The third Swiss Fintech Pitch event is in Zurich next week.
Daily Fintech is global. We have subscribers from 130 countries, mostly tracking GDP but skewing English speaking (until we get our act together in other languages) and our 6 Authors are from 5 nations of origin and 5 nations of residence (which are different as we have two Greeks in two countries and two people who moved to Switzerland).
So we don’t take sides in the Fintech capital of the world debate. But as I love living in Switzerland, I may have some cognitive bias.
Which is a long way of saying that I am looking forward to the third annual Swiss FinTech Pitch on October 11th at Landesmuseum in Zurich. Daily Fintech readers can get a 25% discount by quoting sfpmedia discount code.
I want to mark this occasion by noting how far Swiss Fintech has come in a few years and to give a shout out to the pioneering work of John Hucker in bringing this community together. If you wanted to connect with the Swiss Fintech community in the early days, you went to the MeetUps organised by John. Today the meetings have morphed into more professional events as the community became bigger, but it is still a gathering of the tribes.
The Swiss Fintech world has changed a lot in a few short years. In December 2014 I reported back from one of those early MeetUps with Zurich Fintech Fans Look Jealously To London. in those days it felt like Switzerland was playing a catch up game at best and the game itself (Fintech) was not in prime time. Nearly 3 years later, the whole Fintech market is moving into prime time and Switzerland is taking a leadership role.
7 reasons why Swiss Fintech is moving into prime time:
- Bitcoin is a legal currency in Switzerland. This is a little known fact (obscure history around WIR). Nor do many people understand the significance, but it is quite simple. For Bitcoin to go mainstream it must be legal. The companies that want to profit from this move to the mainstream want a country that welcomes them rather than fights them legally.
- Switzerland led the way with the first wave of innovation around ICOs. Yes, that wave went too far in one direction (free and easy wild west era) and is now moving into the next phase which is more regulated and professional. If Switzerland can get the balance right between enabling innovation and regulating away the bad actors, the country can lead the change that is coming to the Innovation Capital business (from Seed to IPO)
- London scored an own goal with Brexit. As a Brit by birth, it is sad for me to note this. London will always be a great Fintech center, but Brexit has sure made it easier for other centres to grab more share.
- Switzerland is a great place to live and work. This is true whether you want the beauties of nature, a thriving arts scene or business friendly environment or a well educated workforce or great trains and other infrastructure.
- Switzerland as a Financial Centre is right-sized. It is big enough to have capability but not so big that they have to play defence. Fintech is better for upstarts than incumbents. If the market and the regulations are dominated by incumbents with more to lose than to gain, innovation will be stifled.
- Switzerland has a very innovative Fintech License. Nobody would have forecast this three years ago, when FINMA was at best playing catchup with FCA and MAS. (See this post for more).
- The Crypto Finance specialisation. This is where Switzerland moved from playing catchup in the 1st and 2nd wave of Fintech to taking a leadership position in the third wave of Fintech by playing to strengths rather than overcoming weaknesses. The combination of regulation, technical bench strength and financial capital in Crypto Finance is hard to beat.
3 hurdles for Swiss Fintech:
- Cost. It is expensive here, which is a killer if you are trying to get traction based on a skimpy seed round. What we are now seeing is startups from all over the world coming here for expertise in crypto finance, to raise money the modern digital way. So we can see ventures where most of the workforce is outside Switzerland, making the high Swiss costs less of an issue.Nor are ICOs usually skimpy rounds, so there is less problem being undercapitalised.
- Angel investor tax incentives. The SEIS tax scheme in UK has been a major boost to angel investing. Switzerland has a perverse/strange issue where individual investors pay zero capital gains tax on occasional investments but pay at income tax rates if they are classified as a “professional” investor. What determines professionalism – total amount invested, number of deals, IRR? That maybe why one sees a lot of Funds in Zug which is a low tax Canton.
- Risk aversion. This will take time. It happens when founders become serial entrepreneurs. This is happening today with Lykke and Squirro for example – but in Silicon Valley there are hundreds of examples like that.
The issue of risk aversion brings us back to the Swiss Fintech Pitch event. In addition to the usual mode of entrepreneurs pitching investors they have a reverse form of this where investors pitch entrepreneurs. This makes sense as investors need high quality deal flow and if they tell entrepreneurs what they are looking then they are more likely to get deal flow that is a good fit. This “reverse pitch” also illustrates the changing balance of power between founders and investors. This has been well understood in Silicon Valley, where there is great competition by investors to get in the good deals. Seeing this happen in Switzerland is another sign of Swiss Fintech hitting prime time.
In short, if you live near Zurich and are into Fintech be there or be square. I will be there. Details are at Swiss FinTech Pitch.
Bernard Lunn is a Fintech deal-maker, author, adviser and thought-leader.
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