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Switzerland is not Silicon Valley: Swiss startups have more diverse expertise

June 2018


Interview with Dr. Martin Vetterli, President at EPFL (Ecole Polytechnique Fédérale de Lausanne).

Dr. Martin Vetterli highlights the impressive innovation culture in French-speaking Switzerland and how it thrives alongside other startup ecosystems.

Mr. Vetterli, what role does >>venture>> play for Switzerland? It is the country’s most visible startup competition and provides a good overview of what’s happening on the scene. It was Thomas Knecht’s lifetime achievement, and it cannot be praised highly enough. I have known >>venture>> since the first award in 1998 when I took part with a startup myself.

You came second place with the company Ares. At the time I was a little disappointed but it was Sensiron who came first and they have close to 700 employees today. Ares is also still around, but it is now called Dartfish, and is much smaller with around 50 employees. The award ceremony this year will be held in the EPFL for the first time. What does that mean for French-speaking Switzerland? To be honest: it’s about time (laughs). Seriously though, it provides recognition of the Romandy as a startup location. According to the Swiss Venture Capital Report 2018, 32 percent of venture capital today is invested in Vaud. Zurich is in second place with 29 percent, and Basel is third with 9 percent. According to this study almost 300 million Swiss francs have been invested in our canton in the past year. We had no idea the competition between Lausanne and Zurich was still so strong… (Laughs) Now you’ve got me. And you are right, I’m not interested in the rivalry between ETH Zurich and EPFL. We should invest our energy in joining forces against foreign competition. But is there really room for two top technical universities in Switzerland?

That’s such a Swiss question. At an ETH Day in Zurich, Severin Schwan, the head of Roche, told me how glad he was that EPFL existed. We need the competition, he said, to keep people on their toes. But that doesn’t mean that we don’t work together strategically. Last year, we launched the Swiss Data Science Center in a 50-50 cooperation with ETH Zurich. So we work together very well. If you compare the competition with international equivalents, how can we make >>venture>> more attractive? The prize money could be higher, which would raise visibility and make it more attractive. Between 1973 and 1996 there were at most seven EPFL spin-offs per year. Then when >>venture>> started the numbers increased dramatically. In the last decade there have almost always been at least 15 spinoffs. Is this a coincidence? It’s obviously difficult to prove the causality here, but there is definitely a correlation. »venture» anticipated the startup trend in Switzerland and reinforced it.


What would you prefer: if an EPFL alumnus won a Nobel Prize or founded a unicorn firm, worth over a billion dollars?

EPFL was only founded in 1969 and so far it has not produced any Nobel Prize winners—so of course, that would make me happy. However, we already have a unicorn with Mindmaze. But it’s not an either/or question: entrepreneurs and researchers tend to be very different types of people.


Stanford, your Alma Mater, has earned more than a billion dollars from its spin-offs in four decades. Does EPFL share in the success of its spin-offs?

That’s an area where there could be some expansion, but we are already profiting from the success of companies that emerged from EPFL. In general, like most educational institutions, we don’t have shares in the spin-offs but we do own the patents that the startups base their ideas upon, and so we get the license fees in return.


Having been at Stanford, you know Silicon Valley very well, the oft-cited role model for innovation. Does it still deserve this reputation?

Yes and no. Silicon Valley is small, like Switzerland, with around three million inhabitants and two excellent technical universities; it’s also extremely international and focused on innovation. But that’s where the parallels end. It would be a mistake for every last village to want to become some Silicon-whatever: there is only one Silicon Valley and it’s in California. You have to develop an innovation culture of your own, or you will be forever two steps behind.


So what is our unique selling proposition?

Silicon Valley is a mono-culture: with a few exceptions, everyone there is basically good at software. We have a lot more range, with expertise in different areas. Today I spent the afternoon at Logitech, the computer appliances producer and an EPFL spin-off. Among other things the company produces specialized ultra-fast computer mice for gamers. Computer science plays only a minor role at Logitech—the rest is high-precision mechanics.


Aside from mechanics, what other areas have potential in Switzerland?

I can think of pharmaceuticals, finance, food, and also perfume. These areas are defined by their complexity, narrow margin for error, and reputation. The US company Medtronic produces pacemakers here—I don’t know if it would be possible anywhere else. Medtronic also develops new products here, and only when they have gotten through all the growing pains do they start producing them elsewhere.


What’s lacking in Switzerland?

Our major companies started in the nineteenth century. I’m thinking of Nestlé, the Schweizerische Kreditanstalt (today Credit Suisse), UBS, BBC (today ABB), Ciba-Geigy (today Novartis), and Roche. That’s all great, but it’s a long time ago now. What are their twenty-first-century equivalents?


What should we do?

Many of the areas I mentioned are being digitized and software is not our strong-point, mainly because we lack the IT talent. From a startup point of view, aside from the pharmaceutical industry, we lack big international investors capable of supporting a company with financing rounds worth 50 to 100 million. And what makes this so annoying is that, as a result, the startups we should be holding on to keep moving away.


In the startup strongholds of the US and Israel, pension funds and the military are strongly involved in financing young firms, but this doesn’t happen here. Does this put Switzerland at a disadvantage?

The military should definitely be investing a lot more of its five billion budget in innovation. And the same goes for pension funds: for a few years now they have been allowed to invest in venture capital but few actually do so—they first have to learn that it works differently from traditional investments.


What should we explicitly not adopt from Silicon Valley?

The prohibitively expensive cost of education. The low cost of university education in Switzerland is a huge competitive advantage: it means we do not lose talent just because a person cannot afford a university education.


Alongside the United States, a major startup scene has emerged in China. What can we learn from this development?

Most of the young Chinese companies are focused on the domestic market—which has little relevance for us. China, however, could learn a lot from Switzerland, particularly when it comes to political systems.


China currently has only half the amount of unicorns as the US—the ratio stands at 59 to 113. Is this about to change?

Yes, China will become as dominant as the US, if not more so.


And Europe?

We have to position ourselves clearly. Today we are a digital colony of the US—which is not good. We need to cut ourselves free. We have to invest in the areas I mentioned. But it’s not just about money: we need more technology students, and above all we need more women in the field.


What’s the best way to foster new talent?

In the USA people complained for ages that there were no engineers. Then suddenly, wonder of wonders, Google finds them. Why? Because it pays well and provides interesting work. I believe in meritocracy. If people want to get ahead then they should be able to do so. This attitude is deeply entrenched in Silicon Valley. In Europe, on the other hand, background and schooling play an important role.


How do we get more women to study physics, math, and computer science?

By sensitizing them to it at an early age. In concrete terms this means making university lectures less intimidating, and making sure they are more applicable to real life and have plenty of examples of interesting work. Furthermore, the courses should not only be about developing technical prowess but also about competencies in communication, creativity, and social issues. This is already happening successfully in some colleges in the United States.


The Internet was invented at CERN, or at least co-invented there, so why has Switzerland not produced any major Internet companies?

It’s unbelievable, isn’t it? Computer science was not an issue at the beginning of the 1980s. People didn’t really believe in it and, aside from that, researchers at CERN are conducting basic research. They want to win Nobel Prizes, not found a company.


You’re a tech guy, but you are also very interested in the humanities. How come?

Technology is nice but it has to serve society, not the other way around. This is something we must never forget. Techno-logy is too dominant today. Social media companies should not be able to define global regulations for the private sphere. Do we really want the world to work like this? We cannot allow ourselves to be naïve.


Your doctoral thesis began with a quote from Jean-Jacques Rousseau. Why?

He asked the right questions, and as a thinker he invented the modern Western world. I think about the importance of education, the democratic organization of the state, and equality among people or in the social contract. Before the French Revolution, between 3 and 5 percent of the nobility essentially owned 95 percent of the capital. We all know how that ended. We are not far removed from such a situation today. We should start reading Rousseau again if we want to avoid another revolution.


Interview: Simon Brunner, first published in the 2017 annual report of the Venture Foundation (download here).