Start-ups face uphill battle to succeed in Switzerland

High-tech start-up companies in Switzerland face red tape and strict regulations Keystone

The number of Swiss high-tech start-ups is on the rise, but they face an uphill battle to survive and flourish. Entrepreneurs say current regulations on share values and the distribution of work permits put a brake on their ambitions.

This content was published on September 2, 2000 minutes

Although the economy is growing solidly and unemployment has reached new lows, not everybody believes it's a perfect world. For high-tech entrepreneurs, starting a business is still a tough proposition in the current legislative environment.

Two major issues cloud their horizon: the minimum price of company shares and the lack of available work permits for foreign technicians and specialists.

Swiss company shares cannot be valued below SFr10 ($5.85). Analysts say this is a major obstacle for fledgling IT companies.

"Start-ups don't have cash in hand," explains Claudine Voyame of consultancy Price Waterhouse Coopers. "If they cannot offer attractive stock option plans to potential employees, it is very difficult to hire the right kind of person."

Help may be on the way, though. Committees appointed by parliament to examine the issue have proposed dropping the minimum share price to one centime. The proposals must now go before the House of Representatives and the Senate before becoming law.

Work permits are also hard to come by. The cantons dole out their quotas slowly and carefully, while small companies need fast, positive responses to their requests.

"A potential employee is not going to wait a few months in the current job market to find out if he can accept a position or not," says Marc Schriber, former general manager of DuPont International in Geneva and a member of "Le Réseau", a "new economy" lobbying group.

Entrepreneurs think Switzerland needs to act now. "Changes in the economy are happening now, not in five years' time, " explains Daniel Borel, chairman of Logitech, the Swiss peripheral manufacturer.

"If Switzerland cannot hire the foreign specialists it needs, we won't need Swiss specialists further down the road, no matter how well trained they are."

Other difficulties facing start-ups include problems in setting up a company and a lack of venture capital in Switzerland itself.

However, there are signs that lawmakers are becoming more responsive to idea that rules for creating a company need to be simplified. According to Thierry Mauron, head of the Fribourg Development Agency, "Local legislators are slowly becoming aware that the rules need to be changed. It's just that, as always, it takes time to get politicians to move on something."

Venture capital may also be on the way. Investors have targeted Europe as the next big growth area for the "new economy".

Local authorities have also decided to invest in new start-ups. Jean-Marie Ayer, managing director of InMotion Technologies, says "we chose to work in Fribourg because of the support we received from the cantonal government".

But start-ups should not wait on changes from the federal government or the cantons, says James Pulcrano, CEO of Shockfish, a communications start-up. "Running a start-up isn't easy, no matter where you are. You can't wait on the lawmakers to make up their minds. You just have to go out and do it."

by Scott Capper

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