How to start a business in Switzerland
Switzerland is a modern market economy with low unemployment, highly skilled labor force, and a per capita GDP among the highest in the world. Switzerland's economy constitutes a highly developed service sector, led by financial services, and a manufacturing industry that specializes in high-technology, knowledge-based production. Its economic and political stability, transparent legal system, vibrant infrastructure, efficient capital markets, and low corporate tax rates make Switzerland one of the world's most competitive economies to do business in.
The Swiss-India Case
Switzerland and India have many similarities. They share different languages, different ethnic groups, different landscapes and climates within the national boundaries. Start-ups are often connected to innovations. Switzerland has always been a very friendly nation and has always encouraged participation of Indian start-ups.
The Switzerland government has created an environment for innovation by building a start-up frame work that links performance, incentives, taxation and legal framework together. Innovation in Switzerland is largely driven by the private sector. The country provides an environment where ideas can flourish, including from India. Currently, more than 35 Indian SMEs/start-ups are operating business out of Switzerland.
Of course, there are challenges for small companies and start-ups in the field of innovation and a huge challenge is ‘financing’. There are new financing strategies like co-financing with partners along the value chain. However, it becomes very tough for small Indian companies to finance the industrialization phase of a new product because these activities are not supported enough, whereas it is possible to find support for the R&D activities.
Ideas that are especially relevant for the Swiss start-up scene are the integration of business case studies into university curriculum to foster an entrepreneurial culture. Here, several Indian start-up examples like Flipkart are taught to students.
Doing Business in Switzerland
There are several ways for Indian start-ups to set up a company in Switzerland. These are as follows:
Sole Proprietorship: Most entrepreneurs start with a sole proprietorship as this is the cheapest and simplest way to start a business. You can later on turn into a limited liability company (LLC). The social insurance registry (SVA) allows you to start your business and then register it after you have acquired few customers and are earning more than 2.300 CHF (Swiss Franc) per year.
As soon as you earn more than 2.300 CHF (Swiss Franc) annually, you are required to pay social insurance from your income. Since the registry works hard to eliminate fake self-employment, you have to fill out a detailed form on your business and name a few customers, at least three in order to prove that you are not just working for one customer. It’s not mandatory for the founder of the company to live in Switzerland, but he/she needs to have a work and residence permit.
Documents required to prove that you are setting up a company includes – Business plan, Offers to customers, Rental agreements, Marketing material, Customer contracts, and Supplier contracts.
Limited Liability Company (LLC): More and more entrepreneurs opt for a limited liability company to choose a name independent of their family name. There is no application process with the social insurance registry for the same, since the registry assumes that if you are willing to invest a capital of CHF 20.000, or equally valuable assets, then you are allowed to establish a limited liability company. If you don't show any profits after three years in business, they will inquire about your purpose and you may have to prove that you have at least three customers.
The registration process with the official company registry is a simple application after you have prepared your documents which include founding documents with company bylaws, all stamped from a notary. Before the notary stamps your documents, you will have to have a proof that you have paid the share capital into a temporary holding account at your bank, with a banking fee of CHF 200. At least one representative, with signing rights of the company has to live and have a work and residence permit in Switzerland.
Documents required for a LLC includes – Confirmation from your bank on paid share capital and/or confirmation from a notary on the value of your assets, Founding documents stamped by notary, and Company bylaws stamped by notary.
Immense Potential for Indian Start-ups
Non-EU citizens have to apply for the ‘right to find’ a Swiss company. You should inquire about the necessary documentation and funds with the migration authorities. Most cantons require non-EU employees to have a minimum salary of CHF 120.000 to get a ‘B’ permit.
Assuming you cannot pay yourself a salary in the beginning, you may have to prove that you have the funds to provide for yourself. Once you have all the necessary documents together, then you should let the migration authorities go through your application. The authorities may ask you to prove that your intended business will have a "lasting positive impact in the Swiss labor market". The best way to be accepted is to have a detailed business plan as well as all the relevant documents, which is often required in case of sole proprietorship.
Let’s take an example of Indian Medical Technologies as a start-up. The sector is in its nascent stage, at the same time, the elderly population in Swiss is increasing. The elderly population would be more prone to fall prey to disease patterns, making it a strong case for the need of such MedTech devices in Switzerland.
On the other hand, the private and government healthcare infrastructure in Switzerland, which is facing the scarcity of young skilled workforce, exhibits the need for more accessible medical care through technology.
Here, the technology can be facilitated by Indian start-ups through Social Media Analytics Cloud, which is on a high in Medical Technologies in India. It has emerged as a powerful force driving businesses in the domestic country. The proven way of launching a MedTech device in Switzerland, is by studying the unmet needs directly through and with the stakeholders, investing time and energy on an innovative model.
It is now the right time for Indian start-ups to look at Switzerland to internationalize. There is a clear first mover advantage and an opportunity to shape the Swiss industry in this sector. However, the key focus when looking at Swiss market should be – Availability, Accessibility, and Acceptability.
The Vibrant Support System
Switzerland Global Enterprise (formerly known as Osec) was founded as a non-profit association in 1927 and was commissioned by the Swiss government with the official performance mandate for the promotion of exports, imports and investments.
Apart from export promotion, Switzerland Global Enterprise has also been responsible for promoting Switzerland as a business location abroad and aims at strengthening Switzerland's position as an economic hub. The enterprise runs 21 Swiss Business Hubs abroad, most of which are incubated in Switzerland's diplomatic representations, including one in India.
The Swiss Business Hub India (SBHI), set up in 2001, is an antenna of Switzerland Global Enterprise located within the Swiss Consulate General in Mumbai with chapters within the Swiss Embassy in New Delhi and Swiss Consulate General in Bengaluru. The overall joint responsibility of SBHI is vested with the Swiss Ambassador to India in New Delhi, Dr Linus von Castelmur.
Swiss business Hub helps SMEs in Switzerland and Liechtenstein discover and identify opportunities for selling their products and services to India. They offer several services to Swiss companies like:
1. Information about the local market in India and the states, market research and analysis.
2. Reports about business opportunities in their specific industry sectors.
3. Active support for identification of qualified business partners.
4. Contacts with local trade associations and public authorities.
5. Reports on trade fairs and other promotional activities.
6. Organisation of trade fair participation and events in India.
7. Organising fact-finding missions to India for Swiss SMEs as well as industry sector specific work-shops for relevant Swiss organizations.
The SBHI also assists Indian companies interested in establishing business in and with Switzerland by providing basic information about Swiss companies and products, the Swiss market for Indian products, how to become a distributor or representative of a Swiss company, and also about opening an Indian subsidiary company in Switzerland.
Holistic Growth & Development
As a practice, SBHI should regularly organise state delegations of private companies to Switzerland, because each state of India is like a country. Switzerland today offers one of the best start-up environments for companies in India. Some examples of the support system for Indian start-ups are:
ICT Start-ups: Telematik Cluster Berne (tcbe) is collaboration between businesses, training institutions, trade associations and local authorities with the aim of strengthening the telecommunications and IT sector in Switzerland. Through events, networking forums and specialist support, tcbe makes available a successful and proven network to its members. With its goal-oriented activities, tcbe is the strong partner in the telecommunications and IT sector.
Support Organisations: Founded in May 2003 by Jean-Pierre Vuilleumier, CTI Invest acts as the leading financing platform in Switzerland, where entrepreneurs may find early and later stage capital and also access experience and the network of the investor members during the foundation. The investors are offered the opportunity to make investments into Swiss high-tech start-ups, mainly out of the CTI start-up coaching and/or companies of the portfolio of the fellow members. The association is the leading force in the professionalisation of the business angels and venture capitalist scene in Switzerland.
Swiss India Chamber of Commerce (SICC) is a bi-national, private sector and a non-profit association with 380 Swiss and Indian members. Founded in 1985, SICC is widely recognised as a key player in advancing Indo-Swiss economic relationships. SICC achieves its objectives by enhancing the flow of information on investment- and trade-related issues between India and Switzerland, improving bilateral commercial, industrial and technical co-operation between India and Switzerland, supporting the establishment of joint ventures, innovation initiatives and strategic alliances between enterprises of both countries.
Financing for Start-ups: Initiated in the year 2007, Venture Kick is a philanthropic three-stage funding model designed to support Swiss start-ups with enough capital to kick start their dream venture. Start-ups can qualify to receive up to CHF 130.000 in start capital. After each individual stage, promising entrepreneurs are also offered professional guidance in developing their business through the 2-day kicker camps. In return, Venture Kick will gain participation in start-ups having passed all three stages. All proceeds of any subsequent sale of shares will be reinvested into the promotion of new start-up projects.
Start-up News Channel: Startupticker.ch is the online platform for young entrepreneurs, innovators and supporters. The hub increases the visibility of young Swiss companies and serves to highlight the diverse and vibrant start-up scene. The news portal provides daily information on company results, launch of innovations, growth, financing, exits, support services, events and award tenders. This hub of the Swiss start-up scene is operated by the Startupticker Association, a public-private partnership initiative from CTI Start-up, CTI Invest and the WA de Vigier Foundation.
Other important portals like startups.ch and vaud.ch support company formation and technology innovation for companies operating in Switzerland.
The Promising Future
As the Indian economy is witnessing robust growth, there is immense possibility for the two countries to widen and deepen their relationship and pool resources so that a new synergy raises their productivity and gives them a competitive advantage in today’s global economy.
India’s outbound investments have been growing robustly over the past four years. Switzerland is amongst the preferred destinations for Indian companies, due to many advantages it offers to foreign investors. Even Indian companies are increasingly setting up their units in Switzerland. Despite the fact that it is an expensive base for operations in Europe, already more than 24 Indian companies have their operations in Switzerland including HCC, Tata AG, Birla AG, Infosys, Wipro, Dr.Reddy’s Laboratories, TCS, Mindtree and Devi’s Laboratories, Ramco, Amas Bank, Preroy AG, Neillsoft and Glenmark.