Start-ups, failures and funding: the Swiss company landscape

A record number of companies were founded in Switzerland in 2023 - along with a rise in bankruptcies. Keystone / Jean-Christophe Bott

Each year, thousands more Swiss companies open their doors for business than go bankrupt. Most new entries and business failures are small enterprises, which form the backbone of the Swiss economy.

Switzerland is well known for its multinational companies, like Nestlé, Roche and Holcim. But these giants represent just 0.05% of Switzerland’s 610,000 firms. Nine out of 10 Swiss firms employ less than 10 staff.

SWI swissinfo.ch takes you through a tour of the current Swiss company landscape in graphics and analysis.

Start-up trends

The number of freshly minted start-ups has been steadily rising over the last ten years. In 2014, 41,560 firms registered for business – a number that increased to 51,637 last year (an average 141 start-ups per day).

The Institute for Young Enterprises (IFJ), a consultancy that helps start-ups in their first years, has witnessed new trends emerging. More entrepreneurs are building up their own businesses in their spare time whilst holding on to their day jobs, says IFJ co-CEO Simon May. “More and more people are yearning for more freedom in their careers and are willing to fulfill their dream of starting their own company,” he said.

IFJ has also observed a new trend in the type of legal incorporation. An increasing number of start-ups are being created as general partnerships or as solely-owned entities, which require less starting capital to establish. But the most dominant form of business registration remains as a limited liability company (LLC) – which made up 40% of all start-ups in 2023.

Despite higher starting capital requirements, LLCs often offer entrepreneurs better tax conditions and protection from liability in the event of insolvency.

Business failures

But these figures do not tell the whole story. At the other end of the spectrum, thousands of companies also fail each year.

In 2023, 5,089 companies folded in Switzerland, a rise of 5%, according to research group Dunn & Bradstreet.

But the Swiss Creditors’ Association, Creditreform, counts nearly 10,000 bankruptcies by including bankrupt individuals who run a business by themselves.

According to Creditreform, the net growth in Swiss companies actually shrank last year. This is measured by subtracting the number of bankruptcies, and firms closing for other reasons, from the number of new incorporations.

Funding new firms

Many entrepreneurs self-fund their start-ups or borrow money from friends and relatives or get a bank loan.

Other start-ups need greater financial resources to get off the ground and turn to venture capitalists, private equity groups or the financial markets.

In 2023, some CHF3.56 billion was raised in this way by start-ups, which was down 10% on the previous year.

According to EY Switzerland, in the first half of 2023 only 2% of this money came purely from Swiss based investors. Some 60% of financing came from investors based outside of Switzerland. The remaining 38% was raised by investment groups that involved both Swiss and foreign entities.

“The overall economic situation with high inflation and interest rates, the generally challenging environment for businesses and investments and of course the geopolitical turbulences led to a more selective and considered type of financing,” explains Alexander Schatt, Head Startups & Scale-ups at EY in Switzerland. “Investors shifted towards a more cautious approach.”

This trend was mirrored in other countries, including neighbouring Germany and Austria, which both saw a more drastic decline in funding from specialist venture capitalists, which focus specifically on financing start-ups.

Schatt expects this year to prove challenging for start-ups that fail to convince investors that they can become profitable in a reasonable time frame. “Companies leveraging AI, that operate in climate or clean tech or that offer solutions which help to save costs may find a more favourable funding climate, “he told SWI swissinfo.ch.

Edited by Balz Rigendinger