Author: Boris Schneider
Published: Jan. 30, 2013
HYT

When Time Flows Like Water

Bienne-based watch manufacturer HYT has united the diametrically opposed worlds of water and mechanics. In the world's first hydromechanical watch, the time is indicated by a colored liquid.

At the outset, they were considered mad or dismissed as fantasists: Pioneering entrepreneurs often don't have an easy time of it. It was at Expo.02 that Lucien Vouillamoz originally told friends about his vision of using water in a mechanical wristwatch to show the time. Back then, however, no-one really knew whether to believe him. Water clocks have been around for millennia, but in the past have always worked by using gravity: As with an hourglass, the water flows from a higher vessel into a lower one. However, engineer and inventor Vouillamoz wouldn't let go of the idea until he came up with a possible solution years later: Two flexible reservoirs, one at each end of a circular, enclosed tube, were to be filled with different-colored liquids that do not mix. When one reservoir is compressed, its fluid flows into the tube to indicate the time; meanwhile, the other fluid is forced back into its reservoir. Positive and negative polarity ensures separation of the two liquids. Like magnets, they repel each other at the point where they meet.

An Experienced, Complementary Team 

With the help of Patrick Berdoz, a longstanding friend and experienced entrepreneur from the medical technology field, Vouillamoz embarked on an adventure. Berdoz recognized the idea's potential, and recruited additional engineers from his network. Together they drew up the first technical specifications. Emmanuel Savioz, another experienced start-up entrepreneur, soon joined the team and the HYT company was set up. After a year's intensive research and development work, an initial prototype was produced. However, some important steps first had to be taken on the road to creating a luxury watch: Although Vouillamoz, Berdoz, and Savioz now had the fundamental technology to produce a water wristwatch, they had no experience of the watch industry. In 2010, they finally succeeded in hiring CEO Vincent Perriard, a passionate watchmaker who had spent many years working at renowned firms such as Audemars Piguet, Concord, and Technomarine. "It's always been a dream of mine to work with water and mechanics, because they're two diametrically opposed worlds," says Perriard.

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Many Challenges Surmounted 

"The biggest challenges lay in finding an interface between the mechanical movement in the watch mechanism and the fluid system, housing the two systems in a confined space, and ensuring they interact perfectly," recalls Berdoz. The liquids also had to be developed in accordance with watchmaking industry requirements. They need to be able to resist vibration, knocks, and temperature fluctuations, as well as be stable over a long period. Calculation of the exact volume of fluid in the two reservoirs was also critical: "The total volume in the closed loop must be accurate down to the microliter," says Berdoz. In addition, HYT developed a special system for adjusting the time of the watch. This prevents the liquids from flowing too quickly and getting mixed together. The watch mechanism also had to be developed from scratch, because the reservoirs containing the liquids took up a considerable portion of the available space. That task was entrusted to Manufaktur Chronode in Le Locle. Neuchâtel firm Etude de Style was responsible for designing the watch.

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Enthusiastic Response from the Experts 

The concept was presented to various watch dealers and distributors from summer 2011 onward. By the time of the watch and jewelry fair Baselworld 2012, HYT's watchmakers were in a position to present the world's first mechanical-fluidic hybrid watch – the H1 – to an enthusiastic audience. It costs between 43,000 and 65,000 Swiss francs, depending on the model. "Although we've not yet been able to ship the watch, many dealers and collectors paid upfront for their watch on the spot. That's not normal in the watch industry," Berdoz explains. The creators are already busy working on successor models, the H2, H3, and H4. The target audience consists mainly of collectors and watch aficionados from all around the world. The new concept and attractive shareholder base also proved persuasive for Credit Suisse Entrepreneur Capital Ltd. From a very early stage, it provided HYT with seed funding – partly on account of the many advance orders. This was later followed by growth financing, to ensure the company can fully exploit the potential of its innovation. "Credit Suisse Entrepreneur Capital Ltd. 's involvement is also important to us, in that such a renowned investor opened the door to other financiers," notes Berdoz. "With fluid mechanics, we have given the world of watchmaking a new means of expression," he continues. But the passionate entrepreneur and his team have a lot of other cards up their sleeves: In the course of developing and designing the H1, the engineers also acquired unique expertise in the field of microfluidics – the behavior of fluids in tiny spaces. Various related patents have been registered. "Our technology could be used for accurate injections in the medical sector, or the diffusion of fragrances, for example," says Berdoz, with an eye to the future.

The watch manufacturer HYT entered a partnership with Credit Suisse Entrepreneur Capital Ltd. in August, 2011. How did this come about?

Savioz: The extensive media coverage of the founding of Credit Suisse Entrepreneur Capital Ltd. piqued our curiosity. We had just developed H1, the first prototype of our watches, and were looking for a solid partner. We asked around a bit, got uniformly positive feedback, and then contacted Credit Suisse Entrepreneur Capital Ltd.

And how did that go?

Savioz: Even the first telephone conversation was very productive􀀏 which confirmed our choice. We had no hesitations about openly laying out our paperwork, including confidential information, and we quickly established a relationship of trust.

Suter: We receive 10 to 15 requests each week, from companies in every industry. We viewed the request from HYT as very exciting.

What made HYT stand out?

Suter: Watches are generally a very emotional product. The H1 prototype captivated us at first sight. Its combination of mechanics and fluid is a world first! An ingenious and highly innovative example of Swiss quality, with an experienced and professional management team guiding its further development. But one deciding factor was the unusually strong response from the industry when HYT unveiled its watch to the public in 2012.

Savioz: Even we were surprised by the high level of interest. Many dealers and collectors ordered their watches on the spot, paying in advance. This does not usually happen in the watch industry.

Suter: Furthermore, so far your watches have no competition.

Savioz: Exactly. The technical hurdle is very high. Another particularly attractive aspect for investors is our patent portfolio – all the knowhow we were able to develop in the context of this invention, which could find future uses in medical technology as well. 

According to your guidelines, Credit Suisse Entrepreneur Capital Ltd. invests in only a few start-ups and ordinarily requires market acceptance.

Suter: Based on the watch industry’s positive reaction to the H1 prototype, HYT already has that. But it’s true that we got on board during an early phase of the company’s development.

Savioz: A very delicate phase, by the way, for many high-tech pioneers. They might secure the first million with the help of people they know and private investors, but after that they need partners who invest in the company because they believe in the team and the product. 

From your perspective as a young entrepreneur, what have been the greatest challenges so far?

Savioz: Initially, it was the product itself. Our watches are very complicated. Time and again in the development stage, our specialists encountered technically demanding questions. Now that we’re in the production stage, the crux is our suppliers. If supplies arrive late or don’t meet our quality standards, the effect ripples through the rest of the production process.

To what extent can funding from Credit Suisse Entrepreneur Capital Ltd. help you with this?

Savioz: Watchmaking is a very precise process, and mistakes are costly. We must work very carefully, and that takes time. With its longterm perspective, Credit Suisse Entrepreneur Capital Ltd. gives us the time we need.

Suter: Fortunately, we are in the privileged position of making all our investment decisions with a decidedly long view, because we do not have to pay dividends or otherwise return capital to Credit Suisse, our parent company. That definitely makes financial planning easier for our partners.

What else makes Credit Suisse Entrepreneur Capital Ltd. different from other venture capital investors?

Suter: Our ultimate goal, through financially sustainable investments and with the company as partner, is to create new jobs or safeguard existing jobs, strengthening Switzerland as a center of employment. This is a unique undertaking here in Switzerland.

Savioz: And Credit Suisse Entrepreneur Capital Ltd. is much more than merely a source of funding. It also opens doors to other investors. Thanks to the support from Johannes and his team, for example, we have developed a very good relationship with Credit Suisse in Lausanne.

Suter: Another difference between us and other venture capital investors is that Credit Suisse Entrepreneur Capital Ltd. is independent of its funding sources and can help its partner companies set the right course.

Savioz:  We particularly value this aspect. With Credit Suisse Entrepreneur Capital Ltd. we have gained a partner that is truly interested in our company’s development and understands our needs.

The companies evidently benefit from more than the capital investment.

Suter: Absolutely, and „door opener” is a good way to describe us, Emmanuel. As a minority stakeholder or lender, we view ourselves primarily as intermediaries. We routinely turn to our extensive network, which thanks to Credit Suisse is also a global network.

Savioz: We have already gained a great deal from this network. At the moment, for example, we are looking for new space for our firm, and we’re happy to have been able to ask your help with this.

Strengthening Switzerland as a workplace is a central goal for Credit Suisse Entrepreneur Capital Ltd. How important for you is Biel, or Western Switzerland, in this regard?

Savioz: As watch manufacturers, Western Switzerland is the ideal location for us, because the skilled employees and the suppliers are right at our doorstep. Other advantages of Bienne are its economic development program and the subsidies available from the canton of Berne.

Suter: For us, the company itself, and its product, are clearly more important than their location within Switzerland. Interestingly, however, we made six of our first ten investments in Western Switzerland.

How important for the Swiss market, in your view, is the label “Swissness”?

Savioz: Swissness quite clearly stands for superlative quality and innovation. The Swiss market cannot and will not draw attention to itself with bargains, and that’s exactly what makes us competitive.

Suter: I agree. The watch industry is a prime example of how Switzerland can hold its own in the global marketplace.

Credit Suisse Entrepreneur Capital Ltd. has been in operation for three years. What do you see as its greatest challenges in the near future?

Suter: Some 70,000 companies in Switzerland are headed by entrepreneurs who are more than 65 years old. Unfortunately, all too often jobs are lost because succession strategies cannot be financed. We believe we can be part of the solution to this problem. In our view, effective succession planning and support for young entrepreneurs are equally important for Switzerland as a workplace.

Savioz: Good to know. In that case, we’ll get back to you again in 30 years. (Both laugh.)

Meanwhile, what do you expect of each other at this point?

Savioz: We want to continue our constructive collaboration and deliver on what we have promised.

Suter: Ultimately it’s like any other good relationship. There’s a give and take, and it has to be right for both sides. I personally find it extremely satisfying to work with a young company like HYT as it makes its way in the marketplace. We can be part of this journey, and I’m already looking forward to the moment when we’ll see HYT watches on display in store windows, giving the world another shining example of Switzerland’s pioneering spirit.