Giving investments a purpose by supporting spin-offs

Recently, ETH Zurich Foundation and the Mirabaud Group led an initiative to enable a group of students at the Swiss Federal Institute of Technology in Zurich (ETH Zurich) to present their spin-offs to investors. This evening event, entitled “Circle of innovation”, was held to lay the first foundations of a broader bridge – allowing young talent from the academic world to cross over into the real economy.

The drive behind this initiative came from Corinna Adler, who has been responsible for partnerships at ETH Zurich Foundation for 10 years, and Nicolas Mirabaud, Member of the Executive Committee of Mirabaud & Cie SA, who were keen to explain their approach and the goals of the evening. Their interview, which took place at the Mirabaud offices in Zurich, shows that the academic and financial worlds have much in common, starting with their shared quest for excellence.

Switzerland often leads league tables ranking countries by innovation. How do you explain this success?

Nicolas Mirabaud: The only raw material we have in Switzerland is brainpower. Taking this as the starting point, our country understood early on that it was essential to establish an environment that nurtures innovation. This means two things: ensuring that ETH Zurich and EPF Lausanne Institutes of Technology are at the forefront of educational achievement, and establishing a wide-ranging network of public-private partnerships. Innovation can only be brought about by building robust bridges between the worlds of academia, technology and economics, between the people who come up with and develop new products and services and those that are willing to invest in them.

Corinna Adler: I would add that one of the main ingredients for Switzerland's success in innovation is the quality of our research institutes.

Since its foundation in 1855, ETH Zurich has always targeted international recognition, which has enabled it to attract talent from around the world. This openness to foreign countries is essential and is due to several factors, not least our geographical situation, our size and our multiculturalism. The Swiss live in close proximity to each other but are culturally diverse, which puts broad-mindedness at the core of their outlook.

N.M. We are also very pragmatic. We do not innovate for innovation’s sake; we do it because it is the sine qua non of our survival, in the short term and in the long run. If I take the example of banks, especially private banks, they could not have developed based solely on the domestic market; they had to look abroad. And in their very specific sector, they cannot simply export homespun know-how: their success depends on an intimate understanding of their customers, their respective cultures, and their regulatory and other constraints. Contrary to what is happening in other countries, adopting a "Swiss-centric" attitude would not be possible.

This understanding of the world beyond our borders, this permanent interest in what is happening elsewhere, the awareness of the need to adapt and even to anticipate external developments that we cannot control – that is what has allowed us develop a special degree of agility. In this regard, I would like to cite the rapidity with which the Swiss economy adapted when faced with the overnight rise in the franc after the SNB abandoned the floor rate. All this leads me to believe that innovation is less about finding "new" things than it is about creating the links and solutions that allow us to adapt to a world that is constantly changing.

Which are the sectors where you think Switzerland is particularly well positioned?

C.A. As far as industry is concerned, you only need to look at sectors where ETH Zurich is most active: it is a mirror that reflects industry as it will be in 10-20 years. And our advantage is clear in the fields of life sciences, information technology, robotics, physics and architecture just to name a few. 

In concrete terms, we could take the example of CERN, which today has the most powerful particle accelerator in the world. And as a side effect, building leads to a large number of "inventions" and spin-offs with ETH involvement.  In general, Switzerland is a country of start-ups; since 1996, ETH students have created 359 such companies, which is a good indicator of our ability to transition from theory to the real economy.

N.M. Services represent a second competitive cluster where Switzerland has an international edge. This position is easily explained: if, like our banks, you have to be able to serve customers from all over the world, this means that you have to keep yourself up to date with current developments, both in terms of regulation and in terms of trends in supply and demand. Competition is global, and the need to adapt never stops.

In private wealth management, this demand for flexibility is especially strong since we have a very demanding customer base which requires us to offer tailor-made solutions. As a result, having only superficial knowledge of the environment and the culture of the markets in which we operate would be completely insufficient.

You started the “Circle of innovation” together to give spin-offs and investors a place to meet. How did this joint enterprise come about?

N.M. Our customer base increasingly wants to invest in the real economy through long-term projects that make sense for the future. An interest in start-ups is therefore natural. Working with the significant pool of young talent at ETH Zurich therefore fits very well with our desire to support our customers in this process.

C.A. To prepare students to become entrepreneurs, the university needs significant financial resources among other things. This helps to attract the most talented teachers and students. The “Circle of innovation” is a great opportunity for all involved parties to exchange ideas, learn about existing challenges and start promising partnerships.

N.M. The modern world is complex. Just having good ideas is not enough. You need to know how to make these ideas grow, and how to navigate the maze of administration and regulation that stands in your way. Being an entrepreneur today is like training for a marathon.

C.A. The role of the university is not limited to providing students with specific knowledge. It goes much further than that.  The job of ETH is also to develop critical thinking, creativity and entrepreneurship. ETH brought this to the fore with the "Critical Thinking Initiative" launched in 2012. Going further, ETH put the "Pioneer Fellowship" in place. This support programme allows ETH to bridge the gap separating research from business. It has already created 34 spin-offs since 2010, including some which are already recognised internationally.

N.M. Absolutely, building bridges is essential. Complexity fosters silo thinking, so it is fundamental to put in place structures that allow ideas to be debated by people from totally different but complementary universes.

What is your assessment of this first experience in partnering finance and academia?

N.M. We are very satisfied and hope that we have laid the foundations of a long partnership. Having been present in Zurich for many years, it makes sense for us to develop our local network and to reinforce our involvement.

C.A. This was also one of our priorities. By working with Mirabaud, we sought to reinforce the relationships with young entrepreneurs, to a great extent to those from the French-speaking part of Switzerland.

And what were the reactions from participants?

C.A. From the young entrepreneur’s point of view, the experience of face-to-face meetings with such a density of investors and potential customers was extremely well received. We at ETH Zurich Foundation are pleased with such a positive outcome.

N.M. Absolutely, and the reason for this is that we recognised that it was not enough just to organise yet another meeting between researchers/entrepreneurs and investors. If we did not put in the effort to ensure that participants have complementary expectations and set up a platform where they can discuss the projects that interest them one on one, the initiative would have failed. There had to be a benefit for both sides.


The search for talents

Innovation presupposes a certain talent. How should this be fostered?

C.A. The most important aspect is providing the right environment. Funding can also be decisive: a thousand francs is sometimes enough to make a difference, for example by giving a laboratory project the possibility of continuing its work.

N.M. In my opinion, talent, which can manifest itself at all levels, is the ability to transform an idea into reality, while remaining pragmatic. In the financial field, it was easier to "stand out" 20 years ago than it is today, when everything is subject to strict regulation.

Many are called, but few are chosen. How should these talented individuals be identified?

C.A. As far as ETH Zurich is concerned, we are all too aware that we are in direct competition with prestigious institutions such as MIT, Stanford or the University of Singapore. It is not enough simply to choose the students with the best grades (see ESOP box). You need to understand their motivations, knowing that these vary greatly according to their culture of origin. For this reason, ETH makes its selection based on a number of normative criteria, and we also hold personal interviews. And the final decision is made by management on the basis of pre-selection carried out by the department concerned.

N.M. It is quite surprising to see where our talent identification issues meet. The metrics which are measured, such as performance history for a manager, for example, turn out to be very poor identifiers of talented individuals who are likely to flourish in the very specific environment of Swiss private wealth management. Our business is based on human relationships and – above all – trust. It is not enough to excel in the markets to be able to thrive there: in addition to technical qualities, it is critical to understand our culture, to be entrepreneurial; sometimes also to be able to work alone, and always to work hard. Overcoming constraints is critical to success!

With this first positive shared experiences of academia and finance behind you, what are your plans now?

C.A. We will, of course, organise more of the same sort of meetings. There is no need to branch out into a plethora of initiatives. The important thing is to know how to reinforce what is already working well.

N.M. Improving the fluidity of dialogue is critical. And to achieve this, we need to simplify networking and provide access to bridges between researchers and investors.

Can foundations act as accelerators in this process?

C.A. Absolutely. They enable us to meet challenges that would otherwise be overlooked. The beauty of philanthropy in the field of science lies in the fact that philanthropists are involved in shaping the future. What better legacy could they provide?

N.M. Investors are no longer satisfied with performance alone. They want to give a purpose to their investments, to commit themselves to the future of the human race and the planet. Social and environmental impact is becoming an increasingly intrinsic component of investing. From this point of view, ETH Zurich Foundation is an ideal partner because it is able to accelerate the process of idea to realisation.

ESOP: excellence by design

To attract talent from around the world, the Swiss Federal Institute of Technology in Zurich (ETH Zurich) has created the “Excellence Scholarship & Opportunity Programme” (ESOP) to enable students to study for their master’s degree at this institute.

This programme is directed towards students with potential, and scholarships are awarded to those who have the personality and the intellectual capabilities such that we can expect exceptional results. ESOP is financed entirely from private funds provided by 3,500 philanthropists (former students, private individuals, foundations and companies).