Zurich as a Startup Cluster!?

Startups are en vogue and a lot of people describe themselves as entrepreneurs. But in my book not every young company is a startup... In my mind startups have a scalable and repeatable business model (that isn't proportionally related to how many hours are worked).

Investors put money into startups in the hope of getting back more than 10x their investment. They need that multiple because startups - as described above - are associated with a lot of risk. Commonly it is thought that only 1 or 2 out of 10 startups are a runaway success, 2 to 3 will survive and approximately make back what investors have spent and the rest will die and lose most or all of the money that got invested in them.

With this trend of everything being a startup Zurich has started to position itself as a startup cluster. The eZurich initiative even wants to be Europe's Silicon Valley (Link to a PDF). But is this even realistic?

Clusters are important for startups

Startups seem to thrive in clusters and Silicon Valley is the most well known example for that. By now in and around San Francisco a (web-)entreprenuer can find whatever he needs to create a successful startup:

• Talents
• Money
• First Clients

Nicolas Berg splits these requirements up into 9 preconditions for a startup cluster to be successful:

1. Previously successful founders and startups
2. Internationally acclaimed universities
3. Lively ecosystem
4. Highly qualified immigrants
5. Early stage investors
6. Unbeaurocratic innovation subsidies
7. Regulations and Infrastructure
8. Established companies in the same sector
9. Attractive home market

These are clearly mostly a given in Silicon Valley, but how does it look in Zurich?

Zurich (by MadGeographer)

Zurich is an attractive place for companies. The excellent Universities provide talents, the infrastructure is well maintained and works, public authorities are service oriented and quite quick, laws in Switzerland are stable and politics are rather predictable. On top of that Zurich is a very nice place to live which helps attracting foreign and retaining local talent.

There is a first generation of internet entrepreneurs that had successful exits that is now investing and mentoring. Organizations like the IfJ not only raise awarenes but are literally trainig thousands of students (and others) how to take the plunge and start their own company. The Commision for Technology and Innovation has been supporting innovation for decades. The Technopark in Zurich has spawned a lively ecosystem around it that contains many, many startups (over 284 in Zurich) and many other things entrepreneurs need.

Regulation in Switzerland is reasonable and geared towards common sense in many cases (e.g. Value Added Tax has only to be paid if your company crosses a certain revenue threshold). All these are reasons why Switzerland ranks very high in competitiveness rankings.

So Zurich is doing quite well and that shows in various rankings. But it is not all good:

But all these things literally come with a cost. Living costs in Zurich are extremly high and as a result salaries are very high as well - often too high for a startup to be feasible and competitive in the global competitive landscape.

But we did not want this to stop us and Zurich has treated us well. We have found funding, we found amazing employees here, the Technopark has been an excellent starting point... We would have loved to completely build our company here. But Swiss immigration made that impossible. The main reason why my co-founder and the other programmers in our company are not working from Zurich, why we had to go the way of a virtual team, is the barriers put in place to get a work permit for Non-EU citizens.

Last week a Blog post by Moritz Zumbühl stired up a controversy (that even got picked up by the Swiss Daily Newspaper Tages Anzeiger). In the Blog post he outlines how he tried to found a startup with a "foreign national" that had been pursuing a doctorate at ETH. The odessey to get Emre Sarigol a work permit had lasted 15 months cost thousands of Swiss Francs and yielded nothing but frustration.

He has now written a letter to the mayor of Zurich. We wholeheartedly agree with this letter and everything it states and call upon every startup in Zurich to sign it.

Our experience in getting a Swiss work visa for Ata has been different. We gave up much earlier. From what I had heard from other founders and what experts told me it was neither within our budget nor within our schedule to get a work permit. We had to work around this problem and did so by becoming a virtual team that is working in various places. We are now building our tech team in the Ukraine. As a result of these difficulties we are now employing people outside of Switzerland so we can have our tech team in one place.

So what?

I do not think that Zurich is an important startup cluster yet - but it certainly has potential. A lot of things have been done right and an attractive environment for companies - young and old - has been created. It is now up to entrepreneurs, investors and unfortunatley also regulators to get the last hurdles out of the way.

If we can find the means to get these stopgaps out of the way there is nothing that will stop Zurich from becoming a great place to start a company with a scalable and repeatable business model. That it will be able to compete with Silicon Valley I doubt though. Just Zurich is a bit small for that.