A wake up call to Swiss and European finance to invest into new innovative companies
Why are we investing so much in research & development in Europe and not investing in the companies generating economic benefits from it? There is only ¼ as much funding for new innovative businesses compared to funding for research and development. Are we wasting potential? It's a question that the following book goes through: Deep Tech Nation Switzerland. By Dominique Mégret (ex Swisscom Ventures).
A wake up call to traditional finance, from being gate keepers of wealth to active economic actors and future shapers. This book gives you much game, many insights into European entrepreneurship and financing.
It goes first through the history of successful entrepreneurs in Switzerland, many of them foreigners from neighbouring countries. It analyzes the success stories of ABB electro machinery, Swatch, Swisscom. The analysis of the hidden champions, and their many various and different paths to success. Ending with the potential future activities.
A curious fact about the country: Do you know that most Swiss politicians have a profession in the private economy? Even a president and the leader of the major party are the directors of major industrial groups. Fantastic example for the continent!
Main topic covered:
One key observation about Europe, the capital invested in research and development versus the capital used to invest (venture capital) into the new companies (startups) that try to translate these discoveries into market advantages. Risk stages, which are much higher earlier on in R&D phase and market testing startups are absorbed locally by government programs, while international investors enjoy more safety returns participating at later stages with proven technologies that are closer to generate economic returns, foreign strategic investors potentially could pressure to relocate activities near them. Risk appetite must increase across the economy to keep our regional wealth.
An important question to ask ourselves:
Can the long-term strategy of quality and perfectionism outperform the capital intensity and agility of today's technological environment? Switzerland looks not only to maintain its status but to stay ahead, as well as, remain independent of Asian hardware and American Software.
Some topics mentioned and remarkable:
A very well rounded book with some economic considerations, an entrepreneur as a revolutionary playing a role in the fundamental process of generating change plus its interaction with the figure of the banker/ capitalist and financier. The accelerated cycle of innovation and creative destruction by Schumpeter, comparing it to the shortened life cycle of companies' life expectancies in today’s market.
It also analyzes the mismatch between the availability of human capacity factor, qualified talent, and practical implementation of computer science based (software + hardware) companies across the continent
A key observation, country or industry capital availability doesn't translate into local capital deployment directly. There are huge investments being performed outside of the country, by institutional funds, Swiss national funds, and insurances. Transforming capital availability to capital deployment is not automatic, and this has to be facilitated 💪
Trying to learn from the strong US VC market, several well known cases and industries are analyzed. A book that goes further away beyond its title.
The case of Asian Corporate VC, with large holding dedicating as much available cash flows for investments into new companies and creating portfolio management strategies as innovation tools to ensure the parent company survival in an ever evolving more complex business environment.
Evolution of financing in time:
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Startups were financed by family and friends and therefore only for the wealthy perpetuating inequality.
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The banks appeared to set up financing for many SMEs.
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A new alternative adequate to today's complexity of product creation is needed, Venture capital. That understands the longer time frames for returns.
Importance of capital intensity: even to achieve local, regional or nationwide success you are dependent on available capital, if you don't have it your foreign competitors Do, and sooner or later they pass by your house.
Call to action
Briefly I want to mention this association's new efforts in connecting institutional investors with startups speaking each other's languages and acting as a quality filter and creating a new fund for this purpose.
And this clear call to action to use the economic dry powder of the country managing 1/4 of the world's wealth abroad. Innovation and adaptation are not an option but a core part of survival. Prosperity or Dependency?
Literature links
Deep Tech Nation book: https://deeptechnation.ch/about/book/
If you want to know more about the Swiss business and finance, I recommend the following and public available literature:
Swiss Finance, inspiring to understand a well organized market with many cross checks functions and stable historical values: https://link.springer.com/book/10.1007/978-3-031-23194-0
Swiss Angel Investor handbook, being key players in the Swiss financing landscape and some of them very large, also useful cross Europe: https://www.sictic.ch/swiss-angel-investor-handbook/