Editor's note: this is a guest post from Joe Scarboro, recently appointed Head of Entrepreneur Relations at Tech City UK and co-founder of 3beards. Disclosure: Joe was invited on the 'innovation tour' documented below by the Embassy of Switzerland in the UK.
When you think of European innovation hotspots, you’re not likely to think of Switzerland. There is actually a lot of innovation there though, but it’s a very different type to what is seen in most other startup clusters.
I spent three days travelling in Lausanne, Bern and Zurich discovering what the Swiss innovation environment looks like. In a resoundingly positive way, the most concise answer is probably “different”.
(Not so lean) innovation in unlikely places
What began in 1969 as an engineering school on the site of a proposed airport is now the EPFL (Ecole Polytechnique Federale de Lausanne), the world’s top university under 50 years old as judged by the Times Higher Education rankings. The site hosts both the university and many companies on the EPFL innovation park, with there being a tangible feel of collaboration between the two.
In fact, there are many, many joint projects whereby professors and students work side by side with corporate R&D departments. The research work is generally funded by a mix of government grants (no greater than 50%) and a contribution from the corporate. These type of projects are exactly in line with the federally mandated mission of EPFL (and ETH) of training, research and technology transfer.
The mix of people and openness of the park, which contains 25,000 people day to day, provides much serendipity which has helped EPFL evolve over the years. This is definitely a parallel to the other European startup clusters, having a critical mass of innovators, but I quickly got the feeling that the type of innovation that happened here was a long way from the rapid prototyping, lean style of innovation that we frequently see.
There are a number of clear reasons that the companies get involved with the innovation park: talent recruitment and staff retention, leverage of the professor’s experience and access to specialist equipment too.
EPFL then make sure that the corporates engage with the startups and labs at the university; there are three buildings housing startups, regular showcase events and free co-working spaces. One area that did concern me however was around IP ownership for the joint research projects, when I asked Jean-Michel Chardon (Snr Director, FutureLab, Logitech) who owns the IP, it was explained that the researchers keep it for research purposes and Logitech (in this case) own it for any commercial applications. This didn’t strike me as particularly fair at the time, but as the trip went on it seemed consistent with the approach taken to innovation in Switzerland (note that the research teams do not have an issue with this).
Following on from the information about EPFL, we heard from Jean-Philippe Lallemant, the MD of EPFL Innovation Park who had some interesting facts about their startups: 80% are still in existence after 10 years but few grow rapidly and whilst all good projects get funded eventually, speed of funding is an issue. Couple this with few big exits (and therefore little money coming back into the system) and it seems that there is a liquidity problem too.
In Jean-Philippe’s view, there’s great research resources and 20+ years of startup creation and support, with over 200 startups created each year, but the environment is risk averse and low unemployment means that attracting talent is difficult. As well as this, there is no critical mass of entrepreneurs and also a lack of experienced mentors/investors.
In addition to the speakers from EPFL, we heard from two successful Swiss companies; Logitech and Actelion, the former you will know and the latter not. Actelion are a pharma company and have been around for 17 years, they now have 2.5k staff and a turnover of CHF1.95Bn (2014) from just 6 products.
They only look to produce new products from their own IP which has a time limit until generic rival products can be produced. For this reason the pharma industry is understandably secretive and there is little collaboration between companies. The top university and research environment in Switzerland makes it a very attractive place to establish and grow this kind of company, with Roche and Novartis other good examples.
From the first day it was clear that Switzerland had no 'normal' innovation or startup environment. On the one hand it has some incredible technology and deep research facilities, but on the other hand the general ecosystem is risk averse and slow moving, lacking sufficient liquidity in both funding and entrepreneurial skills.
“We don’t like failure in Switzerland, but we don’t like success either”
The second day took us to SERI (State Secretariat for Education, Research and Innovation) in Bern, where we met the innovation policy team. This was a little confusing at first as we were told that there is no explicit policy for innovation. It is the Swiss government’s view that “Innovation is the domain of the private sector”. However, the education system, and funding and infrastructure for research have a lot of governmental support, so whilst there is no “explicit” policy, they are providing many elements that enable innovation and support the general environment.
One of these programmes is CTI (Commission for Technology and Innovation), which is the Swiss confederation’s innovation promotion agency. It has been in existence for 40 years and lends support to R&D projects, entrepreneurship and startup companies. This is the programme through which 50% of the EPFL research projects mentioned above are funded. In addition to financial support, a large proportion of the programme’s CHF150m budget is used for coaching startups and entrepreneurship training. They run a comprehensive process around evaluation and coaching which can last up to 36 months and includes internationalisation camps, investor pitches and participating in Swiss pavilions (trade shows such as Expo2015). Once this process is completed, the startups can be awarded the CTI Startup Label "A Seal of Quality and Maturity”.
In addition to CTI, but not directly linked (despite the name) is CTI Invest. This organisation is the leading Swiss venture platform for high tech startups; it's a public private partnership and receives some funding from federal government and at a local canton level. CTI Invest provide events, a matchmaking platform, coaching services and investor education days all to help startups find funding.
What made this particular initiative more remarkable was Jean-Pierre Vuilleumier (JP), the MD of CTI Invest. JP presented CTI Invest with a very different style to what we had seen up until now, he was outspoken, loud and very visibly enthusiastic about startups. A couple of his more interesting comments were "We don’t like failure in Switzerland, but we don’t like success either” and that as a country they have "failed to monetise on their education”. These remarks were in line with the conservatism we had seen so far but JP also pointed out that there are good Swiss ICT startups:
Unfortunately, two of these startups have moved most of their operations out of Switzerland as they felt that they had better access to funding and markets outside the country (HouseTrip are now in London and GetYourGuide in Berlin).
Although JP had clearly been exposed to and had absorbed more of the type of entrepreneurial spirit that I would expect in a regular startup scene, he did concede that generally, Swiss startups are very research based and look to get as close to perfection as they can.
Clearly this is not in most people’s definition of startup.
Later that day I met Ben Robinson, Chief Strategy and Marketing Officer for Temenos, a banking software company. Temenos are in the process of launching the first FinTech incubator in Switzerland, whilst it seems fairly illogical that somewhere known to be a centre for finance is only just opening a FinTech incubator, it’s a great sign that the type of innovation in Switzerland is changing.
I ended day 2 with a better picture of the Swiss startup ecosystem.
It excels in Pharma, CleanTech, MedTech and precision technologies (think watches, dental implants) that cannot be launched as MVPs, lean methodologies are not necessarily appropriate and research is pretty much always required (in some cases for several years).
An overwhelming majority of the startups we heard about were associated with a university. There didn’t seem to be any talk of organic startups (not related to a university) and there were very few consumer businesses that could achieve the kind of “unicorn” speed of scale that the likes of Uber and Slack have seen. There are people like JP though, who believe that in order to stay relevant and successful, some of the Swiss expertise in research needs to translate into more rapidly growing startups and that there needs to be a better, more supportive ecosystem for this to be successful.
Zooming in on Zurich
In a busy third day that also included flying back to the UK, we encountered sound reducing net curtains, world record holding, super-thin photovoltaic film and one of my personal favourites, the immersive bird flight simulator (Oculus Rift and a whole lot more).
We started the day with an overview of the Swiss startup landscape from Stefan Steiner from IFJ (Institute for Young Entrepreneurs), a private company helping entrepreneurs and supporting startups.
Stefan started his first internet company at 15 and has had a good variety of experience having worked in entrepreneurial activities for 16 years as well as 10 years in banking at Credit Suisse. Stefan explained that through IFJ and VentureLab, they run a number of initiatives like Venture Leaders which takes a selection of startups to Boston for a 10 day intensive trip for business development and teachings from a very developed startup ecosystem. They also run an alumni network and other events to promote growth in the startup community.
The discussion with Stefan was followed by a showcase from the Game Design faculty at the ZHdK school, which was impressive. The industry itself is showing good growth signs in Switzerland, with 10 times more studios than 5 years ago and some big names opening offices, including Disney research, Miniclip and Studio Gobo. The output from the students we saw (and tested/played) was well put together and different too, it’s clear there are talents in game design too.
What followed this talk was the best Oculus Rift experience I have had to date. Birdly was developed by Professor Max Rheiner and is not only a regular sound and sight Oculus simulation, it includes a full body support and wind effect too (see pic below).
You lie flat on your front in the simulator, with your arms out sideways and control yourself/the bird by some very well designed and intuitive controls (the hand paddles). Flap to gain height, twist forward to dive, and twist back to point up, the faster you go the stronger the wind gets.
It was a very enjoyable experience, I was even directed to an easter egg which teleported me from flying around San Francisco to the Swiss alps! Aside from my obvious excitement about using Birdly, the design and construction of the hardware and software were very impressive, further confirmation that the University has some great tech talent.
After a short coach trip, we arrived at Swiss Federal Laboratories for Materials Science and Technology (EMPA) where we were given an overview of the research projects which are geared towards a sustainable future (and in the main are partnered with commercial entities).
As we saw with the types of project at EPFL, the idea-to-market cycle is long, in the example of Flisom (where we travelled to next) it has taken 18 years! We were shown some examples of the technologies that had been developed at EMPA, such as the thin net curtains that have the sound proofing qualities of thick theatre stage curtains (and were still semi transparent), UV activated caffeine patches (used for premature babies, instead of injections) and also Aerogel insulating plaster, developed using space technology (this is the best insulating material in the world).
In addition to this, EMPA are constructing a new “building" called NEST; it will be a modular research and demonstration platform for testing innovative building technologies in real life. The building will be used as office and living space in order to test materials and building methods being developed at EMPA. Different projects will be installed in the platform for various time periods and the real life results measured. In addition to the research projects, EMPA also incubate startups that come from the projects (and some that do not).
Our final stop was Flisom, the flexible light weight CIGS photovoltaic solar module manufacturer. They are about to start production at a new facility they described as small, but was pretty large for a startup.
They explained their manufacturing process in fairly simple terms and outlined that they had a very technological USP, so much so that one of their machines was hand-built with components ordered from over 200 different suppliers in order to protect the IP. They are the current world record holder for the highest efficiency rating from CIGS photovoltaic film and the modules can be used for a wide range of purposes. It was a impressive manufacturing facility; it will be interesting to follow Flisom’s future, especially with the likes of Tesla’s PowerWall.
After three days of travelling and ingesting a huge amount of information on various areas of Switzerland’s innovation and startup environment, it was clear that some of the sharpest minds in the world are working on some potentially world-changing technologies. They have great strength in pharmaceutical, MedTech and CleanTech and have extremely high-quality research facilities and capabilities backing up these industries.
When it comes to ICT and consumer technology focussed startups however, there are fewer examples to point to; this part of the ecosystem feels quite early in its development and the type of support available hasn’t wholly embraced the fast paced, lean, pivoting style of startup that is prevalent in most startup clusters.
There are startups of this kind though, and on our short trip we did meet people that want to move away from the usual risk averse, perfectionist style of the Swiss startup - it does feel like change is coming. If Switzerland can translate its huge success in research and development into a more iterative, more commercial and slightly less perfect startup process, then the rest of Europe should be very worried. Switzerland is one area to keep an eye on.
Featured image credit: xtock / Shutterstock