Switzerland is a hotbed of tech innovation: It's the birthplace of the World Wide Web, the first mass-market computer mouse, and the world's largest particle collider. The problem? Local startups still struggle to steal the spotlight.

Nicknamed the Bio Alps, Switzerland has a rich research history thanks to innovative institutions like the European Organization for Nuclear Research (CERN) and generous government funding programs like the National Science Foundation, which lets students and established academics alike apply for funding for research projects. The country recently led the World Economic Forum's Global Competitiveness Index for the eighth year in a row, including in the innovation category, thanks to a large talent pool of scientists and engineers and an economic environment that emphasizes collaboration between universities and corporations. But startups have struggled to find their place in a business environment that historically has favored driving innovation through giant corporations.

Venture capital invested in Swiss startups is on the rise--up to about $670 million in 2015 compared with just under $300 million in 2012. And Switzerland has launched a few startups of note--including ProtonMail, a venture built out of CERN that has become one of the most popular encrypted email services in the world--but the country lacks success stories such as Sweden's Spotify or Finland's Supercell.

One thing is certain: It's not for lack of interest. Inc. spoke to Swiss founders to determine why the desire for innovation has not translated to a more robust environment for startups--and what the country is doing to fix that.

Championing entrepreneurship and risk-taking

"I think the big challenge we face here in Switzerland is we're still lacking in the startup DNA," explains Mike Baur, the co-founder and executive chairman of Swiss Startup Factory, a Zurich-based accelerator. It doesn't help that there aren't many young hot shot tech companies like Facebook or Google for budding entrepreneurs to look up to. While 99 percent of Swiss firms are small or medium-size, the most valuable companies are industry stalwarts like Credit Suisse and Nestle, which have been around for 160 and 150 years respectively.

Switzerland's private and public organizations have begun to step in to give founders the building blocks they need to take the first step. The Institute for Young Entrepreneurs (IFJ), founded in 1989, launched a funding arm in 2007 to give young entrepreneurs a another option for securing seed capital.

Switzerland's largest research university, the Swiss Federal Institute of Technology (ETH), has also changed its approach to teaching entrepreneurship. When Jan Lichtenberg, CEO and co-founder of commercial 3-D tissue provider InSphero, was a student at ETH in 2005, students were often told that the best way to get their cutting-edge ideas to market was to license their technology to big companies. Not anymore.

"Since we started InSphero, ETH has become very active in teaching the students about how to start a company, and to think in a more entrepreneurial way--to think about things like patent protection of new ideas at an early stage, before they are published," Lichtenberg says.

Spotting the gaps--and how entrepreneurs can bridge them

Part of what makes Switzerland an innovation hub--but also a difficult place to start a business--is its governing structure. Switzerland is organized into 26 different states, called cantons. Each canton sets its own laws, and as a result, each canton wants to become known as its own "hub" for a certain industry, sometimes to the detriment of building a cohesive startup ecosystem across the country. The canton of Zug has become known as the "crypto-valley" of Switzerland, thanks to its low tax rates and its early adoption of bitcoin as a valid payment method for public services. Meanwhile, Geneva, home to a large number of private banks, is trying to establish itself as Switzerland's fintech sector.

As a result, newer privately funded accelerators and networking groups like Swiss Startup Factory, as well as Zurich-based Digitalswitzerland and Kickstart Accelerator, are more focused on connecting startups across Switzerland and Europe than on building a concentrated startup hub that's focused on one particular industry. This also helps bring together entrepreneurs coming out of the country's universities with specialized skill sets who need to find co-founders with complementary backgrounds.

"All of the cantons have their own incubator programs, which are financed through the government or through the regions," Baur says. "We started Swiss Startup Factory because we said, 'Hey, why do we not have privately financed programs? It can't be that we have only the politically driven and governmental support,'" he adds.

Emphasizing an international game plan

Switzerland has a population of just eight million--so any Swiss entrepreneur aiming to build a billion-dollar company will have to expand internationally sooner rather than later.

"We established ourselves as an international business right from day one," says Dorian Selz, the co-founder of Squirro, a data analytics company that has offices in Zurich, London, Barcelona, and New York City. Both Squirro and InSphero keep the majority of their sales and marketing personnel outside of Switzerland, while most of the research and development is done in the country. It's a model that Lichtenberg and Selz say was popularized in Tel Aviv, another startup hub with a rich research and development history.

The Swiss government has also taken a number of steps to help startups expand outside the country. Swissnex, a joint private-public institution founded in 2000, connects Swiss researchers and companies to key decision makers in other innovation hubs. Entrepreneurs can apply to participate in a coaching camp, where they can work for a month in Boston, San Francisco, or New York. Swissnex also has offices in Bangalore and Singapore.

The startup ecosystem won't change overnight, but Swiss founders remain optimistic that the next generation will help bring about a significant shift.

"There was nothing like a startup scene 10 years ago in Switzerland," says Selz, noting that most large companies in Switzerland now operate accelerators. But there's an even greater sign of changing times: "Now a lot of young people do consider doing something besides joining a big company after studying."

Published on: Nov 28, 2016