Tag Archives: Switzerland

Recent exits in Swiss biotech show interesting features

In the last 12 months, 3 biotech start-ups from the Zurich area have experienced an exit. Molecular Partners went public on the Swiss stock exchange (see my post from Nov. 21) and two other start-ups have been acquired, Covagen by Janssen (see news release dated August 2014) and GlycoVaxyn by GSK (news release from Feb. 2015), both for about CHF200M. I had already written a post entitled Swiss Founder’s Dilemma in Decembre 2013. But I had not at the time published precise individual capitalization tables. Here they are.

Covagen cap. table – click on image to enlarge

GlycoVaxyn cap. table – click on image to enlarge

The next table compares some interesting features such as levels of investments and dilution:
click on image to enlarge
I could have added the university equity which was in the 5-8% range at incorporation to be reach 0.2-1.8% range at exit. An interesting additional point is that the IPO seems to induce less dilution and more value creation than the M&A.

The liquidation preference is another interesting feature. The Glycovaxyn case was interesting with a complex mechanism. Despite its complexity and because the acquisition price was much higher than the amount invested by the VCs, the resulting stakes were similar to a plain vanilla prorata shareholding.

I just added these companies with a couple of others to my series of cap. tables and updated my file soon!

In the French speaking part, EPFL has enjoyed some exits too in the last two years: Jilion, Sensima, Aimago, Composyt. Interestingly the exit values were lower and VCs non-existent. But VCs have been active too in the last 5 years. Hopefully some nice outcome will happen in the near future…

“You have money, but you have little capital”

Here’s my most recent contribution to Entreprise Romande. Thanks to Pierre Cormon for giving me the opportunity of this opinion column.


“You have money goal you-have little capital.” This is essentially the phrase that the US ambassador in Switzerland, Ms. Suzie Levine, delivered at a ceremony in honor of the ventureleaders alumni – a group of young Swiss entrepreneurs – last November 15 in Bern. She said she remembered it after hearing it from one of her recent contacts. I also quote her from memory and since then, I thought about it many times, trying to understand it.

“You”, of course, is Switzerland. We have money, for sure. Switzerland is rich. It is doing well socially, economically and financially. And Swiss companies invest wisely. It would not be fair to take “little capital” at face value, if one defines the capital by what is invested. I feel compelled to repeat “You have money, but you have little capital. »

The first explanation, the most obvious probably is due to the factual finding of the weakness of the Swiss venture capital. The figures vary from 200 million to 400 million per year, depending on whether one defines venture capital as the money invested in Swiss companies (regardless of the origin of the capital) or capital invested by Swiss financial institutions (regardless of the geography of the companies). For comparison, venture capital in Europe is of the order of 5 billion and in the US of 30 billion, or 75 times less in Switzerland than in the US, while the population is 40 times smaller.

A second explanation, perhaps less known, is related to the relative lack of “business angels” (BAs). While Switzerland has the highest density of “super-rich” and one of the highest living standards in the world [1], investments by individuals in Swiss start-ups are limited. Swiss startups unfortunately do not benefit from this potential windfall: the amounts invested by BAs are around 50 million per year and 30 billion in the US. And the situation is even worse: most of the US investment is made in two regions (Silicon Valley and Boston), which does not allow anymore to poner the figures in relation to the population size.

Some players such as SECA, the Swiss association of private investors, or the Réseau through its “manifesto for Swiss start-up” [2] are conscious of the deficit. They lobby to create new venture capital funds of funds and favor private investment in start-ups with lower taxation.

Finally, but this in itself would be the subject of another article, the transition from business angels who provide the first funds (up to a million in general) and venture capitalists who are involved from 5 to 10 million is much less natural than in the US because of a lack of trust and mutual understanding.

However, I fear that the citation / title of this article can not be explained solely by the finding of simple numbers. The third explanation, I should say interpretation of the word capital is that of human or cultural capital. The strength of the US investment in innovation was not financial only. It requires individual attitudes more than economic reasonings.

One note: it may be useful to recall that institutional venture capital – funds from pension funds and corporations – was born out of the vision of a few individuals who believed in the potential of innovation in entrepreneurship; it is the business angels who created the venture capital (not the reverse). This vision comes from a typical American optimism and also more prosaically from the fact that these first business angels had made money by betting on innovation.

The Swiss money is less adventurous and above all – this is often said to me – from a capital creation of more traditional and maybe less innovative economic value. It is also transmitted by inheritance. As it is more hard-won, the fear is stronger of losing it and the confidence lower to make it grow again. Risk taking and lack of stigma associated with failure are typical features of American entrepreneurship, this is well known. We can better understand the (good) reasons for this larger Swiss (and European) conservatism.

Worse: because the financial capital travels easily and many Swiss start-up entrepreneurs look for their investors in London, Boston and San Francisco, this cultural capital is lacking in Switzerland. I do not speak of the quality of the executives in the large companies and SMEs, who perfectly manage their businesses and rarely leave them (rightfully maybe!) to create their businesses. I speak of the non-existence of men and women who have succeeded in the world of startups. One could become tired of always refering to Daniel Borel as the “role model” of Swiss high-tech entrepreneur. Silicon Valley has created in the same period thousands of millionaires in technology, wealthy individuals who systematically reinvest their money, and their time most importantly, in new adventures.

I had found the quote a little unfair, when I first heard it, because I had misunderstood it and at worst easy to fix if it referred to a lack of financial capital. I realize it refers to an even more serious situation as it takes time if we want to change a culture.

[1] Le Matin (May 2012): http://www.lematin.ch/economie/suisse-affiche-forte-densite-superriches/story/25762272
[2] Bilan (June 2014) http://www.bilan.ch/node/1015095

PS: the following table was not in the article but I had included in my book to explain the “cultural” differences between American and European venture capital.

Cruttenden VC US  Europe 2006

A Look Back at the Swiss February 9 Votation

Here is my regular column in Entreprise Romade. This time, the impact of the vote on February 9…


So much has has been said and written about the impact of the vote on Feb. 9 on academic research and education, that I have hesitated before writing this column. Freezing of the exchange of students through the Erasmus + program and the access to ERC grants for top researchers; degradation to the rank of third country in the Horizon 2020 research programs. All this was well explained and should be known to those who are or feel concerned. Foretold disaster or major constraint to which Switzerland will adapt through its own genius, the future only will tell. Finally, the people are sovereign and the concerns expressed trhough the vote are fairly shared, in Europe and even in the USA. Europe suffers probably more than Switzerland and our neighbors have shown their misunderstanding rather than frustration.

So I will just try to illustrate here the reasons for my sadness. A simple anecdote to start: I arrived at EPFL in 2004. The first file on which I worked was the project of a young Spanish student, Pedro Bados. He had just finished his master’s thesis as part of an exchange program and his work had produced some nice results. These results were patented, and the student turned into an entrepreneur when he founded NEXThink which today has about one hundred employees. The start-up, which is headquartered on the EPFL campus, is supported in part by foreign capital due to the weakness of the Swiss venture capital scene.

Mr. Blocher had told Radio Suisse Romande he did not believe in big European projects that do not work. It is true that innovation can not be planned and very clever is the one who can predict the future. But Pedro’s innovation is real however and simply would not have existed without Erasmus. NEXThink is not the only Swiss company founded by a migrant. Biocartis has raised over CHF 250 million and its founder Rudi Pauwels, is Belgian. He is a “serial entrepreneur” who had come to seek inspiration at EPFL after a first success. More than three quarters of the spin-off EPFL have foreign founders, and half are European.

Another anecdote: Switzerland is a model for its neighbors in academic matters and for its innovation performance. Many universities and representatives from European regions visit the EPFL campus. For six months, I have been working on a project with three other European technological universities on high-tech entrepreneurship. Without accepting the intiative on mass immigration, we would have been the project leader of an exchange program for entrepreneurs. We will not be better than a third country and I can not work with my Swiss colleagues from the private sector who have a good knowledge in the internationalization of entrepreneurship. We will adapt…

The problem is not so much economic as Switzerland contributed largely to the funding of these programs. It is human. In a recent debate in Neuchatel, Peter Brabeck, chairman of Nestlé, said: “75% of people working in Switzerland in our research and development teams are foreigners; this vote is creating a lot of uncertainty for them. But I can assure you of one thing: Nestlé will not lose a single one of its scientists. But Switzerland perhaps. Because if I do not have the right to employ them in Switzerland, so I will have them work elsewhere on their projects” [1]. Novartis had already made long ago the choice to open a research center in Boston. On a smaller scale, HouseTrip, a recent success story from the Lausanne Hospitality School, moved to London, because of the lack of local talents.

Last anecdote: I arrived in Switzerland in 1998 and the process of obtaining my work permit took more than six months…; it was not an easy arrival. The entry into force of the bilateral agreements, in 2002, certainly simplified the decision of Pedro Bados to create his start-up in Switzerland; no doubt. I have no idea how future young foreign entrepreneurs will experience our new situation. Switzerland will probably adapt here too! But I do not see who wins anything at complicating the arrival of talents whereas they leave very easily.

I finish on a more symbolic dimension by quoting a participant in another debate on the subject [2]: “And to return to the question of research, EPFL has not only research capacity, it has a serious mission in training. I’m an engineer and I am amazed to see that the very notion of engineer is disappearing when the EPFL is now staking everything on biotechnology. I’d like to see EPFL still train people how to build bridges.” If the academic world has been so little audible despite its attempts, it is perhaps because it is not as well liked as you might think. Switzerland does not like elitism. One prefers established SMEs to start-ups, which do not make people dream as in Silicon Valley and pension funds do not support the venture capital. When I attended a selection committee of promising young people, I heard the jury member smile while indicating that only 2-3% of Swiss students benefited from Erasmus and if it was for them to live what describes the movie “L’Auberge Espagnole” (The Spanish Inn), this may not be so bad. Yet high-tech entrepreneurship also concerns only 2-3% of our students. Scarcity and elitism, I think, are more important than you think.

EPFL did not stop training specialists of concrete or mechanical structures. Academic research has even improved the quality and cost of bridges. But the world is changing too. Bioengineering, computer science are promising and future innovations in these disciplines will be much larger than those that improve our bridges and tunnels. One does not need to be a genius to understand this. Except if we have lost faith in science and technology? I can tell you that Asia and America have not lost that confidence. Would Switzerland be like Europe?

I understand that the initiators of the referendum are sticking to their positions and consider that the country’s problems were more important than the consequences thereof. Expressing a frustration in front of a Europe in crisis or a concern for the future is one thing. Minimizing the impact this will have on Switzerland seems to be a risky bet. I respect the decision, but I regret it… badly.

[1] http://www.arcinfo.ch/fr/regions/canton-de-neuchatel/a-neuchatel-le-president-de-nestle-peter-brabeck-s-inquiete-des-consequences-du-vote-du-9-fevrier-556-1271025

[2] Florence Despot on the RTS: http://www.rts.ch/info/dossiers/2014/les-consequences-du-vote-anti-immigration/5619927-playlist-immigration-suites.html?id=5598709

After Banksy and Invader, Pully’s Mirror Mosaic Man…

What is fascinating with Street Art is that you might not be aware of it but when you begin to see it, it does not stop appearing in front of your eyes. After following Banksy in New York and then discovering Space Invader’s work in Switzerland (Lausanne, Geneva and Bern), a colleague mentioned to me the poetic mirror mosaics in Pully. I spent a few hours walking around and they blossomed everywhere!


The beauty of life also comes from chance as Paul Auster artistically expresses it in his novels (check The Music of Chance). While I was taking a picture of one of these mirrors, someone behind me asked “So you like my snail?”. It was “Mirror Mosaic Man”. We had a short chat. I mentioned Space Invader in Lausanne and Pully’s artist told me I should contact Pierre Corajoud who publishes very nice little books about walks around Lausanne. Pierre Corajoud had indeed published a small booklet about Invaders in Lausanne. I thank him here again for offering me a copy because unfortunately, many works have been destroyed or stolen after its publication and Corajoud took his book out of the shelves. A pity! I hope the mosaics will not disappear… Here is the map though.

Afficher Mirror Mosaic Man on a bigger map

Finally here is a pdf document with all the works I saw or found online. But the best is to go and find them directly on site!

Bern Space Invaders (and in the Rest of the World – including Paris, Basel, Ravenna…)

A very short post which is a complement to Space Invaders in Lausanne and in Geneva.


Space Invaders arrived in Bern in 2000 and for those passionate by his work and close to Switzerland, he was also in Basel in 2013 and Anzère in 2014…


Here is the map and you can also have download my pdf which includes what I have found so far… An update will come when/if I go to Bern!

PS: I went to Bern on June 15, 2014. A strange coincidence étrange is that I finished reading that day La Vie mode d’emploi by Georges Pérec. I thought then that Bartlebooth is a kind of analogy for Street Art and its fans… I just updated also the pdf above and here are the ones which survived after nearly 15 years. Another coincidence: they are 8 surviving pieces out of 29, similarly to start-ups where 50% still survive after 5 years and about 25% after 15 years…


PS2: here is the map or Basel’s invaders…

In August 2014, I added this Basel compilation in pdf.

Afficher Space Invader in Basel sur une carte plus grande

PS2: from time to time, I add chapters to my Space Invaders discoveries. Here is a synthesis essentially based on the artist site and using other passionate data: SpaceInvaders around the World (pdf – 8Mo)

You may find in other posts data about Lausanne, Geneva, Basel, Grenoble, Brussels. In September 2014, I began to compile data about Paris. Here are pdfs files about specific arrondissements:
the 1st,
the 2nd,
the 3rd,
the 4th,
the 5th,
the 6th,
the 12th,
the 13th,
the 14th,
the 15th,
the 16th,
the 17th
and also the 1000+ Paris Invaders. Below is my Paris map.
You will find more recent Paris data here.

In October 2014, I followed in invasion of Ravenna. Here is what I found on line: Space Invaders in Ravenna. The maps also follows.

The Space Invaders in Ravenna

The Space Invaders in Paris

The Immigrant, Factor of Creation

Here was my last column in 2013 for Entreprise Romande, with a subject that is dear to me, the importance of migrants.


The paths of innovation and entrepreneurship are paved with a myriad of dilemmas. Clayton Christensen a few years ago had explored the first topic in his Innovator’s Dilemma and last year Noam Wasserman has published the interesting Founder’s Dillemmas. The uncertainty of the market, youth vs. experience, disruptive vs. incremental innovation, the new vs. the established are just a few examples of these difficult choices. A more controversial and politically sensitive subject is the contribution of migrants and foreigners in the field of creation.

Just when he debate is growing in Europe as well as in Switzerland about the threat that would represent those who are different and come from elsewhere, it is perhaps worth remembering more positive elements about the importance of openness to outsiders. The Swiss history [1] reminds us that the watch industry is linked to the arrival of the Huguenots in the sixteenth century; a part of the textile industry in St. Gallen has its origin in England. There is also a French origin in the Basel chemical industry. Perhaps it interesting to recall that Christoph Blocher has distant German roots. But what about Nicolas Hayek, the savior of the watch industry, rocked by his Lebanese and French cultures.

Much further, Silicon Valley, the world champion of innovation and entrepreneurship, owes much to its migrants. Of course America is a land of pioneers, but the San Francisco area pushed the logic to an extreme. More than half of the entrepreneurs in this region are of foreign origin and for example Google, Yahoo, Intel had founders with foreign roots.

While Europe has a temptation of closing its doors due to its economic difficulties, in the United States, the Start-up Act 2.0 intends to streamline visas for foreigners and to regularize children of migrants to enable them to enter higher education. Japan was another major country for innovation a few decades ago nut it may have suffered from its low level of migration; the country is aging and has not really reinvented itself.

Switzerland is a land of migration, let us not forget it. This is one of its strengths. Today, the campus of EPFL and ETHZ have a great deal of students but also of researchers and teachers with foreign origin. The proportion increases much more if you focus on those who create businesses. For those who have received an entrepreneurial scholarship to EPFL, the proportion rises to 75% including 25 % of non-Europeans.

Would foreigners be more talented and creative? The answer is rather a larger experience of what is unknown and uncertain. Migrants have agreed to leave their homeland, sometimes leaving everything behind. And they know by experience that we can recover from this loss. They know well that it is always possible to start again and the fear of failure is reduced. He also learned to domesticate novelty. It should be added that a migrant has less access to established circles and is stuck by “glass ceilings”. They must often build they destiny. From this point of view, they do not take the jobs of anyone, they create new opportunities, that will become beneficial to others!

[1] http://histoire-suisse.geschichte-schweiz.ch/industrialisation-suisse.html

Space Invaders were also in Geneva

It was tough not to add the Geneva invasion by the Space Invaders after the one in Lausanne (After Banksy in NYC, Space Invader in Lausanne). But this one is far from perfect, many images are missing and I did not take the time to go on site.


Still, you can download my pdf compilation of what I found online as well as a Google map of the places.

Afficher Space Invader Geneva sur une carte plus grande

Swiss Founder’s Dilemmas

Following my recent post about Wasserman’s book, The Founder’s Dilemmas, let me react about recent (and less recent) events related to Swiss start-ups and founders. Do we have here the same dilemmas Americans face, that is building a company which is either control-oriented or wealth-oriented? If you do not know what I mean, read the blog or let me just add that there is this binary model of either slowly creating value with your customers and partners with not much investor money or taking the risk of fast growth with investors, in anticipation of customer demand.

The ultimate example of this in Wasserman’s book is Evan Williams who founded Blogger, Oddeo and then Twitter, with diverse strategies. Paul Graham addresses the issue often (for example in Startup = Growth or in How to Make Wealth) and for a young entrepreneur, getting a million can be very important. At the macro-economic level, there is also a debate which I honestly never really understood. I think an ecosystem is (or should be) interested in fast growing companies, and slow growth should be less of a focus, not because it would not be important, but because it has always existed and will continue to exist with or without public support… However, because there are many SMEs in Switzerland, the support to small firms seems to be important. So is the situation very different from what I know in the USA? Let me try a simple description.

Sensirion is a very succesful Swiss start-up which is a good illustration of the debate. In an article written in 2008, its co-founder, Felix Mayer wrote about “How to finance the Growth? Being somewhere in the middle between the “US American” who is shooting for the moon and the Swiss who develops his technology on the cash flow of a one man company we did not choose the classical venture capital path to finance the first growth phase of the company but were able to find a private investor. In Switzerland, if you look for private investors, you may find experienced entrepreneurs who are willing to invest into a promising business. They are also known as “business angels”. It took quite a while to get from a prototype to a product family or from 1 to 10 to 100 as described before. You need knowledgeable and patient partners to survive this phase with many ups and downs. Usually, it takes longer than you expect. Nevertheless, at the end of the day, you have to get to the point where you generate growth by your own cash flow, which Sensirion reached 6 years after its incorporation. Since then, we generate enough cash flow to finance our yearly growth of around 30%-40%. In order to manage this growth we are of course continuously looking for excellent people!”

Is Sensirion a different model? I went to the Swiss register of commerce and looked at Sensirion financing (the Canton of Zurich is offering very detailed information). It was not an easy exercice and I am not sure about the accuracy (You will see the figures differ slightly!). I tried also to show the dilution of founders over time:


and here is Sensirion employee growth since its inception


Sensirion is clearly a success story, but is it that different from the US model? There might be no VC, but the private investor(s) have put a total of CHF13M with a valuation of CHF190M at the last round. The growth was as fast as many VC-backed start-ups, so I am not sure the investors were more patient and the exit might be less of a priority. This is very similar to many US start-ups… But Sensirion is often mentioned as an example that start-ups would not need venture capital (hence investors). There is not that much difference between a private investor and a VC (or is there?)

Now it is true that many of the Top 100 Swiss Start-ups raise very little money with business angels In the order of CHF1-2M. Recently EPFL’s Jilion has been acquired by Dailymotion for an undisclosed amount and the local press mentions Jilion had raised about one million. Optotune in Zurich is a similar model with 200’000 raised according to the register of commerce. Techcrunch was concerned recently about BugBuster (small) CHF1M A round. Dacuda raised about one million too at a CHF7M valuation. LiberoVision raised CHF200k with Swisscom at a CHF2.5M value before being bought for about CHF8M (it might have been more with upsides). Netbreeze was acquired by Microsoft after raising about CHF5M from one group of investors which owned 80% of the company. Wuala was acquired by LaCie 2 years after its creation and it was totally self-funded. And the list is nearly endless.

But there are also fast growing companies. Covagen, GlyxoVaxyn, GetYourGuide, InSphero, Molecular Partners, Nexthink, TypeSafe, UrTurn have raised a lot of money with VCs. And people who would say Switerland is about health related firms will see it is more diverse…

Company Field Money raised Latest valuation Investors
Covagen Biotech 56M NA Gimv, Ventech, Rotschild
GetYourGuide Internet 16M 50M Highland
GlycoVaxyn Biotech 50M 37M Sofinnova, Index, Rotschild
InSphero Biotech 4M 16M Redalpine, ZKB
Molecular Partners Biotech 56M 115M Index, BB Biotech
Nexthink Software 15M NA VI, Auriga
Sensirion Electronics 13M 190M Undisclosed
TypeSafe Software 16M NA Greylock
UrTurn Internet 12M 36M Balderton


And of course, the founders have been diluted. I will not specifically show the dilution in each company but anonymously illustrate this with the data I could found online (non confidential data).

Company Founders Seed A B & Later ESOP
1 9% 26% 65%
2 30% 33% 31% 6%
3 34% 32% 33%
4 40% 7% 12% 41%
5 43% 47% 10%
6 35% 11% 27% 28%

I am not sure, with all this data, that Switzerland is qualitatively that different… I will finish with an interview of Daniel Borel, the co-founder of Logitech: “The only answer that I may provide is the cultural difference between the USA and Switzerland. When we founded Logitech, as Swiss entrepreneurs, we had to enter very soon the international scene. The technology was Swiss but the USA, and later the world, defined our market, whereas production quickly moved to Asia. I would not like to look too affirmative because many things change and many good things are done in Switzerland. But I feel that in the USA, people are more opened. When you receive funds from venture capitalists, you automatically accept an external shareholder who will help you in managing your company and who may even fire you. In Switzerland is not very well accepted. One prefers a small pie that is fully controled to a big pie that one only controls at 10%, and this may be a limiting factor”

Click on picture to enlarge

After Banksy in NYC, Space Invader in Lausanne

Another post which does not have much to do with my favorite topic, start-ups. But after discovering Banksy’s work in New York, I saw his movie Exit Through the Gift Shop. A very loose link is Space-Invader, another street artist, who appears in the movie. Another loose link is that Space Invader has produced some work in Lausanne where I work. So I looked for his invaders and the result is that attached pdf: Space Invader and Spaceramik in Lausanne (Note that it is a rather large 24Mb pdf document)

An unidentidied Lausanne Invader

I am far from the first one to do this. For example Alain Hubler blogged about it in 2007 and helped me in finding the final place I was struggling with (thanks!) And I nearly know nothing about Street Art. But it was fun to look for his work.

As a strange coincidence Xavier Delaporte on French Radio France Culture had an interesting chronicle last Friday about our new ways to walk in the street in the Internet Age, Les nouvelles façons de marcher (avec nos outils numériques) This is just another example!

Space Invader, just like Banksy and many other Street Artists, remains anonymous. He has his own web site, www.space-invaders.com. He has his fans like Monsieur Chat who follows his production in Paris and many others who put pictures of his work online. Unfortunately, most of the work has disappeared, either the buildings have been destroyed, or the art has been stolen and/or replaced by others. There is also a second artist, Spaceramik, who put his own video on YouTube. The picture I put above might not be from Space Invader neither from Spaceramik, hence the term “unidentified”.

A final point here is the Google Maps of Invaders in Lausanne.

Display Invaders in Lausanne directly on Google Maps

PS: (February, 8, 2014) Pierre Corajoud and Space Invader
Pierre Corajoud is famous in Lausanne for publishing very nice little books about walks around Lausanne. I learnt through Mirror Mosaic Man that he had published such a booklet about Space Invader in Lausanne. I thank Pierre Corrajoud here again for offering me a copy of his book because unfortunately, many works have been destroyed or stolen after its publication and Corrajoud took his book out of the shelves.


PS: (December, 24, 2013) A year of Street Art

Myths and Realities of Innovation in Switzerland

Xavier Comtesse has just published an excellent report The Health of the Swiss innovation – Ideas for its strengthening, which he gave a summary on his blog, Innovation in Switzerland: it is primarily the domain of Health! This is a very interesting report and it is challenging for me because it “proves” that Silicon Valley is not and should not be a model for innovation in Switzerland: in his introduction he states that “the success of Switzerland in this area is still largely and for many people a mystery, especially since the only model actually known and studied is that of Silicon Valley and it does not fit, as we shall demonstrate, that of Switzerland. Although this model has made California the envy of all, it seems to have finally not been fully copied by anyone.”


But as Comtesse is a bit “Contrarian” (as I am also – my friends often accuse me of debating with myself), he cannot be satisfied with the health of the Swiss innovation. “As soon as the lines of the Swiss model will emerge, it will also show its weaknesses. This will allow us to propose changes to the current situation for a successful future evolution.”

He begins by showing the strength of R&D from the private sector – 75 % of the 16 billion spent in Switzerland. He adds that Roche and Novartis in pharma represent a large portion of this amount (approximately 30% of all R&D spent in Switzerland) and they invest more abroad.

A first point of divergence, R&D is not innovation … In simple terms, innovation is the creation, closer to entrepreneurship than to R&D. Apple has always innovated and much better than other companies, but its R&D ratio is very low.

(Click on image to enlarge)

Then he compares Silicon Valley and Switzerland: “Silicon Valley massively encourages the emergence of new actors (start-ups) in the field of information technology and communication (ICT) while the Swiss model promotes rather large incumbents in the field of health.” [Page 20] and even [page 25] “Silicon Valley has deliberately chosen the new technologies of information and telecommunications (including the Internet) as the innovative axis of its development.” He concludes with: “You could say that Switzerland is for health what Silicon Valley is for ICT.”

Second point of divergence: Silicon Valley is not the Mecca of ICT, but that of high-tech entrepreneurship. Genentech and Chiron were the leaders of biotech before being bought by Roche and Novartis respectively. Intuitive Surgical is a leading medical technology company, Tesla Motors could become a major player in the automotive industry and there are hundreds of other start-ups in the fields of energy (massively financed by funds like Khosla or KP), in clean technology and health. Furthermore Silicon Valley has also large established companies such as HP and Intel which are no longer startups.

Comtesse is convinced that Switzerland is less fragile. “As amazing as it may seem, the Swiss model is more robust and efficient over the long term than Silicon Valley because it is less dependent on global rivalries and Silicon Valley may be under threat from Korea, China or any other part of the world. Switzerland is less so because the entry ticket in the field of health, namely the huge investment to develop higher education, university hospitals, research centers, the creation of companies producing blockbusters (products reaching the billion in sales) is so high that few regions can compete in this field.”

Third point of disagreement: I do see how Korea (through Samsung and LG) has indeed become a threat to Silicon Valley but I cannot see why it could not be in the field of health. Investments in electronics and telephony were also huge. Also, the higher and higher reluctance of emerging countries with intellectual property protection (patents) on drugs and the emergence of generics seem to me equally destabilizing.

Finally Comtesse also describes the weaknesses of innovation in Switzerland: “But the question that no politician really wanted to answer was the lack of good projects. If this question is asked the answer is obviously not the creation of science and technology parks, or even the transfer of technology, let alone coaching. It is the creativity that is lacking. How to make Switzerland and especially young people from higher education to be more creative?” Neil Rimer, from Index Ventures, said similar things: “There is innovation in Switzerland, but few entrepreneurs are ready to conquer the world” and “To attract [ … ] you need a critical mass of start-ups so that there are other options available in case of failure. […] Switzerland and its cantons seek to attract traditional companies or the administrative centers of large corporations. […] My biggest wish would be that the authorities encourage the creation of jobs creation in engineering, design, marketing and management. This is how we will attract a critical mass of professionals who create and grow start-ups in Switzerland.” (See L’innovation en Suisse d’après Neil Rimer).

There is a slight difference. Neil Rimer is not talking about good or bad projects, but about ambition. He even said on this blog a few months ago : “I continue to be amazed to hear that there is not enough support in Switzerland for ambitious projects. We and other European investors are perpetually in search of global projects from Switzerland. In my opinion, there are too many projects lacking ambition artificially supported by institutions – who also lack ambition- which gives the impression that there is enough entrepreneurial activity in Switzerland.”

Comtesse then returns to the role of government by distinguishing incremental innovation and disruptive innovation . “Indeed what matters to a nation is its overall innovation capacity including disruptive innovation. But if the State does not take all the risks, then nobody will do it. That is why it is urgent to give further instructions or guidelines to the CTI. Financing incremental innovation should not be its task, or only marginally.” [Page 27] “The Commission for Technology and Innovation (CTI) tends to support incremental innovation projects, which are less risky and easier to implement. These should be the prerogative of private companies and therefore should not benefit from government support. On the contrary, disruptive innovation, similarly to basic research, should be largely the responsibility of government.” [Page 30] “So on the one hand our innovation system is supported by large companies, and on the other hand by innovative SMEs as well, but those do not reach a sufficient critical mass to make often a difference. The idea would be not to finance individual projects as does CTI in general, but multi-partners programs led by one of the major Swiss companies.” [Page 28] “This approach does not preclude the emergence of new start-ups but these would be placed under the protective wing of medium and large Swiss companies. This would avoid start-ups to be immediately sold to the Americans (a phenomenon called “born to be sold”) or and help to counter the fact that they are never able to grow. It should be remembered that over 80 % of our start-ups do not perish in 7 years, while the “normal” rate is 50 % (one might well say that “never die” is another Swiss phenomenon).” [ Page 31]

I agree with him on the analysis, less on the implemention solutions. I find interesting the idea of giving priority of government support to disruptive innovation. It reminds me of the excellent analysis of Mariana Mazzucato about the Entrepreneurial State. I remain much more cautious about the idea of ​​a consortium of major companies to develop and protect our start-ups. I understand the desire to reduce the risk of the sale, but I do not think the concept is realistic. Which real entrepreneur wants to be protected or controlled by a big even if nice brother… I also have some doubts about the ability and entrepreneurial desire of large corporations.

In a little artificial manner, Comtesse adds the idea of ​​a tax incentives for innovation companies. “The Swiss tax system does not explicitly provide incentives for companies that conduct R&D. The simplest solution is the tax credit for innovation that would, in various ways, decease the burden of corporate tax based on their spending in innovation. Many large countries (the United States, Canada, England, Spain and France) have already implemented such an instrument. It is not, however, about encouraging any sector by this tool but rather to create an emulation for long-term innovation in the country. This device must provide to companies, especially SMEs, more freedom of maneuver to face the innovation process.” (See again Comtesse’s blog).

Here I can speak of complete disagreement. You can read again my analysis of Mazzucato denouncing tax optimization in this area. I never believed in tax incentives and I could be wrong. I understand the greater effectiveness of the approach, but I believe there are more perverse effects than real positive ones. Just look at the plight of the American Taxation system of the large technology companies.

Despite my criticism, this is an excellent report. Like all Contrarians, I focus more on disagreements but there are, in this analysis, extremely interesting points about the myths and realities of innovation in Switzerland. A short reminder as a way to end this post: Comtesse published a few months ago a Prezi presentation on the same topic, and you can read my comments about the Swiss model innovation : is it the best?