Isabelle Ganz, Partner of QUORUS GmbH and Nina Fois, QUORUS GmbH, Research, Marketing & Communications
Ivan Orlov, CEO of Scientific Visual, was born in Nizhny Novgorod. After graduating in aviation electronics, he studied crystallography at the Moscow State University and later moved to Switzerland, where, in 2007, he completed his PhD at the École Polytechnique Fédérale (EPFL) in Lausanne.
In 2010 he established Scientific Visual, a company producing equipment for quality control in industrial crystals. Its automated scanners ‘see’ internal defects in raw crystals and prevent defective material entering costly processing chain, thus improving the quality of the watch, LED and optics production.
Compared to other attractive locations in Europe, Switzerland’s business-friendly environment, as well as the numerous reliable partners present on the territory, make the country a very attractive place to start a business. This is why Ivan Orlov decided to establish Scientific Visual in the Swiss Canton of Vaud. Although the high costs newcomers have to deal with, the famous Swiss quality and advantages offered by the Swiss startup ecosystem make the expenses worth it.
1. How would you describe the aim and the purpose of Scientific Visual?
Growing large crystals is a blend of science, art and technology. Most of the raw synthetic crystals contain defects, but non-transparent crystal surface makes it impossible to see them until the crystal is cut or polished. Our equipment visualizes and classifies such defects in freshly grown crystals – sapphire, ruby, spinel, semiconductors – before they enter the expensive processing. It allows to save up to 50% of the production’s costs of crystals used in LED, watch and the semiconductor industry.
The mission of Scientific Visual is to empower crystal manufacturers to improve the amount of high-quality material harvested from each crystal.
2. For what reasons did you choose Switzerland as your location, especially with regard to other attractive locations in Europe? What were the key elements the Swiss parquet offered and which of these elements played the decisive role in your decision-making?
Switzerland is the best choice in terms of access to a highly qualified workforce and R&D opportunities. It is a consequence of its high-level education and university innovation ecosystem actively supported by the government.
The high quality and safety standards, as well as the patent regulation and protection, were also key factors that did direct my choice towards Switzerland. In addition, not to forget is the exceptional Swiss international reputation: The brand Made in Switzerland is a very valuable factor that brings substantial advantages at the market of precision equipment.
The country’s geographical position at the center of Europe, its economic stability and legal security are also factors that positively influenced, although did not determine, my choice.
3. What role played the canton and its business associations during the foundation and establishment phase of Scientific Visual and what was the most relevant assistance provided by the canton? Which other institutions have been particularly important?
The canton of Vaud and its business associations greatly helped at the start. They supported the project with pre-seed money, that boosted the Research & Development necessary for launching the first scanner. Particularly important were two cantonal players, the Service for Economy and Innovation (SPEI, https://www.invest-vaud.ch/about/who-are-we-/spei) – the cantonal department that supports innovative businesses and startups – as well as the Foundation for Technological Innovation (FIT), based in the Cantons of Vaud and Valais and supporting innovative technologies with so-called “honorary loans”. Besides these two institutions, we should also not forget the EPFL and the quick access that the university offers to scientific instruments, know-how and academic network. In this respect, I would also like to point out that grants offered by Swiss universities can be an interesting source of financing for startups at the pre-seed and seed stages. But in some cases, these financial sources are available for university members and researchers only. Depending on the project, it could therefore be advisable to engage with someone that is studying or working at the local university. Especially for foreign and Russian owned companies, it is important to get the support and know-how of someone that is familiar with the procedures of starting a business in Switzerland.
4. Which Swiss financial instruments and to what extent could you benefit from when you set up your company?
We benefited from various financial instruments on different levels.
As I mentioned earlier, at the cantonal level the SPEI’s support was very important, as the office financed the project with pre-seed money. I learned about the SPEI support from advertisements in the university and business schools. Applying for the grant helped to finalise our first business plan. However, at that moment the company was not yet registered. I was impressed by the fact that the canton was willing to grant the support to the company before it is created, as well as by the straightforwardness of the whole process: the money was granted based on a dossier and a short presentation.
At the federal level the Swiss Innovation Agency (Innosuisse, https://www.innosuisse.ch/inno/en/home.html), played a key role by awarding Scientific Visual a grant of CHF 300’000 at the seed stage. The grant allowed us to engage two EPFL chemists for a year and start developing our technology.
Following these two grants, Innosuisse and SPEI, Scientific Visual could also obtain risk capital financing (Money for Equity) from two Business Angels Clubs, Business Angels Switzerland (BAS, https://www.businessangels.ch/) and Go-Beyond (https://www.gobeyondinvesting.com/) that invested in the company and joined the board. The cooperation with one of the clubs did not work out as expected in the long term. Whereas the collaboration with the member of the second club – who not only joined the board of Scientific Visual but later also assumed a full-time executive role – went hand in hand with the investments and proved itself to be quite fruitful. This person is now in the team and continues to contribute to the development of the company. In this regard, one of the most important lessons learned in the process of applying for financial support is, without doubt, to select the right person – Business Angel or member of Venture Capital firm (VC) – to work with. In Switzerland money is a widely available resource, therefore I advise not to take the first available investment, but take into account and double-check the “chemistry” between the founder and the major investor.
At later stages, Scientific Visual also benefited from financial support through the Fond de Technologie (https://www.fonds-de-technologie.ch/) at the federal level as well as from the aid of the Foundation for Technological Innovation (FIT) of the Canton of Vaud (https://fondation-fit.ch/en/). Furthermore, in March 2020 the company received an EU grant of Horizon 2020 (https://ec.europa.eu/programmes/horizon2020/en) – a Research and Innovation program of the European Union, supporting the breakthrough R&D projects in Europe. After being awarded the grant, Scientific Visual received also further funding offers from VC firms.
Thanks to the help of the Fond de Technologie, Scientific Visual obtained its credit line with a Swiss Bank. According to my experience, traditional financing options through Swiss Banks are almost impossible for startups at the pre-seed and seed stages, because they don’t have yet revenue streams nor sufficient fixed assets that can serve as collateral.
5. How can a start-up approach an investor in Switzerland, what were your experiences in this regard? What advice would you give to a startup when looking for investors in Switzerland?
If you start from zero, subscription to email newsletters related to venture business is helpful for getting information about available funding options, and investment landscape in general. In this regard, I would like to mention our personal experience at European level with EIT Raw Material, as Scientific Visuals decided to apply for a grant after getting its newsletter. I also recommend devoting part of your time looking for grants and subsidies offered in Switzerland. Getting a couple of grants will greatly help you to find and onboard further investors by convincing them that you are worth their money. Besides, when a startup can show that it already did receive financial support from renowned Swiss institutions, it means for other potential investors, that the due diligence already was done and the company did successfully pass the “test”. This is also the reason, why we as of today have a part-time colleague responsible for finding and applying for public grants.
If you meet the prerequisites, I would also suggest applying for university grants, in this regard, once again, it can be very helpful to engage with people working there and making this option more achievable. It is also worth to follow education programs like the ones offered by VentureLab (https://www.venturelab.ch/) or to onboard an alumnus of such program who is familiar with the Swiss procedures. Indeed, it is very important to have someone on board that understands the local business habits, is fluent in the cantonal language and therefore can present the project and the idea behind it in an understandable and persuasive way.
Once you collected first grants and awards, come to Business Angels clubs and platforms for private money. You have to make sure that you complete the formal applications properly – in this regards further details can be found in my interview published in Forbes: https://www.forbes.ru/finansy-i-investicii/359941-startap-po-alpiyskomu-standartu-kak-rabotayut-venchurnye-investicii-v (in Russian).
While pitching to private investors, you should be aware of the differences between the Russian and the Swiss mentality. While in Russia it is crucial to impress and prove that you are a strong-willed leader, in Switzerland it is much more important to be collaborative, listening to the partners and investors and respecting the rules and advice given by the government.
6. What challenges did you have to overcome during the foundation, development and establishment phase?
Although the difficulties in receiving the Swiss work permit are often overestimated, obtaining the work and residence permit is a time-consuming step of your move to Switzerland. Thus said, in my case, the whole process happened gradually and was simplified by the fact that I have studied at a Swiss university. Therefore, I initially had to apply for a Student visa followed later on by the application for a working permit as soon as I established the company. The process included an interview at the cantonal labour department (Service de l’emploi) to explain the business project and the submission of several documents, such as the business plan, the company financial plan and a letter explaining why I was the specific person with unique skills needed to run the company, accompanied by a detailed CV.
To newcomers, I would also suggest to prepare a detailed business plan explaining the company’s value for the canton in specific and for Switzerland as a whole, thus also proving, for example, that the company will create new job opportunities and create economic value for the canton.
Another challenge we had to overcome was the occasional disagreement with partners and investors. It is very important to learn quickly how to protect yourself and your interests without damaging the relations with the investors. Balance is not always easy to find but is key for a good and long-lasting business.
7. What concrete opportunities has Switzerland offered you as a business location? What advantages does Switzerland offer for scaling up a successful startup?
Thanks to its economic freedom, the simplified access to investment as well as the streamlined administration, Switzerland is a very good platform to start your venture. In our case two of the most important advantages the country offered were the valuable international reputation of the Swiss Made brand in the field of precision instruments and the proximity to the Swiss watch industry, the market we initially addressed our product to. I would also like to add that the Swiss environment is characterized by a strong link between the scientific and the industrial world, thus enabling you to easily move know-how’s and talents from academia to the industry. This transition in Switzerland is well feasible and greatly supported.
Scientific Visual plans to scale its business in Switzerland as well as internationally, the focus lies especially on China and, eventually, the United States. As Switzerland offers a limited domestic market, it is important to go global and grow also outside the country as soon as it is possible. In this context, I would like to briefly mention the Swiss Export Risk Insurance (SERV), a special institution supporting startups and companies that plan to go global and export their products (https://www.serv-ch.com/).
It appeared to me that often Swiss companies are not ready to take the risk to quickly expand at a global scale, and find it difficult to adapt their business models to global tendencies. This happens in my point of view because Switzerland still is a bit isolated from the global market and tends to have a local approach to the business. The country and with it its companies are often not thinking global from the get-go and in many cases need a third party input to set the internationalization process in motion.
8. What factors should foreign founders consider when starting a business in Switzerland? What companies or startups with, for example, Russian roots need to bring in order to take the step into the Swiss market?
Based on my personal experience, when coming to Switzerland there are three main points to take into account:
1. Choose your partners very carefully: the choice has to be made not only with a business perspective but also in regard of the mentality, the age and the experience of the person you are planning to work with. Choosing the right partner could spare you a lot of problems.
2. The power of collaboration: As I previously mentioned, the Russian mentality and way of doing business are considerably different from the Swiss ones. The willingness to cooperate and a conceptual approach is highly appreciated in Switzerland. This said, instead of having just one partner for all relevant fields you are dealing with, make sure to collaborate with experts in different sectors that can advise you efficiently in your critical decisions.
3. The third advice I would like to give is directly linked with the first two: Make sure to engage the right persons in your team and to select the right people to work with. If it’s the case, you will have less struggle and will be supported by their diversified knowledge. For the presentation of the project and of the business plan, choose someone who speaks fluently the cantonal language and that is familiar with the Swiss procedures, thus also knowing how to convince the local audience.
In general, in order
to take the step into the Swiss market, companies owned by Russians or other
foreigners should be able to prove their technological superiority in the
sector they work in and protect their intellectual property. Having a European
or, even better, a world-wide patent, is particularly important and will enable
a company to prove the added value of its ideas and technology and will
substantially support the partner-, investor- and potential client onboarding.