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Swiss banks are part of the rescue mission for the economy in the coronacrisis. But what will happen to the fintech industry?

The coronacrisis is heavily impacting the health care industry and logistics firms. But the financial turbulence that is following in the wake of the pandemic is equally affecting the Swiss startup community and primarily the fintech industry.

A survey by the Swiss Blockchain Federation published earlier in April showed just how critical the situation has become for the fintech cluster in Zug's Crypto Valley. Almost four out of five firms said that they will likely go bust within half a year – finews.com reported.

Unfair Criteria for Emergency Loans

Another survey conducted by Venturelab, a startup promotion program, among 660 startups showed that seven out of 10 can't get any help from the government's emergency aid package. They simply don't qualify because they tend not to have any significant sales. 

The concern about the difficulties of the startup business prompted Zurich's liberal lawmaker Andri Silberschmidt and his colleague Judith Bellaiche from the Green Liberal Party to launch the «Startups and Entrepreneurs» with the aim to get the voice of new companies heard in the capital Bern.

Weak Foundations

Silberschmidt said in an interview with «NZZ» that startups were unsure about their future. Bern had found a solution for small- and medium-sized companies, but not for startups. The startup community fed of the flow of deals, a regular inflow of financing. If that failed to materialize, even the best of startups would be bound to fail.

Many companies in the fintech industry are likely to fall at that hurdle, according to Michael Bornhäuser, chairman and managing partner of Bulb Capital, a Swiss venture capital firm launched in 2019. Bornhaeuser told finews.com: «Many startups have surfed the wave of the blockchain or the wealth management segment, but with little substance beneath. Their aim often simply was to develop an app and then sell out to a bank as quickly as possible. That's not how to build and develop a sustainable business.»

Realistic Appreciation of Their Worth

Many startups are fighting old problems during the coronacrisis. Normally, only about 10 to 15 percent of startups survive any longer than an average two years. But the current crisis is aggravating their problems, says Bornhaeuser: «Startups that were just about to launch a round of financing will face serious problems. Many of those companies won't survive and venture capital firms will have to write off their investments, if they don't decide to make another investment.»

Venture capitalist acting as white knights? Only if you manage to attract their attention and liking – but that is rather a hard feat to achieve, according to Bornhaeuser: «It is exactly what many startups especially in Switzerland find so hard. What is their unique selling point? What is their positioning, especially in respect to global competition? And, primarily, what is the company worth, realistically?» And it is this last question that is key to startups in times of crises: «I just hope that the founders of startups take a realistic view.»