The Real-Life Problems of Startups

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Sophie Küsterling

23.05.2019
Zug

Attracting international founders to participate in Swiss incubation and acceleration programs is easy. Getting them to stay is the hard part – due to financial but also regulatory issues such as residence and work permits. Two participants of the CV Labs Incubation Program, Orvium and BHander, talked to Startupticker about their plans for Switzerland and the struggles they’ve encountered.

Switzerland continuously ranks as the most innovative and most competitive country in the world. In recent years, it has also established itself as the center of blockchain innovation, often called the Crypto Valley, attracting founders and startups from all over the world. Yet, however desirable Switzerland may be as a location, foreign founders encounter several obstacles when trying to incorporate here.

One of those founders is Rostyslav Futalo, CEO of BHander. The Kyiv-based startup develops a hardware wallet and payment device for cryptocurrency. Now, Futalo and his co-founder Victor Golub are part of the first CV Labs Incubation Program. One of their goals: To either move the headquarters to Switzerland or establish a subsidiary of an EU-company here.

Another CV Labs incubatee with plans to open a branch office in Switzerland is Orvium. Its founders Antonio Romero, Roberto Rabasco and Manuel Martin are building a decentralized platform for scientific collaboration, funding and publications management based on blockchain technology and artificial intelligence. «Manuel and I have lived in Switzerland for many years, we have a strong academic and research network thanks to our experience at CERN, and it is the best startup hub for blockchain startups», explains Romero.

Expensive but worth it?

Futalo and Romero both agree that being an entrepreneur in Switzerland is expensive: the costs of living, production and talents are consequently high. «It’s definitely a cash flow challenge compared to, for example, Estonia where the total cost of incorporation is about 1’500», says Futalo.

«One of the main reasons we incorporated our company in Estonia instead of Switzerland were the significantly higher costs associated with legal advisory for crypto projects and ICOs in Switzerland», explains Romero. For building up the team, Orvium might open a branch in Spain too, as it would reduce costs of staff salaries among other things considerably. «But exposure would not be comparable with being in Switzerland», he adds.

Apart from exposure, being incorporated in Switzerland is also considered a seal of quality. BHander is thus considering manufacturing the secure element of their payment device here. «One of our ideas is having a ‘Swiss made’ label», says Futalo. However, Swiss quality does not stop at hardware components; it is also reassurance for investors skeptical of blockchain technology, according to Futalo: «Switzerland is well understood and received by investors and other international financial institutions. It is also very blockchain friendly and has advanced regulation».

Visas and work permits

Setting aside the issue of raising enough funds to operate in Switzerland, another obstacle pops up: residence and work permits. «We have heard from some local businesses that bringing non-EU talents to Switzerland is not easy», admits Futalo. While Ukrainians may have visa-free entry to the EU and Switzerland it does not include a permission to work.

The Orvium founders have made similar experiences with residence permits. In order to found a limited liability company at least one managing director must be a resident of Switzerland. This was the second reason for not incorporating here. «Mine and Manuel’s residence permit was restricted to the duration of our contract at CERN and that was an issue for incorporating the company», says Romero. The solution would have been either to find a Swiss partner or to hire a managing director, which again would have come with a hefty annual fee.

Awareness and Change

Both, Rostyslav Futalo and Antonio Romero say they are getting important help from the mentors and experts of the CV Labs Incubation Program to overcome these obstacles. CV Labs is aware of the problems startups are currently facing in Switzerland. «There are many positive aspects for startups to be in Switzerland, but it is not the best possible jurisdiction – nor is there one anywhere in the world – yet», says Pavel Jakovlev, Lead Incubation & Ecosystem at CV VC. Jakovlev stresses the need for all relevant stakeholders to work together to ensure that Switzerland will remain competitive and attract innovators that will stick around.


(Rostyslav Futalo, Antonio Romero and Pavel Jakovlev)

(Picture above: Zug-Tourismus)

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