This year’s edition of Swiss Startup Radar offers new data-based insights into the performance of the Swiss start-up ecosystem in comparison with other countries: Swiss start-ups are proving resilient in the current financing crisis, with stabilising factors including an influx of venture capital from abroad and a high proportion of deeptech start-ups. A comparison with the financial crisis in 2008 also enables identification of early indicators of an upturn.
The start-up sector is in crisis mode following the end of the digitalisation push triggered by the pandemic. Switzerland has done well in this downturn so far. For example, the local ecosystem is performing well if the capital invested in start-ups in 2023 is compared with investment made in 2018 and 2019. The total in 2023 was 40% above the level of the two pre-coronavirus years. This is growth that few other countries can match. In leading markets such as the US or the UK, venture capital investment in 2023 was only slightly above the levels of 2018 and 2019.
Dichotomy between winners and loosers
However, a closer look also reveals limitations to the positive news. The sustained growth is due to many smaller and medium-sized financing rounds. Switzerland’s weakness in mega-investments of CHF 100 million or more has become even more pronounced during the crisis. In addition, not all start-ups benefit equally from the generally good performance. There is a dichotomy between winners and losers, as the massive increase in start-up liquidations in 2023 shows. Finally, a few countries, such as Denmark and the Netherlands, are performing even better than Switzerland.
Early indicators of an upturn
Analysis of the impact of the financial crisis 2008 on the start-up sector also allows us to identify early indicators that could point to an end to the current difficult situation. In the years after 2008, an increasing number of exits and more launches of new funds preceded the upturn in invested capital. In addition, very low interest rates had a revitalising effect. However, if we look at these early indicators today, we cannot expect a rapid recovery. The number of exits and newly launched funds remains at a low level. Although interest rates have fallen, they are still high compared with the years immediately following the financial crisis.
Stability thanks to foreign investors
One reason for the good performance of the domestic start-up ecosystem in the current crisis is the traditionally high flow of money from abroad into Swiss start-ups. Over the past 10 years, Swiss investors have generally contributed between 20% and 25% of the capital invested in Swiss start-ups. In 2023, the share was at the lower end of this range. From 2022 to 2023, the amount provided by Swiss investors fell more sharply than that from abroad. Investors from Europe in particular ensured that the total amount invested in 2023 fell only slightly compared with other countries.
One of the largest ecosystems in OECD countries
The breadth of the Swiss start-up scene can be proven with data. It is not only the density – ie, the number of venture capital-financed start-ups per capita – that is impressive, but also the absolute number. In this country, about 250 technology-based start-ups are created each year that attract investor funding. In France and Germany, the figure is only twice as high, and in the Netherlands, with 18 million inhabitants and thus twice the size of Switzerland, the number of start-ups per year is lower.
High share of deep tech start-ups
Deep tech start-ups are not easy to distinguish from other young technology companies in databases. Nevertheless, several indicators demonstrate Switzerland’s strength in this area. For example, the proportion of start-ups that have at least one founder with a doctorate is three times higher than the OECD average. In addition, the density of start-ups with patents is about twice as high as in Sweden and a good five times higher than in Germany.
Failure rate of 20%
In addition to statements on start-ups, we also carried out for the first time a reliable analysis of the failure of Swiss start-ups, the basis of which is the Startupticker database, which has grown to 5,000 companies. According to this data, about 20% of companies fail after 10 years. Five years after founding, just under 10% have failed. These figures are significantly lower than those usually quoted; however, those usually refer to all new start-ups rather than to only technology-based, innovative and ambitious start-ups. Start-ups in the true sense of the word therefore have a much lower failure rate than new companies in general, 50% of which fail after five years.
The Swiss Startup Radar can be downloaded from the website of Startupticker.ch: https://www.startupticker.ch/index.php/en/swiss-startup-radar
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