Iavor Tzolov

Venture Building. Perpendicular Thinking. #venture #entrepreneurship #sovereignity

[Iavor Tzolov @iav]

@thedankoe Great piece to learn how to play a better game!
If I may add : be in love with the game, enjoy the outcomes, but don't build identity around the score.

[Iavor Tzolov @iav]

@nivi @pmarca Why the Apple and japanese products limitation?

How about truth-seeking friction rather than contrarian theatre around provocative and argumentative answers for the sake of it?

Thanks for your valuable insights!

[Iavor Tzolov @iav]

@newstart_2024 Bulgarian yoghurt is indeed great, though commercially available one outside Bulgaria has very few active ferments.

[Iavor Tzolov @iav]

An economy does not sustain itself through capital preservation alone.

It sustains itself through the continuous renewal and expansion of productive capacity.

At its core, the mechanism is relatively simple.

Companies create value by transforming:

- labor,
- capital,
- energy,
- infrastructure,
- technology,
- logistics, and
- risk

into products and services the market values more than the total cost required to produce them.

The resulting profits are then:

- reinvested,
- distributed,
- taxed,
- consumed,
- saved, or
- reallocated.

This creates the economic flywheel.

Productive investment supports:

- employment,
- innovation,
- infrastructure,
- productivity growth,
- tax revenues, and
- future capital formation.

But not all capital allocation serves the same economic function.

Some capital:

- expands productive capacity,
- maintains existing systems,
- improves efficiency, or
- preserves accumulated wealth.

Those functions are all necessary.

But there is an important distinction between financing productive expansion and recirculating previously created capital and cash flows within the financial system itself.

Because financial circulation can continue for long periods of time without materially expanding the productive base underneath it.

If capital progressively concentrates - around refinancing existing assets, real-estate-driven collateralized lending, balance sheet optimization, and financial recycling - while productive expansion becomes relatively underfunded, the effects may initially appear subtle:

- weaker productivity growth,
- slower industrial renewal,
- lower entrepreneurial dynamism, and
- declining capacity to finance long-duration projects.

Over time, however, economies do not compound primarily through the preservation and circulation of existing wealth.

They compound through the continuous creation of new productive capacity underneath it.

That is why capital allocation matters so much.

Not only for finance.

But for the long-term trajectory of the economy itself.

[Iavor Tzolov @iav]

One of the most important questions is not whether financial institutions take risk.

It is which types of risk the system structurally incentivizes them to take?

A collateralized mortgage loan, a buyout backed by mature cash flows, and long-duration financing for an emerging industrial company do not consume capital, volatility tolerance or regulatory attention in the same way.

Over time, this matters.

Because financial institutions optimize within incentive systems:

- regulatory capital frameworks,
- solvency constraints,
- liquidity requirements,
- return-on-equity targets, and
- balance-sheet efficiency.

Naturally, this pushes capital toward collateralized lending, mature cash flows, asset-backed financing, and lower-volatility activities.

Not because institutions are irrational.

But because the system increasingly rewards capital preservation and capital efficiency.

The consequence is subtle but important.

Financing becomes structurally easier for:

- existing asset holders,
- mature businesses,
- real-estate-backed companies, and
- stablished cash-flow profiles.

And structurally this makes it harder for:

- long-duration innovation,
- industrial transformation,
- deep tech,
- asset-light growth companies, and
- productive risk without immediately pledgeable collateral.

This is not simply a banking question.

It is a capital allocation architecture question.

And over time, the way a system prices and allocates risk shapes the type of economy that emerges from it.

[Iavor Tzolov @iav]

Switzerland became rich through productive capital formation before becoming rich enough to specialize in wealth preservation.

Not the other way around.

Swiss prosperity was built through:
- industrial development,
- engineering,
- entrepreneurship,
- export industries, and
- long-term capital investment.

But today, the financial system increasingly appears optimized for preserving and reallocating existing wealth rather than financing new productive capacity.

Over the past decade:
- SME credit growth became increasingly mortgage-backed,
- private markets concentrated heavily around buyouts and mature asset-backed strategies, and
- Swiss private banking underwent intense consolidation and industrialization pressure.

KPMG Switzerland longitudinal data found in Clarity on Swiss Private Banks shows:
- operating income margins compressed structurally,
- retained profitability remained thin, and
- efficiency gains increasingly offset declining revenue economics rather than creating new growth capacity.

Even the recent improvement in profitability was largely driven by temporary positive interest income.

The question is therefore not whether Switzerland has capital.

It clearly does.

The question is where that capital structurally flows, if:
- SMEs are discouraged to ask for borrowing (see https://t.co/It9e8wYRMr)
- banks increasingly lend against collateral (see https://t.co/eZGkbJbWqb),
- private markets increasingly optimize existing assets (see https://t.co/qyRoB5lzug), and
- wealth management focuses on preservation,

who finances:
- industrial renewal,
- scaling companies,
- deep tech,
- infrastructure transition, and
- long-duration productive risk?

Because capital preservation and capital formation are not the same economic function.

And over time, economies that optimize preservation more than renewal lose productive dynamism.

[Iavor Tzolov @iav]

After discussing discouraged SME borrowers and collateral-driven lending dynamics earlier this week, another figure deserves attention.

According to the Asset Management Association Switzerland / SECA - Swiss Private Equity & Corporate Finance Association / Boston Consulting Group (BCG) Swiss private markets study, roughly 75% of Swiss private market allocations are concentrated in:
- buyouts,
- infrastructure,
- secondaries, and
- other mature asset-backed strategies.

Meanwhile, venture capital and growth capital represent only a very small share of total allocations.

That raises a deeper structural question.

Is Switzerland increasingly optimized to finance:
- the acquisition,
- refinancing,
- optimization, and
- preservation of existing assets…

more than the creation of new productive capacity?

Because this mirrors another trend already visible in SME lending: capital increasingly flows toward collateral-rich and mature structures.

That naturally favors:
- existing asset holders,
- mature companies,
- real-estate-backed balance sheets, and
- lower-volatility financing models.

That may improve short-term financial stability.

But over time, what are the consequences for:
- younger companies without accumulated collateral,
- industrial and deep-tech ventures requiring long investment cycles,
- innovation-heavy businesses built around IP rather than hard assets, and
- broader economic renewal?

The question is therefore not whether risk should disappear.

It is whether the system still allocates enough capital toward building future productive capacity — not only preserving existing one.

Because financial systems ultimately shape the type of economy a country becomes.

Curious to hear perspectives from banking, private markets, entrepreneurship and industry?

[Iavor Tzolov @iav]

@mthomet Distribution is key and risk assessment, appetite and remuneration are integral part. Standardized approaches usually finish them

[Iavor Tzolov @iav]

Is SME financing in Switzerland becoming structurally harder?

A 2021 SECO study already showed something striking : a large share of Swiss companies needing financing were discouraged from even applying for credit.

Not after rejection.

Before the application itself!

Complexity, collateral requirements, pricing, perceived chances of refusal…

And that was before the disappearance of Credit Suisse.

Since 2021 — and especially since 2023 — have you observed:
- an improvement,
- a deterioration, or
- no real change?

Curious to hear perspectives from:
entrepreneurs, CFOs, bankers, investors and private debt professionals.

[Iavor Tzolov @iav]

Swiss SME financing volumes continued to grow over the past 15 years.

One chart from the Lucerne University of Applied Sciences and Arts / SECO Economic Cooperation and Development SME financing study is particularly striking.

Almost all of that growth came from mortgage-backed lending.

Other forms of SME credit remained broadly flat.

That raises a structural question:

Is the issue really a lack of liquidity in the system?

Or is it increasingly about:
- collateral structure,
- risk allocation,
- capital efficiency, and
- the type of risk financial institutions are incentivized to take?

Financing secured by real estate continued to expand strongly.

This structurally favors:
- existing asset holders,
- collateral-rich balance sheets,
- mature businesses, and
- real-estate-backed financing structures.

Meanwhile, more complex or less collateralized financing appears materially more constrained.

The result is a system naturally pushed toward collateralized and capital-efficient lending: asset-based stability, rather than productive dynamism.

Which raises further questions:
- How are younger or asset-light companies supposed to scale?
- What happens to innovation-heavy businesses without accumulated real estate collateral?
- What does it mean when lending increasingly favors collateral over underlying business cash-flow generation?

Curious whether others in banking, private debt, entrepreneurship or corporate finance observe the same evolution?

[Iavor Tzolov @iav]

@mthomet What else do you see?

[Iavor Tzolov @iav]

@RussellShaw_MLS @JoinLifespan What is the recommended blood panel and how do you use it to restore signal?

[Iavor Tzolov @iav]

Pondering over the deflationary nature of the combined impact of AI + humanoid general purpose robots: the marginal cost of services will trend toward zero, the marginal cost of products possibly too…

[Iavor Tzolov @iav]

#collapse is what happens when a centralized control system is no longer worth what it costs.

[Iavor Tzolov @iav]

@hubermanlab Thanks for great advice and amazing work you do!
Any tips regarding REM sleep as well?