The Swiss Miss Out On Venture Capital
BASEL, SWITZERLAND — For a long time, venture capital and Switzerland went together like oil and water - they didn't.
Despite the highest concentration of Nobel Prize laureates in the world and more members per capita in the American National Academy of Science than the United States has, start-up companies here struggle to turn research into revenues.
Banks avoid the risks of venture capital, sending many would-be start-ups into the arms of US financiers.
But a slow-moving European economy has injected a glimmer of adventure into a group of Basel bankers and businessmen.
They recently founded the Swiss Venture Capital Center (SVCC).
Entrepreneurs will arrive at SVCC with a business plan and a hunger for money. Investors, the group hopes, will show up with money, a thirst for aggressive profits, and a tolerance for risk.
The center's staff of consultants, scientists, patent lawyers, and tax experts then acts as a clearinghouse, analyzing the risks and connecting need with money.
"The major problem is Switzerland has so much money, but it's not doing anything with it," says Rene Kaufmann, director of the SVCC. "There are 400 billion francs lying around in pension funds, but the law says they can only invest in real estate or blue-chip stocks."
The SVCC expects to set sail in six months, pending government approval.
Christopher Piaget wishes the idea had docked sooner.
The great-great-grandson of the founder of watchmaker Piaget & Cie., Mr. Piaget started his own career in 1990 as an apprentice at Advanced Hull Dynamics, a windsurf board company in Oregon. Its Swiss factory made boards for Europe.
Piaget wanted to buy the rights for European production but found no investors willing to shoulder the risk.
Family members eventually put the wind his sails. He bought the license, a purchase that paid off when, in 1994, the Oregon company pulled out and Piaget suddenly owned the license for worldwide production.
Today, annual revenues top 5 million Swiss francs (about $3.3 million), up 400 percent from its first year of business.
But most entrepreneurs don't have such family connections. "Finally people are starting to realize they must give venture capital, that it's necessary to help people out a little," Piaget says. "It takes too long to find the money here. We need a center like this to get people going."
About 25,000 companies in Switzerland post annual sales less than 100 million Swiss francs ($67 million).
These companies hold the Swiss economy together but sometimes lose their grip over lack of funds for buyouts, mergers, and acquisitions, says Robert Jeker, one of the SVCC's founders.
"No one does venture capital here," he says. "And you need it to survive."