Switzerland is associated primarily with banks, expensive wristwatches and chocolate. It is certainly not seen as Europe’s startup incubator. London and Berlin gather all the spotlight with everyone else failing off the radar.

I also viewed Switzerland in this way until I started to visit more often, attend events and talk to some founders and investors. This changed my perspective.

Now I believe Switzerland is the country that has the highest potential to become the Europe’s startup hub, because it provides three crucial components needed for them to flourish.

Diversity

20% of people living in Switzerland now are foreign-born (source). Since Switzerland didn’t relentlessly import “cheap labor” for menial jobs as much as UK or Germany did (you can see natives driving trams and buses in Zurich – a rarity in London) much of those 20% are highly qualified professionals. Many of them even have startup experience already. This means there is a pool of people with right qualifications, diverse backgrounds, experiences, hailing from different cultures.

So it turns out Switzerland has a lot of diversity – more than I expected – and has it primarily exactly where it is beneficial: in business, high-tech, academia etc. I consider it important, because I believe diversity creates a more fertile ground for innovation than uniformity.

My observations confirm this: more than half of Swiss startups I met over the course of this year have expats involved

Stability

Switzerland with its unique governance structure and democratic process is a very stable country. The laws influencing business are very fair and stable – at least when compared to other countries in Europe. Last thing to worry about as an entrepreneur is that some stupid government decision will change the rules of the game overnight. Because the government is fairly decentralized (many decisions affecting business & life are made by local government bodies) it is also very aware of its impact and fairly business-friendly.

I don’t have firsthand experience here, but tales told by people I know who moved their businesses to Switzerland confirm this.
Why this is important for a startup? Well, startups are high-risk, unstable ventures by nature, but at least by operating in a fairly stable country you have one problem less to worry about. Insights from those more directly involved confirm this: I spoke to a partner in a startup incubator & investment firm in Zurich, who admitted this is one of the reasons they keep seeding startups in Switzerland despite high labor costs there.

BTW — this is one of the most overlooked problems of CEE countries like Poland, where bureaucracy is in general hostile towards entrepreneurs, laws are unstable&complex and informal connections mean more than the rule of law.

Financing

One complaint I have heard from many startup founders in Switzerland – new and seasoned alike – is that they have a hard time getting investments they need. Some of them even went to the US in search of money eventually moving their businesses there.

However, the problem is not that there is no money available – on the contrary, many of the most powerful companies and richest families are present in Switzerland. The problem seems rather that their investment money is channeled towards more traditional investments, not startups. This is changing — for example many Swiss biotech startups received considerable investment. Other field where investment money is starting to pour in is alternative energy. Albeit this change is slow it is in my opinion still a much better problem to have than not having the capital at all — again, a problem of many other countries.

Of course the list doesn’t end here. Other advantages of Switzerland include first-class universities that provide fundamental research needed as a base for high-tech startups (quite a few of the startups I have looked at were directly or indirectly benefiting from this). Not being a member of the EU – which makes it immune to excesses of EU regulators – also helps. Still, I think it is the first three elements that are the most important.

I think the financing is crucial. As the investment capital available in the country is becoming more and more aware of startups as an opportunity the more financing will become available. There are signs that this is happening already — new investment funds being set up, old ones getting more capital. It should uncork the stream of interesting startups from the Alpine country.

This article was originally published on Medium.