Nearly 90 percent of Swiss blockchain companies don’t expect to survive the pandemic without help from the government, threatening more than 3,000 jobs across the country, according to an industry group.
“It could be that Crypto Valley becomes a Death Valley,” said Lorenz Furrer, vice president of the Swiss Blockchain Federation.
The public-private association asked the country’s 800 blockchain firms how badly the coronavirus crisis is hurting their business. Of the 200 that responded, four of five said they are looking at bankruptcy in the next six months, and 88 percent said they would not survive without state aid. The survey was conducted between March 31 and April 3.
Switzerland has long been heralded as an attractive place for blockchain startups. Favorable legislation, innovation and access to talent are some of the drawcards for these ventures, which include Facebook’s Libra project. The sector employs more than 4,000 people, with the top 50 firms having a combined value of about $25.3 billion, according to Zug blockchain investment firm CV VC.
Currently, however, private capital for young companies is drying up as the pandemic puts investors on guard. Many startups don’t generate enough revenue to qualify for other funding, such as the bank loans provided under the federal government’s COVID-19 aid package. Without seed money, they are likely to fail.
Blockchain nation takes a hit
Entrepreneurs have a hard time raising funds even in normal times, but the health crisis has made the task much tougher, said Ralf Kubli, director at CV VC. He said the pandemic is also making it difficult for mature startups to develop the customer relationships they need to grow their business.
The cancellation of industry events hasn’t helped. The Crypto Valley Association has already decided to forego its annual conference, which was scheduled to take place in June.
“So much of the blockchain ecosystem hinges on coordinated efforts between platforms, networking and attending conferences,” said Daniel Haudenschild, president of the Crypto Valley Association.
German Ramirez, who runs the Swiss blockchain marketing agency The Relevance House, says blockchain events and meet-ups are critical when launching a product, allowing clients to get a snapshot of the market and build their network.
Being nimble and pivoting to digital tools can help companies ride out the storm, Haudenschild said. Many startups have already taken steps in this direction, hosting webinars and online networking sessions.
“Switzerland’s credentials as a leading blockchain nation remain undisputed,” he said. “The Crypto Valley is well positioned to emerge from this crisis on assured footing.”