How the blockchain can help entrepreneurs

The “Blockchain Roundtable” is one of 18 projects enabled by the digitalswitzerland challenge for a value-creating, cross-industry exchange. Its team of volunteers started with IBM, Swisscom and EY and in the meantime grew by a start-up, several lawyers, notaries and the commercial registers of Canton Zug and Geneva. Their joint vision is to simplify and shorten the incorporation process of new companies.

Major pain points for entrepreneurs in Switzerland

Today, national and international entrepreneurs face high barriers to register their company in basically every Canton. This is reflected in the Global Competitive Report 2016-2017 by the World Economic Forum, where Switzerland ranks #54 for “number of procedures” to start a business and #56 for the “time to start a business”. Similarly ranked countries are the Democratic Republic of Congo and Morocco. Norway ranks #22 and #15 while New Zealand clearly leads with one single procedure and 0.5 days to start a business.

One major reason for this unattractive ranking of Switzerland is the lack of end-to-end digitalization across all involved parties. For example, the manual process to fill in the countless paper documents, printing and sending it, just to being typed it into another IT system at the commercial register, make an incorporation hard and long-winded. Moreover, the current law is not constituted for virtual application and requires entrepreneurs to take a trip to the relevant commercial registry office in Switzerland.

Another key driver for the duration and complexity is the mandatory creation of a “blocked account” (analogue to the rent deposit account) with a Swiss bank for depositing the capital stock of the new company during the incorporation process. On top of many legal requirements, Swiss banks usually employ various non-mandatory checking criteria for this temporal “blocked account” – just as if they were opening a regular business account (which is their core interest). This practice is highly non-transparent and unnecessarily restrictive, especially when it comes to international clients and investors. Entrepreneurs might find themselves providing document after document to the bank, wasting precious time and effort.

The blockchain roundtable intends to substantially change today’s common practice and to boost Switzerland’s attractiveness for entrepreneurs.

The vision

The vision of the bet has been defined as speeding up the process to 48 hours – from currently up to 3 to 4 weeks – across all involved parties. A cornerstone of this vision is to  develop a digital (online) workflow replacing the paper documents and using blockchain technology to ensure adequate security and privacy in the end-to-end process.

How the challenge helps to solve the problem by using IBM’s Design Thinking Approach

Identify involved parties

The blockchain roundtable approached the bet by identifying current problems for all involved stakeholders and, in a second step, defined the optimal process. The main personas involved in the company incorporation process have been identified as the entrepreneur, who wants to incorporate the company, the commercial registry office inscribing the company, lawyers/notary setting up the legal framework and Swiss banks, that provide the entrepreneur with a blocked account.

Determine ideal process per party

Each of the four teams (one per stakeholder) consisted of experts in the respective fields and presented how the ideal process looks like from their perspective, always taking into account, that the process should serve the needs of their customers, i.e. the entrepreneur. The group of lawyers even stated that “In the ideal standard incorporation process, lawyers would not be needed anymore” – which is consistent with a currently debated reform of the Swiss “Obligationenrecht”. For the entrepreneur, an increased speed and reduced complexity, costs and efforts are key elements of an improved process. A wow-effect would be video-ID calls, that allows the entrepreneur not only to open a bank account in a video call with the bank but also to obtain the (currently) necessary on-site notary attestation. Swisscom states that their Digital Identification & Signing solution, which is already used by some banks, is even more secure than the common account opening procedure.

Combine process

Using the IBM Design Thinking Approach in a half-day workshop, the four stakeholders’ processes were combined into one single end-to-end process, starting with the entrepreneur’s activities. The different perspectives helped to critically overthink the process, redefining priorities and highlighting difficulties.

Create the technical solution

The participating start-up Legal Hub developed a first small demo for the bylaws of a company: an online tool producing all the documents required in the incorporation process by entering all information only once, which can be completed within little time. This solution is ubiquitous and personalized, allowing the entrepreneur to access his documents anytime, anywhere on its personal profile. Each document or its parts can be shared with other parties for double-checking or further editing. Besides standard documents also extended or non-standard documents can be used, to adequately reflect the legal requirements or the company’s individual characteristics.

Once the documents are electronically signed and submitted, they cannot be altered anymore without repeating the entire signature process. The high security level is guaranteed by the blockchain technology, a tamper-proof technology using cryptographic methods and electronical IDs. The key technical concept of the used technology is a permissioned blockchain (Hyperledger Fabric) that ensures authenticated and verifiable transaction between known business partners (e.g. via electronical IDs) who have adequate individual access rights and visibility to the content of the blockchain.

Already the test system will be “owned” by more than one player – most preferably by a network of partners including government parties – where nobody is able to unilaterally change the content.

Next steps

Currently, the biggest efforts are spent on a) finding an engaged sponsor to finance the development beyond a first end-to-end demo and b) partnering with one of the Swiss banks to realize a simplified blocked account.

Given many painful incidents experienced by the entrepreneurs and lawyers, the roundtable even took into consideration to involve the Cantons or the Swiss Federation, if necessary, to create a special bank-like organisation with the sole purpose to provide (international) entrepreneurs with a temporary deposit account – potentially analogous to the deposit of the house rent in case of disputes with the landlord.

The blockchain roundtable has put a lot of effort into the implementation of their idea. With their first simple demo and a fully elaborated end-to-end process, they own one of the most developed bets and will be honoured therefore by being invited to pitch their project at the digitalswitzerland Power Dinner. It is our main C-level networking event, where the majority of CEOs of the top corporates in Switzerland are invited, taking place on September 12, 2017.

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