Silicon Valley – a look behind the scenes

The US traditionally has played an important role in the Swiss economy. So it is not surprising that two of the winners of the Startup Challenge already have a business relationship with the US. The fintech start-up Algotrader has several American customers and the medtech company 1Drop Diagnostics is conducting research projects with well-known partners, including NASA and Massachusetts General Hospital. The latter, based in Neuchâtel, is already registered as a US company.

The start-ups are aware of the importance of the US.  “Worldwide, 50% of all drones fly in the US,” says Manu Lubrano, CEO of OneSky, which is developing a system to prevent collisions between drones and aircraft. Accordingly, the question is when and how the start-up will approach the US market and when and which parts of the team will move to the US.

Even though the advice received by Swiss start-ups during the Startup Challenge may differ – in one respect at least, investors and mentors agree: if you want to raise money in Silicon Valley, you must have a presence and your product must be validated on the American market.

Difficult recruitment
One thing has changed in the last few years. The advice a few years ago was to come to Silicon Valley with the whole start-up, but today it is clear that the engineering teams should remain in Europe. This is due not so much to the quality of European engineers, but above all to the very difficult recruitment situation between San Francisco and San Jose. Engineers are hard to get and very expensive.

The usual advice is that the people responsible for marketing and product development should move to the US, in particular since everybody is convinced that the best marketers in the world are there.

The reason for being in California is the great importance of the network. As US-Swiss investor Alex Fries says: “Competing start-ups do not win with the best technology, but with the best network.”

This is the general view and so networking is very important. And in order to strengthen the network, people who have just met are usually happy to do favours. Frequently, this involves the introduction of one person to another. “It’s amazing how quickly these introductions are made here,” says Aurélien Demaurex, CEO of Ecorobotix.

Clear requirements
However, the networking brings a risk, of which the Swiss start-ups are warned by American mentors. Since it is very easy to arrange short meetings, it’s also possible to waste much time. That is why start-ups should always be aware of their expectations from possible contacts and articulate them clearly. During a mentoring session at GSVlabs innovation centre, the winners of the Startup Challenge were even advised to include what they might need in addition to investment in their three-minute pitches, since someone in the audience could be able to help.

In addition to the network, it is the speed that makes Silicon Valley special. Behind this, as well as the hard work that marks start-ups all over the world, is a mentality that is best described as ‘done is better than perfect’. It was said at one of the visited companies that instead of an 80-20 rule, rather it follows a 60-40 rule. Failure is accepted and is far less important than the slow pace.

Higher pace with asset-light strategies
It is also interesting that business models are optimised in such a way that the start-ups can develop more quickly. The magic phrase is ‘asset-light strategy’. Anything that requires major investment and costs, particularly for hardware start-ups, should be outsourced. This strategy is also relevant to start-ups that want to build platforms or networks. OneSky aims to prevent collision between drones and aircraft through a network of automatic microcontrol towers. To cover the US, it would need several thousand of these microcontrol towers. A mentor at GSVlabs advised the start-up to work on a business model in which it does not own the tower network. This model would require less money from investors and the start-up could develop faster. Uber and AirBnB are examples of companies that use such a strategy – they do not own the cars or the real estate.

Stefan Kyora’s trip is supported by Swisscom.
Bild: ZVONIMIR PISONIC