Could Switzerland play host to a European equivalent of Silicon Valley? While London, Berlin and even Paris are typically thought of as Europe’s hubs for start-ups in the technology space, activity in the Swiss cities of Zurich and Lausanne has been accelerating fast in recent years. Big tech and venture capital are taking note, making significant investments in the country.
Across all sectors of the economy, Swiss entrepreneurs launched more new businesses in the first half of the year than in any previous period on record according to data from the IFJ Institute of Young Enterprises. Almost 26,000 start-ups were registered, a 4.5% increase on the previous year.
Not all of those businesses will succeed, of course, but Switzerland has a growing track record of producing unicorn businesses with $1 billion valuations, particularly in the tech sector. Recent examples include logistics software business Scandit, the environmental firm Climeworks, security specialist SonarSource, and internet privacy-focused Proton. Indeed, there are now more billion-dollar tech start-ups per capita in Switzerland than in any other European company.
Pascal Mathis, the co-founder of Swiss venture capital firm Wingman Ventures, says the country’s booming start-up scene largely reflects two factors.
“One element has been the cultural shift we’ve seen in recent years, with Swiss young people now far more confident about launching their own businesses early in their careers rather than going to work for, say, one of our large banks,” Mathis says.
“The other crucial support has been our fantastic technical universities, which are attracting incredible talent from all over the world.” In combination, he points out, ETH in Zurich and EFPL in Lausanne now attract more students than a US institution such as MIT.
Many of Switzerland’s most promising start-ups have spun out of these universities, which have world-renowned reputations in areas such as robotics, industrial automation, artificial intelligence, computer vision technologies and climate science.
The plentiful supply of highly-skilled graduates has also attracted large global technology companies to the country, providing further support to the tech ecosystem. IBM, for example, has had a longstanding presence in Switzerland but has in recent years been joined by Google, which employs 5,000 developers in the country. Other companies with boots on the ground include Disney, Nvidia, Meta, Huawei and Intel.
As a result, Switzerland’s international reputation is growing. The country recently topped the Global Innovation Index for the 13th successive years with the organisation praising its educational institutions, its human capital and its business sophistication.
Switzerland’s attractiveness as a place to live has also helped, and while the high cost of living has historically been a barrier for start-ups, cost rises in other European cities are begin to level the playing field. “We also have very supportive authorities that are prepared to work with new businesses,” says Mathis of the tax and legal systems that companies must navigate.
Venture capital investors, for whom Switzerland has not previously been on the map, are now taking more interest in the country’s start-ups. Recent years have seen Swiss businesses attract funding from first-time investors in the country including Bessemer Venture Partners, Sequoia, Index Ventures, GV, Atomico, General Catalyst, Left Lane Capital, Eurazeo, Eight Roads Ventures, L Catterton and Blossom Capital.
Indeed, last year was a record year for venture capital investment in Swiss technology companies according to analysis from law firm CMS. Almost SFr4 billion was raised in more than 380 funding rounds. “Despite the difficult [economic] environment, Switzerland has retained its reputation as a go-to location for high-tech investments,” say CMS’s Jérôme Levrat and Vaïk Müller.
The challenge now is for Switzerland to keep more of its success stories in the country, rather than seeing them sell out to larger firms or move abroad. It is notable that despite the growth of these early-stage businesses, the Swiss stock market features only one technology company of significant size, the manufacturer of software and peripherals Logitech.
“Almost all the pieces in the puzzle are in place – this is our opportunity to build Europe’s Silicon Valley,” says Mathis. “But we do need to work harder to convince these businesses to stay in Switzerland.” Support from the Swiss Government is beginning to help, he suggests, as is the growing interest of larger venture capital firms prepared to invest in subsequent rounds.
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