Swiss Startup Radar, a data analysis of 4,000 technology-based start-up companies with growth potential, paints an unvarnished picture of the Swiss start-up scene. One result shows that in the ICT sector, and particularly in marketplaces, young Swiss technology companies are weak in European comparison. The next eBay or Amazon will most likely not come from Switzerland. Have Swiss start-ups slept through digitalisation? Not at all. A closer look at the data shows that these companies are among the drivers of digitalisation – and not only in the e-commerce sector, but also in the industries in which Swiss companies have long been global innovation leaders.
Swiss start-ups are particularly strong in the mechanical, electrical and metal industries, life sciences and fintech. A comparison of the proportion of Swiss start-ups in these areas with those of similar economies highlights the differences. The number of industrial start-ups in Switzerland is almost twice as high as in Germany and three times higher than in the UK. In medtech, the differences are even greater, and in fintech only the UK has a higher share than Switzerland.
A closer examination reveals that start-ups in these flagship sectors often describe their activities in terms of their contribution to digitalisation; for example, ‘robotics’ and ‘sensor’ in the case of industrial start-ups, or ‘crowdfunding’, ‘mobile payments’ and ‘fintech’ among the young fintech firms.
These start-ups are the drivers of digitalisation and this is good – they keep fit those key sectors that are crucial to Switzerland’s prosperity.
The importance of start-ups, as Startup Radarhas shown, has increased massively in recent years, with the number quadrupling since 2003. At the same time, a recent study by KOF Swiss Economic Instituteat ETH Zurich found that over the same period, the proportion of Swiss companies investing in research and development has declined significantly, and the proportion developing market innovations has fallen even more sharply. The majority of innovating companies are developing better versions of products already on the market. However, KOF’s study also shows that companies that still invest in research and development are spending more money than they were 10 years ago.
Both studies together give a clear picture of the transformation and shift of the innovative Swiss economy. SMEs, which in Switzerland have long been very innovative, now focus on product improvements or have completely abandoned research and development. Start-ups have jumped into the gap with risky new developments, financed by specialist investors.
This shift is necessary and that it is taking place in Switzerland is good news. But the question is, is it going fast enough? Analysis by Startup Radarshows that technology-based start-ups develop more slowly than one would think. The growth phase sets in only after nine to 10 years, and after 20 years the average start-up has developed into a company with at least 50 employees.
This gives rise to thoughts on how to speed up this process. There are some starting points, including better support for start-ups in the growth phase; ie, in the second decade of their existence. It would certainly help to open up existing sector networks to the newcomers, and the recruitment of graduates of Swiss universities, regardless of their nationality, would also facilitate growth. Startup Radartakes no position on such broader considerations, but its analysis provides a factual basis for discussion of such questions for the first time.
Stefan Kyora is an entrepreneur, doctor of philosophy and editor-in-chief of startupticker, the news portal of the Swiss start-up scene. In addition to daily news and a weekly newsletter, startupticker publishes regular studies on the Swiss start-up scene. In January 2019, for example, the next Swiss Venture Capital Report, the annual analysis and listing of investment in Swiss start-ups, will appear.