Switzerland

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10 Zurich-area investors on Switzerland’s 2020 startup outlook

European entrepreneurs who want to launch startups could do worse than Switzerland.

In a report analyzing Europe’s general economic health, cost of doing business, business environment and labor force quality, analysts looked for highly educated populations, strong economies, healthy business environments and relatively low costs for conducting business. Switzerland ended up ranking third out of 31 European nations, according to Nimblefins. (Germany and the UK came out first and second, respectively).

According to official estimates, the number of new Swiss startups has skyrocketed by 700% since 1996. Zurich tends to take the lion’s share, as the city’s embrace of startups has jump-started development, although Geneva and Lausanne are also hotspots.

As well as traditional software engineering startups, Switzerland’s largest city boasts a startup culture that emphasizes life sciences, mechanical engineering and robotics. Compared to other European countries, Switzerland has a low regulatory burden and a well-educated, highly qualified workforce. Google’s largest R&D center outside of the United States is in Zurich.

But it’s also one of the more expensive places to start a business, due to its high cost of living, salary expectations and relatively small labor market. Native startups will need 25,000 Swiss Francs to open an LLC and 50,000 more to incorporate. While they can withdraw those funds from the business the next day, local founders must still secure decent backing to even begin the work.

This means Switzerland has gained a reputation as a place to startup — and a place to relocate, which is something quite different. It’s one reason why the region is home to many fintech businesses born elsewhere that need proximity to a large banking ecosystem, as well as the blockchain/crypto crowd, which have found a highly amenable regulatory environment in Zug, right next door to Zurich. Zurich/Zug’s “Crypto Valley” is a global blockchain hotspot and is home to, among others, the Ethereum Foundation.

Lawyers and accountants tend to err on the conservative side, leading to a low failure rate of businesses but less “moonshot innovation,” shall we say.

But in recent years, corporate docs are being drawn up in English to facilitate communication both inside Switzerland’s various language regions and foreign capital, and investment documentation is modeled after the U.S.

Ten years ago startups were unusual. Today, pitch competitions, incubators, accelerators, VCs and angel groups proliferate.

The country’s Federal Commission for Technology and Innovation (KTI) supports CTI-Startup and CTI-Invest, providing startups with investment and support. Venture Kick was launched in 2007 with the vision to double the number of spin-offs from Swiss universities and draws from a jury of more than 150 leading startup experts in Switzerland. It grants up to CHF 130,000 per company. Fundraising platforms such as Investiere have boosted the angel community support of early funding rounds.

Swiss companies, like almost all European companies, tend to raise lower early-stage rounds than U.S. ones. A CHF 1-2 million Series A or a CHF 5 million Series B investment is common. This has meant smaller exits, and thus less development for the ecosystem.

These are the investors we interviewed:

 

Jasmin Heimann, partner, Ringier Digital Ventures

What trends are you most excited about investing in, generally?
Consumer-facing startups with first revenues.

What’s your latest, most exciting investment?
AirConsole — a cloud-gaming platform where you don’t need a console and can play with all your friends and family.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I really wish that the business case for social and ecological startups will finally be proven (kind of like Oatly showed with the Blackstone investment). I also think that femtech is a hyped category but funding as well as renown exits are still missing.

What are you looking for in your next investment, in general?
I am looking for easy, scalable solutions with a great team.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
I think the whole scooter/mobility space is super hyped but also super capital intensive so I think to compete in this market at this stage is hard. I also think that the whole edtech space is an important area of investment, but there are already quite a lot of players and it oftentimes requires cooperation with governments and schools, which makes it much more difficult to operate in. Lastly, I don’t get why people still start fitness startups as I feel like the market has reached its limits.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Switzerland makes — maximum — half of our investments. We are also interested in Germany and Austria as well as the Nordics.

Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Zurich and Lausanne are for sure the most exciting cities, just because they host great engineering universities. Berne is still lagging behind but I am hoping to see some more startups emerging from there, especially in the medtech industry.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Overall, Switzerland is a great market for a startup to be in — although small, buying power is huge! So investors should always keep this in mind when thinking about coming to Switzerland. The startup scene is pretty small and well connected, so it helps to get access through somebody already familiar with the space. Unfortunately for us, typical B2C cases are rather scarce.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I think it is hard to make any kind of predictions. But on the one hand, I could see this happening. On the other hand, I also think that the magic of cities is that there are serendipity moments where you can find your co-founder at a random networking dinner or come across an idea for a new venture while talking to a stranger. These moments will most likely be much harder to encounter now and in the next couple of months.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
I think travel is a big question mark still. The same goes for luxury goods, as people are more worried about the economic situation they are in. On the other hand, remote work has seen a surge in investments. Also sustainability will hopefully be put back on the agenda.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Not much. I think we allocated a bit more for the existing portfolio but otherwise we continue to look at and discuss the best cases. The biggest worries are the uncertainties about [what] the future might look like and the related planning. We tell them to first and foremost secure cash flow.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Totally! Some portfolio companies have really profited from the crisis, especially our subscription-based models that offer a variety of different options to spend time at home. The challenge now is to keep up the momentum after the lockdown.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
What gives me hope is to see that people find ways to still work together — the amount of online events, office hours, etc. is incredible. I see the pandemic also as a big opportunity to make changes in the way we worked and the way things were without ever questioning them.

 

Katrin Siebenbuerger Hacki, founder, Medows

President Bolsonaro should boost Brazil’s entrepreneurial ecosystem

Romero Rodrigues
Contributor

Romero Rodrigues is a managing partner at Redpoint eVentures, the Brazilian-focused arm of the Silicon Valley venture firm Redpoint.

In late October following a significant victory for Jair Bolsonaro in Brazil’s presidential elections, the stock market for Latin America’s largest country shot up. Financial markets reacted favorably to the news because Bolsonaro, a free-market proponent, promises to deliver broad economic reforms, fight corruption and work to reshape Brazil through a pro-business agenda. While some have dubbed him as a far-right “Trump of the Tropics” against a backdrop of many Brazilians feeling that government has failed them, the business outlook is extremely positive.

When President-elect Bolsonaro appointed Santander executive Roberto Campos as new head of Brazil’s central bank in mid-November, Brazil’s stock market cheered again with Sao Paulo’s Bovespa stocks surging as much as 2.65 percent on the day news was announced. According to Reuters, “analysts said Bolsonaro, a former army captain and lawmaker who has admitted to having scant knowledge of economics, was assembling an experienced economic team to implement his plans to slash government spending, simplify Brazil’s complex tax system and sell off state-run companies.”

Admittedly, there are some challenges as well. Most notably, pension-system reform tops the list of priorities to get on the right track quickly. A costly pension system is increasing the country’s debt and contributed to Brazil losing its investment-grade credit rating in 2015. According to the new administration, Brazil’s domestic product could grow by 3.5 percent during 2019 if Congress approves pension reform soon. The other issue that’s cropped up to tarnish the glow of Bolsonaro coming into power are suspect payments made to his son that are being examined by COAF, the financial crimes unit.

While the jury is still out on Bolsonaro’s impact on Brazilian society at large after being portrayed as the Brazilian Trump by the opposition party, he’s come across as less authoritarian during his first days in office. Since the election, his tone is calmer and he’s repeatedly said that he plans to govern for all Brazilians, not just those who voted for him. In his first speech as president, he invited his wife to speak first which has never happened before.

Still, according to The New York Times, “some Brazilians remain deeply divided on the new president, a former army captain who has hailed the country’s military dictators and made disparaging remarks about women and minority groups.”

Others have expressed concern about his environment impact with the “an assault on environmental and Amazon protections” through an executive order within hours of taking office earlier this week. However, some major press outlets have been more upbeat: “With his mix of market-friendly economic policies and social conservativism at home, Mr. Bolsonaro plans to align Brazil more closely with developed nations and particularly the U.S.,” according to the Wall Street Journal this week.

Based on his publicly stated plans, here’s why President Bolsonaro will be good for business and how his administration will help build an even stronger entrepreneurial ecosystem in Brazil:

Bolsonaro’s Ministerial Reform

President Temer leaves office with 29 government ministries. President Bolsonaro plans to reduce the number of ministries to 22, which will reduce spending and make the government smaller and run more efficiently. We expect to see more modern technology implemented to eliminate bureaucratic red tape and government inefficiencies.

Importantly, this will open up more partnerships and contracting of tech startups’ solutions. Government contacts for new technology will be used across nearly all the ministries including mobility, transportation, health, finance, management and legal administration – which will have a positive financial impact especially for the rich and booming SaaS market players in Brazil.

Government Company Privatization

Of Brazil’s 418 government-controlled companies, there are 138 of them on the federal level that could be privatized. In comparison to Brazil’s 418, Chile has 25 government-controlled companies, the U.S. has 12, Australia and Japan each have eight, and Switzerland has four. Together, Brazil-owned companies employ more than 800,000 people today, including about 500,000 federal employees. Some of the largest ones include petroleum company Petrobras, electric utilities company EletrobrasBanco do Brasil, Latin America’s largest bank in terms of its assets, and Caixa Economica Federal, the largest 100 percent government-owned financial institution in Latin America.

The process of privatizing companies is known to be cumbersome and inefficient, and the transformation from political appointments to professional management will surge the need for better management tools, especially for enterprise SaaS solutions.

STEAM Education to Boost Brazil’s Tech Talent

Based on Bolsonaro’s original plan to move the oversight of university and post-graduate education from the Education Ministry to the Science and Technology Ministry, it’s clear the new presidential administration is favoring more STEAM courses that are focused on Science, Technology, Engineering, the Arts and Mathematics.

Previous administrations threw further support behind humanities-focused education programs. Similar STEAM-focused higher education systems from countries such as Singapore and South Korea have helped to generate a bigger pipeline of qualified engineers and technical talent badly needed by Brazilian startups and larger companies doing business in the country. The additional tech talent boost in the country will help Brazil better compete on the global stage.

The Chicago Boys’ “Super” Ministry

The merger of the Ministry of Economy with the Treasury, Planning and Industry and Foreign Trade and Services ministries will create a super ministry to be run by Dr. Paulo Guedes and his team of Chicago Boys. Trained at the Department of Economics in the University of Chicago under Milton Friedman and Arnold Harberger, the Chicago Boys are a group of prominent Chilean economists who are credited with transforming Chile into Latin America’s best performing economies and one of the world’s most business-friendly jurisdictions. Joaquim Levi, the recently appointed chief of BNDES (Brazilian Development Bank), is also a Chicago Boy and a strong believer in venture capital and startups.

Previously, Guedes was a general partner in Bozano Investimentos, a pioneering private equity firm, before accepting the invitation to take the helm of the world’s eighth-largest economy in Brazil. To have a team of economists who deeply understand the importance of rapid-growth companies is good news for Brazil’s entrepreneurial ecosystem. This group of 30,000 startup companies are responsible for 50 percent of the job openings in Brazil and they’re growing far faster than the country’s GDP.

Bolsonaro’s Pro-Business Cabinet Appointments

President Bolsonaro has appointed a majority of technical experts to be part of his new cabinet. Eight of them have strong technology backgrounds, and this deeper knowledge of the tech sector will better inform decisions and open the way to more funding for innovation.

One of those appointments, Sergio Moro, is the federal judge for the anti-corruption initiative knows as “Operation Car Wash.” With Moro’s nomination to Chief of the Justice Department and his anticipated fight against corruption could generate economic growth and help reduce unemployment in the country. Bolsonaro’s cabinet is also expected to simplify the crazy and overwhelming tax system. More than 40 different taxes could be whittled down to a dozen, making it easier for entrepreneurs to launch new companies.

In general terms, Brazil and Latin America have long suffered from deep inefficiencies. With Bolsonaro’s administration, there’s new promise that there will be an increase in long-term infrastructure investments, reforms to reduce corruption and bureaucratic red tape, and enthusiasm and support for startup investments in entrepreneurs who will lead the country’s fastest-growing companies and make significant technology advancements to “lift all boats.”

Europe is trolling the hell out of Trump one hilarious video at a time

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It all started when a Dutch satirical show produced a cheeky tourism ad introducing the U.S. President to the “tiny country” and asking Trump (in his own voice) if he would make ‘The Netherlands Second?’ 

He’s already putting America first, as we all know.

Now other European countries are following suit and producing a range of parody videos. Here’s a selection: 

Switzerland

Switzerland was the first to respond with a “Switzerland Second” video made by the satirical TV show Deville Late Night’s on SRF channel:

“We’re not flat, like for example the Netherlands. They are so flat. Total disaster.” Read more…

More about Denmark, Germany, Netherlands, Switzerland, and Europe

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