Crypto Valley with resident companies from the Swiss blockchain scene is facing an existential threat due to the economic crisis caused by corona. The Zug region is seeking additional financial aid under the leadership of the cantonal finance director Heinz Tännler.
In order to support start-ups in this difficult situation, the Federal Council recently approved a supplementary aid package. Up to now, startups have only been able to make use of the existing emergency measures of the federal government to a very limited extent, if at all. The Confederation therefore wants to use the guarantee system to protect promising start-ups from corona-induced insolvency. Together with the cantons, loans of up to CHF 154 million are to be guaranteed in this way.
Heinz Tännler, finance director and member of the government council in Zug, believes that this amount is insufficient as a financing cover for Swiss start-ups. In addition to small and medium-sized companies, Crypto Valley start-ups that are active in the young field of blockchain technology are particularly suffering. An earlier survey by the Swiss Blockchain Federation already drew attention to the precarious situation of several innovative young companies.
The Zug region, under the leadership of the cantonal finance director Heinz Tännler, is seeking a financing fund of over 100 million Swiss francs. The fund is to be based on private investments, contributions from local government authorities and federal guarantees. It should be possible to partially convert loans into share capital.
In a revealing interview with Heinz Tännler, CVJ.CH was able to gather information about the proposals for a financing solution.
CVJ.CH: Mr. Tännler, you are of the opinion that more than 154 million francs are needed to provide financial support for start-ups. What exactly do you mean by this?
The amount of 154 million Swiss francs is partly made up of 100 million Swiss francs that the Swiss government makes available as financial aid in the form of guarantees. The Confederation would also like the cantons to participate and to assume the remaining 35 % of the guarantee. This would then amount to approximately 150 million francs. Although each canton is free to participate in the support, the canton of Zug has already decided to participate. Since other cantons will certainly also participate, it is unclear at this stage how much the amount will actually be.
Together with the city of Zug, which has already joined this campaign, we expect to receive a starting capital of 20 to 30 million Swiss francs. Start-ups primarily need capital and investments, not loans. That’s why most of this money will not be granted as a loan, but in the form of convertible bonds. The support provided by the Confederation is intended to act as rapid assistance and as a basis, while our money will be granted through a foundation. If a company is doing well, the convertible bonds can be exchanged for shares. Later, the foundation is to be converted into a fund in which private individuals will also be given the opportunity to invest. The final amount thus also depends on the participation of the private investments.
CVJ.CH: Startups often fail. Why shouldn’t Crypto Valley simply be left to the market in the end?
Blockchain technology is used in countless other areas outside the financial industry. There is a lot of potential here. To say that we simply leave start-ups to the market is, in my opinion, wrong. For the simple reason that start-ups are seen as an important part of our economy. In the world of start-ups, the market is not working at the moment, there is a lack of investment.
If we do not act, Switzerland’s innovative strength will be destroyed. Switzerland, and also the Canton of Zug, lives precisely from this innovation. However, we are of course also aware that many start-ups will not survive. I am personally of the opinion that the public sector can play one of its noblest roles here in relation to the economy by adopting an anti-cyclical approach. Finally, the 150 million in relation to the 40 billion spent on our economy is a modest sum.
CVJ.CH: How do you see the whole development of Crypto Valley?
Crypto Valley relies on blockchain technology. This technology will prevail according to the broadest opinion, regardless of the current crisis. And Crypto Valley is considered the world’s leading quality hub. If we can say at the end of the day that we have been able to help 50 companies to survive in the long term, I am very pleased that there are a few of them that will make Crypto Valley a big place.
CVJ.CH: Would you like more political support for appropriate financing solutions?
We got this project off the ground within three weeks, together with the federal government, the canton and the city of Zug. I have received political support from left to right. What I would now like to see is the private side getting involved as well. Together with the federal government and the city of Zug, we hope to create a trustworthy and solid basis. This basis should in turn lead to credibility. This credibility will enable an innovation push, which will reveal a potential for more private companies to enter the market.
CVJ.CH: Will block chain technology become interesting for small and medium-sized companies in the future, as Ueli Maurer said at the Crypto Valley Summit in Zug?
Yes, I am of the same opinion. The technology will primarily be interesting for SMEs when it comes to applications. In addition, there will certainly be successful projects here which are important for the future of the Canton of Zug and the whole of Switzerland.
*Originally published in German at CVJ.ch