In an interview with the Swiss Startup Association, Fintech-expert and successful serial entrepreneur Marc P. Bernegger explains why Switzerland could win the race as a European Fintech hub. But only when certain regulations are done by the government. A first offense came from the federal president Johann Schneider-Amann last week at the Fintech & Digitization Day.
Switzerland as a startup location is in the shadow of hubs such as Berlin or London and the non-participant on the EU. What distinguishes the Swiss start-up spot?
Switzerland hasn’t fully adopted the fail-fast and lean philosophy that defines Berlin, London and other leading metropolitan regions in the world such as the Bay Area or New York. Switzerland and its largest urban centers have a number of great advantages in terms of living, setting up shop, finding and recruiting talents, etc. Most of these factors are related on one way or another with Swiss culture. But as much as culture is a positive distinguisher, it also can be a challenge: the consistently high level of prosperity is an impediment to entrepreneurial spirit and self-initiative. Moreover, the lack of risk appetite among investors inhibits financing, particularly of startups. While London or Berlin are perceived as the best places for start-ups we should not be lulled into the belief that everything is better there and Switzerland has nothing to offer. Among the attributes of Swiss startups we find characteristics such as understating, thought through, controlling, or frugal. I think these attributes are not necessarily weaknesses in the long run and can be turned into real differentiators and strengths.
Switzerland is a really expensive country. How this influence the development of the startup scene?
The unique combination of the world’s highest salaries, lowest unemployment rates and highest comfort creates almost no urgency for fast-moving innovation. Furthermore, Switzerland’s high cost of living might has put off some startups in recent years. However, there is a surprising vibrant startup scene, particularly in the Greater Zurich Area. While Switzerland has not been a globally well-known hub for startups I think we see now some very positive changes such as political and public discussions around incentives for startups, the launch of incubators and accelerators, and not least a change of the perception of what it means to be an entrepreneur.
What is in your opinion missing to push the Swiss startups more?
Before we talk about what is missing to push the Swiss startups more we need to clarify where we want the Swiss startup ecosystem to be in the years to come. Is it realistic that we compare ourselves with London, Berlin or even the Bay Area? I don’t think so. Zurich and to a certain degree also Geneva are global cities despite the low number of population. But our metropolitan areas are historically structured and grown over time than other global cities. Therefore, I think we have to come up with realistic goals and focus on doable things such as creating an ecosystem which allows startups to easily start and close a company, to get access to talents and offer funding opportunities which enable start-ups to test and trial their products.
What do you think about the regulations of the Swiss government?
First and foremost, Switzerland’s education system doesn’t actively foster the entrepreneurship culture. Fortunately, authorities and politicians involved in the ecosystem are increasingly aware of this problem. In terms of regulations, there is still quite some room for improvement. The founder tax situation or the light bank license are just two issues which need to be tackled anytime soon. Right now, successful young entrepreneurs need to stick together and mutually support startup ideas. The more pressure we can put on the system the better. Regulations will always remain a barrier for startups, here and in London or Berlin. But we have to be aware of the fact that founding a company in Switzerland is neither easy nor cheap or fast. It takes several days and at least 20k CHF in Switzerland while you can do the same thing in Latvia in a couple of minutes and for a few dollars. This should provide ample food for thought.
What other factors influence the Swiss startup ecosystem? What are you pain points? What you would change?
A key factor in Swiss culture is cohesiveness. This is a pain point as much as it is a key success factor. Swiss Federalism and its decentralized institutions, particularly the Cantons, let to a situation where every Canton creates its own programs and incubators for startups, causing a highly fragmented, not well coordinated and splintered situation. Due to the small domestic market, Swiss startups are forced to have an international vision from the very beginning. If we find a way to become more cohesive, we automatically create valuable space for testing and experimentation.
You are promoting fintech-startups – what is the position of fintech startups in Switzerland?
Fintech and Insurtech are among the hottest and fastest growing industries in Switzerland. Considering the county’s history in banking and insurance this might not be a surprise. Private and public sector increasingly recognize this momentum and start to support new initiatives such as DigitalZurich2025, the KickStart Accelerator, the Swiss Stock Exchange’s incubator SIX F10, Geneva’s “Fusion” accelerator, UBS’ “Future of Finance Challenge” program, to name a few. As we currently see major banks opening their doors to startups and regulators such as the FINMA actively seeking solutions for fintech startups, we shouldn’t be surprised if we see new European players growing here. However, I don’t expect that Switzerland will be among the leading fintech nations anytime soon. We will rather see a positioning of Swiss fintech startups in niches such as crypto-currencies or wealth management.
Can the Swiss financial hub with the banks and fintech startups benefit from each other or is there a skepticism and even fear against each other?
The Swiss financial center is increasingly spawning innovative fintech startups. When it comes to consumer-facing web and financial technologies Switzerland and in particular the Greater Zurich Area are among the locations where we can see cross-fertilization. Banks are scared and the public sentiment towards banks is still quite negative. Therefore, I see fear as a powerful motivator for banks to curb innovation and for fintech companies to get their foot in the door of banks. I think today’s fintech entrepreneurs will help to make banks more efficient and consumer-oriented.
How you bring in your personal work these two worlds together?
Our Finance 2.0-Conferences (www.finance20.ch) aim at educating traditional banks and financial services providers while creating a platform for fintech startups and investors. Moreover, I am involved in various fintech companies such as FinLeap (www.finleap.com) or initiatives as Greater Zurich Area, Pioneers’ Club, Swiss Startup Invest or Young SECA and try to build bridges between the two worlds.
How you argument that a fintech startup should operate from Switzerland and not go to Berlin or London?
Switzerland is an ideal base for a global digital finance and there are great advantages: network effects, attracting the world’s best talent, infectious energy, strong trust relationships, etc. Switzerland is and will never be the place where you quickly put together some pieces of code, come up with a fancy presentation, get millions of funding and sell to the highest bidder. In Switzerland you’ll find long-term vision. Our country features a top jurisdiction. Switzerland has the most decentralized political system in the world and its citizens are in full control of the system. This guarantees extreme stability on the one hand and on the other hand competition among the cantons and its municipalities. This results in very friendly and flexible social and business rules, low taxation and a high service delivery. I can also name more here:
- Stable, predictable, neutral political system that is highly responsive to its citizens > Its decentralized, bottom-up political system is a natural fit for the decentralized, bottom-up digital finance technologies of the future.
- The Swiss have the strongest privacy culture in the world, with the first bank secrecy law dating back three centuries to 1713.
- Sound economic policies, including a strong currency with by far the highest gold reserves per capita of any country.
- Global competitiveness > Switzerland is ranked number 1 in the world
- World-leading infrastructure in transportation, telecommunications, financial services, technological innovation, etc..
Marc P. Bernegger is a Swiss entrepreneur and investor: He co-founded several web companies and had two trade sales (usgang.ch and amiando). Today he is also an investor mainly focusing on fintech (with involvements in FinLeap, Next Generation Finance Invest, Ayondo, Orange Growth Capital)