology, says Roland Siegwart, ETH’s Vice President of Research and Corporate Relations. Siegwart believes too much venture capital too early can stifle university spin-outs, putting them under enormous pressure from investors to deliver revenues and profits.

ETH has also added support mechanisms for start-ups, including providing university space, as well as access to scientific equipment. But these breaks have two-year time limits, partly to avoid any accusation of subsidising businesses. “We have to be careful,” Bonaccio explains. “You can skew the market with public money.”

Size is another important factor in Switzerland’s success, says Bonaccio. “We Swiss have realised that we are too small for each university to fight for itself. The technology transfer offices know each other very well and exchange best practice ideas and so on.”

Switzerland is a “good breeding ground” for start-ups, says CTI’s Steinlin. “In this country, you are not alone if you are an entrepreneur.”

This article was originally published in the 9th issue of the Futures Magazine.

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