Entrepreneurial Factors of Swiss entrepreneurial ecosystem

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Entrepreneurial factors refer to the startup-specific environmental context, which is directly related to establish a new venture. These factors include:

  • entrepreneurial support structures: In Switzerland, entrepreneurs have access to a wide variety of support. There are a lot of governmental and non-governmental support institutions, incubators, hubs, co-working spaces and coaching initiatives.
  • visibility for entrepreneurs: Several mechanisms intend to shape stakeholder’s perceptions about the quality and potential capacity of a start-up. These include external certification, such as affiliation with reputable third parties (Elfring & Hulsink, 2003), patents, government grants, awards (Ahlers et al. 2015), and
    media presence (Vogel, 2013).
  • entrepreneurial network: weak tie network tie and strong tie network.
  • venture financing: access to financial support is an important
    entrepreneurial framework condition. The source of financing depends on the stage of new venture development
  • entrepreneurship education: it is comparatively weak in entrepreneurship education for the junior and senior group of the Swiss population.
  • culture for entrepreneurship:

The following section analyzes these dimensions in greater detail. Figure 10 shows an overview of start-up support initiatives for Swiss start-ups (see Appendix II for a detailed list).

 

1. Entrepreneurial support structures

Government Level: CTI

Commission for Technology and Innovation (CTI), CTI start-up, CTI
entrepreneurship: CTI start-up provides a tailored, hands-on coaching process by experienced and successful entrepreneurs. The CTI Entrepreneurship is the Swiss federal training program for startup founders. The CTI Market Entry Camps provide an individualized acceleration program for the most promising Swiss startups with global ambitions looking to expand into the US, India, China, and UK.

Non-Government Level

Startup Weekends or the initiative SwissChallenge

ETH Innovation and Entrepreneurship Lab (ieLab)

EPFL Innovation Park – among many other innovation parks in Switzerland

Impact Hub Zurich

Social Entrepreneurship Initiative and Foundation (seif)

Basel Incubator

Fintech Fusion, Switzerland’s first fintech accelerator

Majority of start-ups registered on the Start-up Monitor are affiliated to
federal (ETHZ and EPFL) and cantonal universities (88.5%), but only 6.2% to universities of applied science, 3.8% to field specific  universities, and 1.2% or less to federal research institutes and private
universities. Measures to support students from universities of applied science, field specific and private universities, as well as research institutes are important as they may have the potential to further catalyze entrepreneurial activity in Switzerland.

 

2. Visibility

With a great diversity of start-up competitions and government grants and several nation-wide startup blogs and websites, the opportunities for entrepreneurs to increase visibility in Switzerland are abundant.

Venture

Venture kick

Foundation W. A. de Vigier

Heuberger Young Entrepreneur Award

ZKB Pioneer Prize

Swissnex

Venture Leaders

Portals:

  • startupticker.ch is Switzerland’s most prominent online platform
    for young entrepreneurs, innovators and supporters.
  • The Swiss Start-up Monitor is Switzerland’s central start-up community that matches stakeholders within the Swiss entrepreneurship  ecosystem and provides registered users with a variety of benefits, such as free access to contract templates.

The opportunities for start-ups to enhance their visibility in Switzerland can be assessed as good due to the wide range of competitions and several media outlets.

 

3. Network

Regarding the type of networks, the literature indicates that entrepreneurs initially rely on their strong tie network, which is formed by close personal contacts, such as family members and friends. These personal contacts not only provide intangible resources such as emotional support, but also initial financial resources to start-ups (Grichnik et al., 2014). In a more advanced stage of business development, start-ups tend to rely on their weak tie network, which
comprises more distant business contacts (Hanlon & Saunders, 2007).

Elfring and Hulsink (2003) emphasize that entrepreneurs make use
of strong ties to attain vital resources and weak ones for achieving legitimacy and discovering opportunities.

Switzerland has several industry clusters which are not only of national but also of international significance. Many Swiss start-ups have basically been centered on these  industrial clusters. The Start-up Monitor database confirms this trend, showing for example that while in Zurich and Geneva ITC high tech start-ups are prominent, in Basel-Stadt and Basel-Land dominate new ventures from the Biotech & Pharma and Medtech & Diagnostics industry (Figure 12). However, with the exception of ETH and EPFL, there are hardly any regional
entrepreneurship specific ecosystems (Vogel & Grichnik, 2014).

 

4. Venture Financing

In the seed stage, businesses are characterized by a lack of track record and high levels of uncertainty. Firms operating in this early stage are investing heavily in the creation of their business, but are oftentimes not generating sufficient revenues and profits to achieve a satisfying Return on Investment (ROI). At this stage, the most common sources of start-up funds are personal savings, family and friends,  bootstrapping and business plan competitions.

As the firm reaches the growth stage, they generate a sales and profit history to inform investors about the potential of the business. The major source for start-ups in this stage is external investors as they have also the possibility to provide higher investments (Grichnik et al., 2010; Seidman, 2005).

The most frequently mentioned external financial sources are:

  1. business plan competitions (33%)
  2. business angels (17%)
  3. public or government agencies (12%)
  4. venture capitalists (7%)
  5. founder, family, friends and money prizes from business plan  competitions (6%)

Financial supports in Switzerland have some biases as shown below:

  • Disciplinary bias: The Swiss Venture Capital Report shows that in 2014 Swiss start-ups collected more than CHF 450 million in 92 financing rounds, of which more than three quarters of the invested money (78%) went to companies in the life science sectors. Several sectors such as MedTech and Biotech have a solid
    basis of venture capitalists and corporate venture capitalists willing to invest in late stage companies.
  • Startup phase bias: To conclude, venture financing is generally available in Switzerland, but not equally for all stages of the entrepreneurial growth process. In Switzerland, there is a large diversity of funding for the seed phase of a new venture. However, there is still a certain lack of capital for the early growth stage of start-ups (Vogel & Grichnik, 2014).

Swiss Investment Fund (SIF) of the Swiss Private Equity & Corporate
Finance Association (SECA)

 

5. Entrepreneurship education

Entrepreneurship education can provide future entrepreneurship with the necessary tools and skills to start their own ventures. In addition,
entrepreneurship education seeks to help novice entrepreneurs develop the right attitude and mindset necessary to spur economic growth. Hence, access to entrepreneurship within educational systems is of major importance at all levels (Volkman et al., 2009). Empirical evidence suggests that entrepreneurial activity is positively influenced by entrepreneurship education programs.

Entrepreneurship education constitutes three main areas that cover different stages in the lifelong learning process of an individual: youth, higher education and senior levels. With the rise of the digital age, barriers to entry have become significantly lower for young people, because of two reasons: each successive generation yields more technology savvy entrepreneurs and geographic barriers to businesses have been essentially eliminated.

However, youth entrepreneurship promotion programs need to account for the lack of work- and industry experience of young prospective entrepreneurs (Vogel, 2013). Apart from the inherently different levels of intellectual and behavioral maturity, the only difference is how
entrepreneurship is taught and how it is learned. At the level of higher education, universities play a key role in creating knowledge and producing high-potential graduates and researchers.

According to the European Commission (2008) such entrepreneurship education programs can have various objectives, like for example: a) developing entrepreneurial drive among students (raising awareness
and motivation); b) training students in skills they need to set up a business and manage its growth; c) developing the entrepreneurial ability to identify and exploit opportunities.

Education and training programs toward opportunity recognition are of major importance at the senior level of education.

In Switzerland, entrepreneurship education for youth (secondary level education) is scarce. An exception is the YES-program  (Young Enterprises Switzerland, part of Junior Achievement), an association
which develops and supports practice-oriented business training programs for high-school students in Switzerland. The majority of universities and universities of applied sciences has established chairs for entrepreneurship and now offer courses in entrepreneurship, providing profound theoretical and practice-oriented skills
for being, acting, and thinking like an entrepreneur.

Overall, there is significant room for improvement in entrepreneurial education at all stages of the learning process of an individual, especially at the junior and senior levels. Although a majority of universities and universities of applied sciences have established chairs for entrepreneurship offering courses in entrepreneurship, experts criticize the lack of attention that is given to creativity, self-sufficiency, and personal initiative, instruction in market economic principles and entrepreneurship in primary and secondary education (GEM, 2014).

 

6. Culture

Individuals in Switzerland has average perceptions about the presence of good opportunities for starting a business (43.6%), as well as the beliefs they have the skills and knowledge necessary to start a business (41.5%). Only 42.3% of the Swiss population considers entrepreneurship as a desirable career choice.

The Global Entrepreneurship Monitor observed a positive change in Swiss cultural and social norms over the last ten years. Another remarkable factor is the growing rate of women entrepreneurs in Switzerland.

As Feld (2012) points out, stories and role models of successful local entrepreneurs can inspire younger entrepreneurs to undertake similar journeys.

It has been observed that the Swiss entrepreneurship culture has changed toward encouraging people in their decision to start-up an enterprise and it is noteworthy that fear of failure in Switzerland is at the same level as in the US. However, Swiss experts notice a lack of entrepreneurial risk-taking in the Swiss culture (GEM, 2014).

This section looks at the entrepreneurial factors in Switzerland and leads to the conclusion that while some of the factors are very strong, others still need substantial improvement. While entrepreneurial support and visibility score well, culture, network, venture financing and education are below the average and have considerable potential for improvement.

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