Talk – Start-up country Switzerland with Andri Silberschmidt

Andri Silberschmidt combines politics and entrepreneurship. He is a member of the National Council and founded the company kaisin. His political priorities range from pension and digitalization issues to the promotion of entrepreneurship and education.

Andri, you have been a member of the National Council since 2019 and Vice President of the FDP Switzerland since 2021. But as an entrepreneur, you also have an exciting story to tell about kaisin. What does kaisin do?

Kaisin is a company that offers Asian-inspired bowls. We started eight years ago with poké bowls – healthy bowls with raw fish on a bed of rice. We now offer a much wider range of options, including bowls with beef, chicken and tofu. We sell our bowls at eleven locations, mainly in Zurich but also in Zug and Basel. It's a lot of fun. We founded kaisin without external financing and have grown from six founders at the beginning to around 120 employees now.

How did you come up with the idea?

The idea came to me while I was on vacation in Bangkok. I ate a sushi burrito in a shopping center, an oversized sushi that looks like a burrito. I also discovered the bowls there and thought it would be interesting to bring this concept to Switzerland. In 2017, this was not yet widespread here. As a banker, I had no idea about gastronomy back then, and I can't cook well either. So the conditions couldn't have been worse. I then called a colleague from the FDP, Markus Segmüller, who, among other things, runs Loft 5 in Zurich, and suggested to him that we implement the concept. He declined, but provided us with a room. So I started a pop-up with some colleagues. We used the 20'000 francs profit from the pop-up to set up a limited liability company, opened our first store in 2018 and have been growing steadily ever since.

Pop-up means that the locations change?

Exactly, but sometimes they also stay. Our first pop-up in Europaallee was planned for four months to test the concept. With 20'000 francs in start-up capital, it's difficult to be successful as a restaurant. That's why we decided to go to existing cafés and bars and sell our bowls at lunchtime. That was no longer a pop-up, but rather a shop-in-shop concept. We now have our own shops, and the interior fittings for these can quickly cost between 400'000 and 500'000 francs. With the shop-in-shop concept, we were able to grow and build up capital by reinvesting the profits. We now also get loans from the bank to finance our growth.

What has been the biggest challenge on the road to success with kaisin?

Covid was a turning point. Fortunately, we already had an online presence and were able to compensate for the loss of sales in the stationary area. However, the margin is much lower online, because you give about a quarter of the turnover to platforms like Uber Eats and Just Eat. So Covid was a difficult time. We were able to grow, but made losses because we overdid it with investments. Our liquidity planning was not optimal. I think that's part of every start-up. But we were never on the verge of bankruptcy. The current challenge is to find the right locations. We know our way around Zurich, but in other cities it's difficult to assess where a location could work. We can't afford to make many mistakes, because with a 10-year lease and high initial investments, it's difficult to get out of a poorly performing location.

So you've grown by bootstrapping?

Exactly, until today. We've always reinvested our own profits. It was only for the first big store on Talacker that we took out a bank loan. Of course, we're doing more of that now. We're also trying to persuade the owners of the properties to get involved so that we can grow even faster.

Aren't you under financial pressure from such 10-year leases and the large investments?

Yes, but I think it's healthy in a way. In the beginning, we primarily invested a lot of time, but if the company had failed, we wouldn't have lost our livelihoods. It's different now. We used to have more freedom and could afford to make mistakes. Now, we have to make sure every month that we are on track and generate an EBITDA at the end of the year to pay back the debt. But I sleep well because we are currently on budget. We don't make incredible margins, that's normal in the restaurant business. Over the last seven years, we have learned to budget well and then stick to it.

Would you do it again?

Yes, of course, in a heartbeat. It's a gift that I had this idea and was able to implement it. I've always been fascinated by entrepreneurship. At 17, I thought I'd go into politics. If I had had a brilliant business idea back then, I might never have gone into politics. I always wanted to make a difference. Politics came first and then, four years later, kaisin. It's a great experience to work as an entrepreneur.

What does it take to go down this path and take the risk as an entrepreneur?

It is important to test the idea on a small scale before quitting your job. I would discuss the idea with friends, work it out and then create an MVP, a minimum viable product, and launch it. One of our success factors is that we complement each other well as a founding team. We are very different, but since we are also friends, we have common ground.

You could be skeptical and say that there's already a company for everything in Switzerland. Do we need more entrepreneurs to take the risk? What is their economic benefit?

In most cases, you're not reinventing the wheel when you start a company. But if you do something better, more efficiently or effectively, you have a chance to survive in the competition. Value creation comes from people who are entrepreneurial. You don't necessarily have to be a company founder. You can also think and act entrepreneurially in a company or in the state. There are many studies, for example the book «The Power of Creative Destruction», which show that countries and regions that focus on innovation create more jobs and people are better paid. Ultimately, everyone benefits from higher value creation.

What can be done better in terms of policy and the framework conditions?

I try to break it down into three topics: employees, capital and customers. These are the key success factors for a company.

Let's start with employees. We have great universities, technical colleges and excellent vocational training. However, we also rely on people from abroad being able to work in Switzerland. This concerns the free movement of persons, but also well-trained people from outside the EU who may even have completed their studies in Switzerland. It makes no sense for us to help finance the master's and doctoral studies of foreign nationals in Switzerland and then not give them the opportunity to work here. Four or five years at ETH or a university cost the taxpayer a lot of money. It's clever of taxpayers to help finance it, but it's stupid that we don't reap the benefits. If the person were to work here, they would pay high taxes. That's why we have to ensure that the third-country quota, especially for people who are already in Switzerland, makes things easier. In general, we have to make better use of the potential labor force in Switzerland. Many people have little incentive to work, including for tax reasons. I am thinking of individual taxation or the situation of married couples who start calculating whether it is worth increasing their workload if they then have to pay a lot more tax.

The second point is capital. We have a lot of that in Switzerland. There are always voices saying that the pension funds have more and more money. I think that's great. It's people's money that is being invested. I would like to see more flowing into illiquid asset classes and I am against politicians dictating how the money is to be managed. Perhaps we could reduce the exposure to real estate by five percent and invest more in infrastructure, private equity and venture capital. Another problem is that most funds are unfortunately set up in Luxembourg or Liechtenstein. We lost the vote in Switzerland because of the withholding tax and the issue tax. This has damaged the Swiss financial center. We have a lot of money in Switzerland, but it keeps ending up in foreign funds.

And then there is the market. It is difficult because we speak so many different languages in Switzerland. We have a small B2C market, which is divided between three or four languages. That is why it is important that we have good agreements with all countries, primarily with the EU, but also with India and the US, of course.

You said earlier that the pension funds should have more flexibility, but that the state should not dictate to them what they have to do.

I once tried to modernize the investment guidelines for the pension funds. It was successful in the National Council, but unfortunately failed in the Council of States. They still say that a maximum of so-and-so many shares are allowed, I don't remember exactly, is it 50 percent or 30 percent? There is no upper limit for bonds. I always say that if you buy a bond from an oil platform, it is perhaps riskier than a Swisscom share. The idea of setting an upper limit for the asset classes in the ordinance is therefore wrong. We need to take a more risk-based approach.

That is why I am calling on the boards of trustees of the respective pension funds to take a close look at this. Regarding the law: you can make so-called extensions, but then you have to know what you are doing and then you need professionals. If you read the law that governs pension funds, i.e. the BVG and BVV 2, you can see the historical background. A hundred years ago, the situation was quite different. Back then, many pension funds were set up by entrepreneurs for their own employees. They were not asset managers. At that time, they had to be given very simple and clear guidelines. In the pension funds I had insight into, I saw that people don't like to deviate and that they justify the deviations. The emotional anchor is still set by these bandwidths. I don't think this is the most pressing problem we have, but it is an important one.

One of your areas of expertise is digitization, but you also work in the area of retirement planning. On your website, you write that it is important to you that the financing of our social systems in Switzerland be made sustainable. The most important social institutions are AHV, IV and, of course, the pension funds. Is the financing of AHV solid?

No, it is not. Unfortunately, the situation is even worse now than it was when we spoke a year ago. We have to admit: this year we have lost all votes in the area of pensions. Unfortunately, what I represent does not correspond to the majority opinion in the Swiss population. We have made huge promises to the AHV that have not been covered. The 13th AHV pension will be paid out, that was the result of the referendum. But we still have a huge amount of work to do on the AHV: The issues are more numerous and more pressing than ever. We now have various projects: the payment of the 13th AHV pension, the financing of the 13th AHV pension, the revision of widow's pensions and the pension fund for married couples. There are four projects in the area of retirement provisions that are running in parallel and there is no overall coordination. I find this negligent. I would have liked the Federal Council to bring all this together and say, now we are doing an overall assessment, a package that will probably be associated with tax increases, because we can't get around it. Although I am always strictly against tax increases. But if the population decides on an expense, then it must also be financed. But on the other hand, sooner or later we really have to deal with the retirement age. The proposals we have made have not found a majority. We will have to present another proposal. We can also discuss the BVG. Part of it is regulated in the so-called BVG law, and there too we have a problem. There is something that falls a bit out of the system. That is the conversion rate, which is currently laid down in the law.

What is the problem with the conversion rate?

The conversion rate means that on average you receive more money from the paid-in capital than you have paid in. This contradicts the capital cover principle of occupational retirement provision. There were three attempts to remove the conversion rate from the law. I was in favor twice, but against it during the revision seven years ago because they wanted to increase the AHV. I don't think you can remove the conversion rate from the law. It's too easy for the other side to start a campaign with the argument that people are getting less pension. Even if you take countermeasures to end up with an even higher pension, just lowering the conversion rate creates enough opposition. And yet very few people would be affected. Most pension funds no longer have to apply the conversion rate because most people (about 85 percent) have more money insured than is required by law. Anything above that is more or less deregulated. So most pension funds have been able to solve the problem.

Another question about pension funds and vested benefits. If you are self-employed and start your own company, you are no longer affiliated with a pension fund and have the freedom to manage your pension fund money yourself. You can choose your own provider or transfer it to a vested benefits foundation. Is there a reason why this is only allowed for entrepreneurs? If employees are engaged in entrepreneurial activities, why can't they also contribute part of their pension fund assets to a vested benefits foundation?

The reason for this is the Federal Constitution. It states that the employer organizes the occupational pension plan. To change this, we would have to amend the Federal Constitution. Personally, I am in favor of it. There was also a motion by the FDP that instructed the Federal Council to examine the possibility of employees being able to freely choose their pension fund. Unfortunately, it failed in the National Council, even though it was only about a feasibility study. Historically, this paternalistic idea exists because the pension funds already existed before the Pension Fund Act. There were many voluntary pension fund solutions. When the law came, it was based on the existing system. But now we are a few decades later, and I agree with you: it would be a great opportunity. It would also lead to consolidation; we might then have 50 providers instead of 1'000. It is important that people know that the BVG is a collective system with a certain solidarity. If you only have individual options and can change every year, it's like the Pillar 3a. You could say that the third pillar is being massively expanded, but the second pillar no longer exists. That's why I think it's not a bad thing that we still have a system in which there is solidarity and investment risks are shared. If we were to abolish that too, I would see no reason for the second pillar. I think the three pillars are good. They are a good mix.

You mentioned the 13th AHV salary earlier. It has not developed in the direction we would have liked from an entrepreneurial point of view. Why did the majority vote that way?

That's a very philosophical question. I'll try to limit it to the 13th AHV salary. When we discussed it in parliament, we thought it had no chance of being accepted by the people. We thought we didn't need to make a counterproposal, it would be rejected. That was a miscalculation. I was among those who said we didn't need a counterproposal. When we discussed it in Parliament, the mood was different than it was two years later when it came to the vote. A lot happened in that time. Credit Suisse went under. Inflation rose. In Switzerland, things were actually still going well, but the global headlines brought it to Switzerland and suddenly we were all talking about purchasing power. All of this together was toxic for the vote. Now inflation is falling again. I think if we voted today, the result might be different. Maybe still a yes, but not so clear. I am sure that there were also people who said: They are giving money to Ukraine now, why aren't they giving it to us, the pensioners? A lot of things that have nothing to do with each other are being linked. Because the AHV doesn't have more or less money depending on whether you send money to Ukraine. But a lot of people are making that connection.

Back to the original topic. We were talking about your business success and money earlier. What does money mean to you?

For me, money is a means of payment and a means to an end. I sound like an economist, which I am, but that's what money means to me.

And how do you invest the money you have left over?

To be honest, it's very little. I always sail a bit close to the wind. I paid fully into my Pillar 3a, maybe not when I was 18, but since I was 21 or 22. But otherwise I have relatively little money put aside. I have mostly invested it in the companies I work for. I would have liked to have bought crypto five years ago, I would have liked to have bought an equity fund ten years ago. Of course, I have shares in my Pillar 3a, where I am 95 percent invested in shares. But otherwise I don't have much money put aside. When I have some money, I pay into the pension fund to take advantage of the purchasing potential there. But I don't know if that's wise. The interest rate is low at the moment. Unfortunately, I don't have the big chunk of money put aside yet, but I'm working on it. I think it's still okay to have some debt at 30. There are people from the previous generation who say they never had debt. I think that's a nice thought. I congratulate anyone who can do that. In my case, it was not possible to have no debt and hopefully build a fortune as an entrepreneur at the same time.

One question that sometimes comes from our customers is related to Pillar 3a. If you pay into Pillar 3a, you only have to pay tax on the money at a reduced rate later in the future. But who can tell us that it will still be the case then? How do we know that we will still have the advantage that the politicians are promising us today?

The Federal Constitution states that private pension provision must be encouraged by the government. As long as this is in the Constitution, we have to comply with it. But we don't have a constitutional court, which means that the Federal Assembly and parliament can deviate from the constitution. So it stands or falls with politics. It didn't help that the Gaillard group of experts proposed removing the tax privilege. But – and this is important for me to say – there is a reason why lump-sum withdrawals are taxed more favorably than pensions. Otherwise there would be an enormous tax progression because the money comes all at once. That's why the tax rate for pensions is lower than for lump-sum withdrawals. Two tax rates are needed. This is clear to us, but not to the public. People have the feeling that there is an unjustified privilege. To conclude: I'm not campaigning for a particular party, but ultimately it always comes down to the question of how the population votes. If the population tends to vote for parties that don't want to promote private savings, then there is a greater risk that these benefits will no longer exist in ten or 20 years.

Last question: What advice would you give to your 20-year-old self?

I would do everything the same way as before. I enjoy getting up every morning, even if the alarm clock rings early. I always say to myself: at some point I won't want to have to set an alarm clock anymore, but that won't be until I retire. I have to say that in the last ten years I have also thought a lot strategically. Every year I take a weekend and think carefully about what I want to do in which area and how. And there's a lot of work in what I do today.

By the way, when I was 20, I went out a lot. But then, on Sunday mornings, I wrote a party program instead of watching Netflix. With a hangover, I did a bit of politics in bed. And I would say it was worth the effort so far.

Andri, thank you very much. And thank you to you, dear listeners and viewers. Until next time.