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Entrepreneurs stampede for emergency cash

The strong franc threatens cutting edge technology Keystone

Budding company start-ups have rushed to apply for grants from a government stimulus package aimed at shielding them from the effects of the strong franc.

This content was published on December 18, 2011 - 18:05
swissinfo.ch

The SFr100 million ($107 million) emergency cash pot has been oversubscribed more than fivefold, with more than 1,000 applications asking for a total of SFr550 million in funding since September.

The agency handing out the grants has called for greater long-term financing.

As the franc gained rapidly in value against most major currencies, including the euro and the dollar, many small and medium sized enterprises (SMEs) had to scale back on research and development (R&D) projects that form the lifeblood of their business.

They do not have the same options as multinational giants, which can absorb some of the losses by cutting jobs or shortening hours for workers, shifting production sites and the source of supplies and hedging currency shifts through long term contracts. 

Stimulus package

Sensirion, a spin-off company from the Federal Institute of Technology (ETH) that specialises in state-of-the-art humidity sensors, is one such firm that has had to shelve vital projects because of the negative impact of the strong franc.

“If we are forced to carry on like this we will lose the innovative lead that we have built up over the last few years,” co-founder Moritz Lechner told the Beobachter magazine last month.

The problem was recognised by Swiss Economics Minister Johann Schneider-Ammann in the summer and he reacted by proposing a SFr2 billion stimulus package mainly to protect jobs, research and ailing hotels.

Parliament watered the package down to SFr870 million ($930 million) in September, with SFr100 million being given to the state Commission for Technology and Innovation (CTI) agency – doubling its coffers for this year.

The role of the CTI is to help fund the transition of promising research projects into commercial reality, helping start-ups get off the ground, and also to provide coaching for would-be entrepreneurs and SMEs hoping to ramp up their businesses to a new level.

Long term funding

The extra funds soon attracted a welter of interest from joint business and academic research partner groups, and SFr99 million has already been awarded on a first-come-first-served basis to projects that passed the necessary quality controls.

Most of the successful applicants were export-oriented projects in the fields of medical technology, nanotechnology, machinery and computer sciences, according to CTI President Walter Steinlin.

“The extra funding is more of a vitamin shot than a painkiller for Swiss innovation in these times of financial pressure,” Steinlin told swissinfo.ch.

The popularity of the cash injection is bound to increase pressure on parliament to boost the long-term funding of the CTI – a view that has long been endorsed by the Swiss Business Federation, economiesuisse.

The CTI received SFr100 million a year between 2008 and 2011 and has been awarded a similar sum for next year. Steinlin said he would now be lobbying for a substantial increase as parliament debates the CTI’s funding for 2013-2016.

“Before we knew of the success of the one-off extra funding we were only asking for a modest increase,” Steinlin told swissinfo.ch. “But with the franc expected to stay strong for some time to come, I now believe that the CTI should receive an extra 50 million a year.”

Support gap

Photovoltaic solar panel specialists Flisom has received several hundreds of thousands of francs from the CTI since it spun-off from the Federal Institute of Technology, Zurich, as a commercial enterprise in 2005.

Flisom chief executive Anil Sethi said the cash was essential to help the fledgling company get off the ground before it attracted private sector funding from the giant Indian technology group Tata.

But Sethi added that providing extra funds to the CTI masks a bigger problem, namely the lack of government support for Swiss innovators in cutting edge technology.

Sethi pointed to countries such as China and the United States that are pumping hundreds of millions of dollars into developing sectors, such as cleantech, in the form of bank guarantees and “soft” loans offering advantageous terms of repayment.

Getting an innovative idea off the ground and into the commercial sector is one thing, argued Sethi, but continued support beyond cantonal tax breaks is essential to help newly established companies properly develop their products before rolling them out into the markets.

“What is required is something that addresses the gap between young firms moving out of the laboratories into the commercial world and developing into globally successful companies,” he told swissinfo.ch.

Without such support, innovative Swiss companies might be forced by their commercial sponsors to relocate to more favourable countries,” Sethi warned.

“At the end of the day, the commercial backers have the last say on getting a return on their investment,” he told swissinfo.ch. “They could easily demand that a firm relocates to another geography where the government is more supportive.”

the CTI

The Commission for Technology and Innovation (CTI) is a government agency set up to help transform academic research projects into commercial reality.

The CTI distributes grants to researchers that have teamed up with a commercial partner – funding covers a proportion of the research teams’ costs.

In 2010, the CTI received 780 applications and approved 343 projects that involved more than 600 participating firms.

Most research projects are in such high-tech fields as engineering, machinery, medtech, cleantech and nanotechnology.

In 2009, the CTI started the “cleantech innovation project”, handing out up to 133 grants per year up to a value of SFr7,500 to worthy projects in the sector.

The CTI also provides a coaching service to help start-ups get off the ground in the commercial sector.

Last year, 96 start-ups received coaching and 24 were awarded the CTI star-up label, signifying that they had passed high standards of quality. Such labels are aimed at helping fledgling firms find venture capital in the next stage of their development.

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