European entrepreneurs who want to launch startups could do worse than Switzerland.
In a report analyzing Europe’s general economic health, cost of doing business, business environment and labor force quality, analysts looked for highly educated populations, strong economies, healthy business environments and relatively low costs for conducting business. Switzerland ended up ranking third out of 31 European nations, according to Nimblefins. (Germany and the UK came out first and second, respectively).
According to official estimates, the number of new Swiss startups has skyrocketed by 700% since 1996. Zurich tends to take the lion’s share, as the city’s embrace of startups has jump-started development, although Geneva and Lausanne are also hotspots.
As well as traditional software engineering startups, Switzerland’s largest city boasts a startup culture that emphasizes life sciences, mechanical engineering and robotics. Compared to other European countries, Switzerland has a low regulatory burden and a well-educated, highly qualified workforce. Google’s largest R&D center outside of the United States is in Zurich.
But it’s also one of the more expensive places to start a business, due to its high cost of living, salary expectations and relatively small labor market. Native startups will need 25,000 Swiss Francs to open an LLC and 50,000 more to incorporate. While they can withdraw those funds from the business the next day, local founders must still secure decent backing to even begin the work.
This means Switzerland has gained a reputation as a place to startup — and a place to relocate, which is something quite different. It’s one reason why the region is home to many fintech businesses born elsewhere that need proximity to a large banking ecosystem, as well as the blockchain/crypto crowd, which have found a highly amenable regulatory environment in Zug, right next door to Zurich. Zurich/Zug’s “Crypto Valley” is a global blockchain hotspot and is home to, among others, the Ethereum Foundation.
Lawyers and accountants tend to err on the conservative side, leading to a low failure rate of businesses but less “moonshot innovation,” shall we say.
But in recent years, corporate docs are being drawn up in English to facilitate communication both inside Switzerland’s various language regions and foreign capital, and investment documentation is modeled after the U.S.
Ten years ago startups were unusual. Today, pitch competitions, incubators, accelerators, VCs and angel groups proliferate.
The country’s Federal Commission for Technology and Innovation (KTI) supports CTI-Startup and CTI-Invest, providing startups with investment and support. Venture Kick was launched in 2007 with the vision to double the number of spin-offs from Swiss universities and draws from a jury of more than 150 leading startup experts in Switzerland. It grants up to CHF 130,000 per company. Fundraising platforms such as Investiere have boosted the angel community support of early funding rounds.
Swiss companies, like almost all European companies, tend to raise lower early-stage rounds than U.S. ones. A CHF 1-2 million Series A or a CHF 5 million Series B investment is common. This has meant smaller exits, and thus less development for the ecosystem.
These are the investors we interviewed:
- Jasmin Heimann, partner, Ringier Digital Ventures
- Katrin Siebenbuerger Hacki, founder, Medows
- Philipp Stauffer, partner, FYRFLY Venture Partners
- Claude Donzé, partner, Tomahawk.VC
- Lucian Wagner, partner, Privilège Ventures
- Maximilian Spelmeyer, partner, SIX Fintech Ventures
- Olaf Hannemann, partner, CV VC AG
- Andreas Iten, partner, F10
- Michael Blank, partner, investiere
- Ninja Struye de Swielande, partner, Lakestar
Jasmin Heimann, partner, Ringier Digital Ventures
What trends are you most excited about investing in, generally?
Consumer-facing startups with first revenues.
What’s your latest, most exciting investment?
AirConsole — a cloud-gaming platform where you don’t need a console and can play with all your friends and family.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I really wish that the business case for social and ecological startups will finally be proven (kind of like Oatly showed with the Blackstone investment). I also think that femtech is a hyped category but funding as well as renown exits are still missing.
What are you looking for in your next investment, in general?
I am looking for easy, scalable solutions with a great team.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
I think the whole scooter/mobility space is super hyped but also super capital intensive so I think to compete in this market at this stage is hard. I also think that the whole edtech space is an important area of investment, but there are already quite a lot of players and it oftentimes requires cooperation with governments and schools, which makes it much more difficult to operate in. Lastly, I don’t get why people still start fitness startups as I feel like the market has reached its limits.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Switzerland makes — maximum — half of our investments. We are also interested in Germany and Austria as well as the Nordics.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Zurich and Lausanne are for sure the most exciting cities, just because they host great engineering universities. Berne is still lagging behind but I am hoping to see some more startups emerging from there, especially in the medtech industry.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Overall, Switzerland is a great market for a startup to be in — although small, buying power is huge! So investors should always keep this in mind when thinking about coming to Switzerland. The startup scene is pretty small and well connected, so it helps to get access through somebody already familiar with the space. Unfortunately for us, typical B2C cases are rather scarce.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I think it is hard to make any kind of predictions. But on the one hand, I could see this happening. On the other hand, I also think that the magic of cities is that there are serendipity moments where you can find your co-founder at a random networking dinner or come across an idea for a new venture while talking to a stranger. These moments will most likely be much harder to encounter now and in the next couple of months.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
I think travel is a big question mark still. The same goes for luxury goods, as people are more worried about the economic situation they are in. On the other hand, remote work has seen a surge in investments. Also sustainability will hopefully be put back on the agenda.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Not much. I think we allocated a bit more for the existing portfolio but otherwise we continue to look at and discuss the best cases. The biggest worries are the uncertainties about [what] the future might look like and the related planning. We tell them to first and foremost secure cash flow.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Totally! Some portfolio companies have really profited from the crisis, especially our subscription-based models that offer a variety of different options to spend time at home. The challenge now is to keep up the momentum after the lockdown.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
What gives me hope is to see that people find ways to still work together — the amount of online events, office hours, etc. is incredible. I see the pandemic also as a big opportunity to make changes in the way we worked and the way things were without ever questioning them.
Katrin Siebenbuerger Hacki, founder, Medows
What trends are you most excited about investing in, generally?
Life sciences is our focus, more specifically medtech and digital/virtual health. Excited about data, AI and ML in digital health, patient-centric data and at-home diagnostics.
What’s your latest, most exciting investment?
Zoundream.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Second opinion platforms and using outcome and certification data to rate and improve surgical practice, creating tools to help medical device companies implement more value-based approaches in different healthcare systems.
What are you looking for in your next investment, in general?
Scaleable business models, business model innovation rather than product innovation.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
COVID testing, simple at-home testing, genetic profiling.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
60%.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Life sciences.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Extremely high-quality technology university and a strong startup ecosystem, world-class ecosystem acceleration and development from government, nonprofits and private institutions — [the] only drawback is that maybe [Zurich is] a bit too comfortable for founders, and the ecosystem of investors is not as competitive as it could be
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
No.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
See above — diagnostics and telehealth/virtual health will take away business from primary and secondary care, so GPs get stuck with older and sicker patient populations for which they are not necessarily adequately compensated. [There is a] need to review the primary and specialist care model.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
The economic impact of the pandemic is far from over. We probably have not seen anything yet — use the time to hire excellent people if you have the cash, and otherwise conserve cash; don’t lose sight of what you need to achieve but also plan buffer for customers, partners, clinical trial sites, etc. being much slower than expected.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Partnerships with strategics still happen, investments still happen.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
I could get experts on the phone in hospital and healthcare institutions in various countries despite the pandemic — and they have been incredibly helpful.
As startups accelerate in record Q3, Europe and Asia rack up huge VC results
Philipp Stauffer, partner, FYRFLY Venture Partners
What trends are you most excited about investing in, generally?
Intelligent enterprise, decentralized data, deep tech. See article here.
What’s your latest, most exciting investment?
Locatee AG and quite a few others (not announced yet).
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
We see 90%+ of all interesting deal flow for us. I think sustainability, healthcare, education and food tech are still overlooked given their importance and potential. Particularly now. We have seen all kinds of issues in the past few months that open up big opportunities for entrepreneurs and innovation in these areas. For example, how to make remote schooling more social and closer to in-classroom learning, how to accelerate telemedicine. We have seen great use cases that actually work in the past few months. Also, due to low traffic, we were forced into an experiment that delivered real data on the impact EVs could have to air quality (see Tesla’s impact report (page 16) or the World Air Quality Index project). In five years we will look back to today and see major players and entrepreneurs in these fields who were born because of this crisis.
What are you looking for in your next investment, in general?
Mission-driven founders solving significant problems through novel and/or decentralized data solutions.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Digital marketing seems stretched with many point solutions that will have a hard time to get to real scale. Any solutions that don’t have a clear and ethical data strategy.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We are inherently international but local at the same time. We build the bridge between Silicon Valley and Switzerland/Europe for many years. We are an early-stage venture team with a presence in both Silicon Valley and Switzerland/Europe. We work hard to make the “ecosystem network effect” work for our entrepreneurs. Two ecosystems collaborating in ideal ways makes math look like 1+1=5.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Switzerland in general: fintech, insurtech, devices and digital health, biotech, material sciences, security/cryptography, quantum computing, sustainable tech and general deep tech have great opportunities due to the high quality of technical talent as well as depth and presence of leading industry players and top universities as well as research centers (i.e., CERN). ICT is catching up and there is no reason why this sector could not be world leading, yielding leading global companies. Excited about founders who think global from day one, not one day.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Switzerland in general: High quality of technical talent due to top universities. Small home market and therefore forced and well-prepared to think international early.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Yes, absolutely. Innovation is increasingly happening everywhere and remote work will help further glue ecosystems that are geographically far but mentally close by. We are part of a group of VCs writing this story as our portfolio is about 40% European/Swiss and 60% North American. However, I also believe that Silicon Valley and the Bay Area will be the sun in the startup solar system for the foreseeable future. We need to find ways to create synergies among ecosystems instead of attempting to copy the Silicon Valley model. Increasingly so, it will be important to be close to the places where deep vertical industry knowledge sits versus pure technical knowledge and skills. This trend will further spread innovation power and help the mission of the “rise of the rest.”
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Travel and hospitality-related solutions look weak, understandably. This weakness will stay for some time unfortunately. We also see weakness in digital marketing solutions as marketers not only spend less but also consolidate their spend. These are areas we have limited exposure in terms of investments. Many other areas that are focused on digital transformation of the enterprise really see crisis-driven growth or have opportunity to shift into these accelerated demand areas. Startups see opportunities in automation, collaboration, remote work, and any technology layers that enable those areas such as AI, robotics, computer vision, cryptography, security, etc. Those are all key areas of our investment thesis.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
It reenforced our strategy. We were always focusing on digital transformation of the enterprise and industries. We always focused on data-driven entrepreneurs who come with a unique insight on how data can be a vital part of their competitive advantage. We like “value chain shifters.” COVID-19 is a catalyst for faster execution and transition for the intelligence enterprise so it benefits our companies quite a bit. Founders are worried about runway and how to manage the crisis optimally around key aspects of talent (e.g., change in hiring plans), customers (e.g., how to manage delayed ARs), product (e.g., roadmap priorities given COVID-19), and market (e.g., investment in growth and new markets). Clearly, liquidity planning is one of the key aspects and it is hard to plan with this level of uncertainty. My advice: Try to find a way to show that your company comes out of the crisis stronger with key metrics and a few key insights. Pivot if necessary to get there. There will be two camps of companies after the crisis: First, the companies who broke during the crisis and did not have the power to change. Also, the companies who lost their direction and will be hard to assess if they will be able to recover. These companies will go out of business or get discounts on their next raises. Second, the startups who showed that they can change and use the crisis as an opportunity to accelerate or at least grow attractively through the crisis. These companies will get the “bulletproof” stamp and can demand premiums in their next raises.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Absolutely. We are proud of many of our founders who see the opportunity not only for growth but for positive impact and contribution through their technologies in this crisis helping to solve it. For example, Beekeeper is powering through the crisis as operational communications is mission-critical for many customers. Sales cycles and the “time to value” got incredibly short since March 2020 and growth is accelerating in many segments such as healthcare, logistics, manufacturing, food/supply chain, etc. For Locatee, a commercial real estate analytics platform, many customers now became even more quantitative about their real estate footprint and they also look for data-driven solutions that will help them to bring their workforce back to different workspaces safely. Locatee is a leading player to help there.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
It has been incredible how people and communities come together; mostly. I am humbled by the heroism of healthcare professionals and other frontline workers globally. I am also super proud of many of our founders and teams, who have switched within days to adapt to the crisis, and are working super hard on the upside and on impact for their customers, employees, and stakeholders. I think this crisis shows clear and large problems that we have to go and fix (that we otherwise might not have seen or problems we know of but endlessly debate and never solve). Times of crisis always have the opportunity to reflect and renew.
Any other thoughts you want to share with TechCrunch readers?
For any entrepreneur, this should be exciting and exhausting at the same time. We can either complain about how hard it is to get through this or we can be part of the solution and work hard contributing to solving the problems we discover. True entrepreneurs very quickly get into problem definition/solution mode and that is what we need now. Try to do that, encourage others to do the same and walk with you, and follow your vision and heart. In a few years, you will look back and not regret it.
Claude Donzé, partner, Tomahawk.VC
What trends are you most excited about investing in, generally?
Global first teams; future of work; decentralized finance.
What’s your latest, most exciting investment?
Lano.io, compliance and payments for global talent.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
One-click checkout, smooth multi-issuer paywalls for newspapers/articles, products for team culture.
What are you looking for in your next investment, in general?
Founders focusing on company culture.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Hard to compete: Marketing automation. Concerned about: e-mobility.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We invest internationally.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Industries: Cybersecurity, deep tech, drones.
Companies: GetYourGuide, Locatee, OTO.ai.
Founders: Robert Lauko, Lukas Speiser.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Capital is here, not too much smart money, thin field of VCs, broad network of angels.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Think through second-order effects of the crisis such as companies being low on cash the next 1-2 years, etc.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Not really, concerns were mostly short-term liquidity, which was provided by government.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Yes, especially in e-ommerce.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
People are very creative in their way of handling the crisis! I think there is more opportunities than problems right now.
Any other thoughts you want to share with TechCrunch readers?
Zurich is a great place to live, high QoL, high salaries, a lot of jobs in the tech sector.
Lucian Wagner, partner, Privilège Ventures
What trends are you most excited about investing in, generally?
Medtech.
What’s your latest, most exciting investment?
Distalmotion SA, a surgical robot company.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Hardware deals.
What are you looking for in your next investment, in general?
Seed-stage company with convincing team and solid market prospects.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Generic “AI”, crypto, ICOs, marijuana.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
75%.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Medtech, algorithmic companies, deep tech in general. Excited about Miro Analytical Instruments AG, Geosatis SA.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Well-suited for deep, complicated technologies. Leave the easy stuff to Silicon Valley (along with anything connected to social networking, where they are truly the best).
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
No.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
In general, nimble companies will survive. You need to pivot quickly and find new customers or engage even more with current ones.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Absolutely. We have zero failures so far out of a portfolio of 20 companies.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
This crisis is a great wake-up call that we can take nothing for granted and that more crises will be ahead –> climate, population changes (too many or too few, depending on the area), other pandemics.
Any other thoughts you want to share with TechCrunch readers?
Investing in Switzerland is like shooting fish in a barrel — the average quality of the startups is just amazing.
Maximilian Spelmeyer, partner, SIX Fintech Ventures
What trends are you most excited about investing in, generally?
Fintech.
What’s your latest, most exciting investment?
Expense Robot.
What are some overlooked opportunities right now?
Fintech.
What are you looking for in your next investment, in general?
Fintech.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Blockchain.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
More.
Which industries in your city and region seem well-positioned to thrive, or not, long term?
Finance.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Positive.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
No.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
No.
Olaf Hannemann, partner, CV VC AG
What trends are you most excited about investing in, generally?
Blockchain.
What’s your latest, most exciting investment?
AdHash.
What are you looking for in your next investment, in general?
Early-stage startups that build applications based on blockchain technology.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Less than 50%.
Which industries in your city and region seem well-positioned to thrive, or not, long term?
Blockchain, fintech, healthcare/medtech.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Innovation country number one.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Yes.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Weaker: travel. Opportunities: gig-economy-related, healthcare and lifestyle, banking the unbanked, impact investment.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Delayed pilot projects (i.e., when working with corporate partners); delayed funding.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
Our portfolio composition due to many applications being set to benefit from the current environment long term.
Andreas Iten, partner, F10
What trends are you most excited about investing in, generally?
Fintech, Insurtech, regtech and deep tech.
What’s your latest, most exciting investment?
Anapaya.net.
What are some overlooked opportunities right now?
We are still lacking companies who tackle the problems of the insurance sector. Looking at problems from a customer point of view and less from the industry silos.
What are you looking for in your next investment, in general?
Solving the problem to ensure data privacy while being able to unlock the potential of customer data and insights in order to provide better and tailored services.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
B2C payment solutions. Blockchain startups who still haven’t found a use case or a business model. SME lending companies are under pressure, due to the massive amount of government money (COVID loans) flowing in.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
30%-40% local in Switzerland, rest in Singapore and Spain.
Which industries in your city and region seem well-positioned to thrive, or not, long term?
Finance and insurance industry (Switzerland is an important financial center).
How should investors in other cities think about the overall investment climate and opportunities in your city?
Switzerland has a small, but unfortunately quite protective, investment community. Very active angel investors and some bigger VCs. Corporate venture capital is trending (e.g., UBS announced venturing activities).
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Switzerland is in a good position to attract foreign founders. The country is small and traveling is very easy. I believe the current crisis will attract teams to start their business here in Switzerland, because Switzerland was able to deal with the situation very well. However, there are some immigration challenges due to potentially new legislation.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
B2C business models in fintech, insurtech can benefit from the shift in consumer behavior. B2B companies helping the incumbents to fast-forward digitalization have a good chance to traction.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Investment strategy: We keep on investing in great teams with good ideas and a relevant addressable markets. Valuation of some overheated sectors will come down, which creates opportunities for us.
Worries of founders:
- Cash.
- Responsiveness of customers (e.g., B2B sales to banks, insurances).
Advice to startups:
- Create a COVID-plan, check cash positions and manage cost.
- Asses if the situation creates new opportunities.
- Try to get access to government funding, nondilutive investments (e.g., loans, etc.) if needed, but don’t overload your company with debt.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Not yet. I think we’ll have to observe the further development of the crisis and see what the real impact will be. We are positive for most of our companies.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
People start to adapt to the situation in a pragmatic way. My team had to switch from offline events, startup pitches, meetings to online formats within a few days. This makes me very proud. Being part of such an agile organization with amazing people is just awesome. We organized an online wine tasting, which was definitely a social distancing highlight event.
Michael Blank, partner, investiere
What trends are you most excited about investing in, generally?
More than half of our portfolio companies are spin-offs from leading European universities. We strongly believe in the cultivation of innovation and cutting-edge technologies at those universities. This can cover various fields from nanorobotics to software trends like computer vision or medical and life-science technologies. However, personally I’m mostly excited about all technologies involved in building interfaces between the human and the digital and virtual reality.
What’s your latest, most exciting investment?
Zurich based ETH spin-off Verity, a world leader in autonomous indoor drone systems. Verity’s systems enable clients across various industries, such as logistics, retail and live entertainment to use the power of autonomous drones.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I would immediately move to the entrepreneur side of the table if I would know such an opportunity ;) Still, to share some of our internal thoughts, we are closely monitoring the field of microbiome and single-cell technologies and would be very happy to see more startups and ideas there.
What are you looking for in your next investment, in general?
We are always happy to get surprised by great founders and their ideas and we don’t need to necessarily follow our internal theses. However, there is one particular industry field where we see clear chances and opportunities, which is proptech and construction technology. The underlying market values are gigantic and digitalization is often still in its infancy. That’s why we recently launched the proptech fund “Swiss Immo Lab” and are looking forward to intensifying this topic with our next investments.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
In general I’m very skeptical about B2C fintech models. While we see a few highly successful outliers in Europe — the majority of those models fail. Startups often underestimate the go-to-market budgets necessary for those kinds of startups and the barriers to overcome in this industry. So even while we are sitting in Zurich in one of Europe’s financial centers — we are very conservative in this field.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We have a very strong focus on our home market Switzerland. Still more than two-thirds of our portfolio companies are Swiss startups and we are still one the most active investors in the Swiss ecosystem. While we are currently actively expanding to other European countries such as Germany and France we will not reduce our activity in the Swiss market. We see a lot of highly interesting startups coming especially from the globally renowned technical universities ETH and EPFL.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Switzerland has always been at the forefront of technological innovation in areas such as precision engineering or life sciences. We strongly believe that Switzerland will also thrive in the long run in those areas. Thinking for example about additive manufacturing startups such as 9T Labs or Scrona, drone companies such as Verity or Wingtra or health tech startups such as Aktiia or Versantis.
How should investors in other cities think about the overall investment climate and opportunities in your city?
There are a lot of highly innovative and promising startups in the Swiss and Zurich ecosystem. Overall I see a very healthy market that became much more mature in the last years. More and more successful “senior entrepreneurs” open their network, share their experience and support younger founders, which creates role models and helps tremendously. Due to those positive developments in the early stage in the last years we expect to see much more interesting investment opportunities in the later stage in the future. The Swiss ecosystem is definitely growing up.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Founders, especially in the early stage, need to have a strong network in order to launch their startup. Often first clients, MVP testing and also first funding happens over the close network of the founders in the early months. Today, many of those networks are still linked to a certain location (such as universities). Therefore I strongly believe that location still plays an important role for founders and the process of successfully launching a startup. However, on the team site, especially in the later stage of the startup, the location factor will become less critical in the future. We’ve seen that many of our portfolio companies succeeded in building up international teams, for example by building up software development hubs outside Switzerland, and I’m sure the pandemic will put these kinds of distributed team setups even more to the forefront.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Travel and event businesses have a hard time during [the pandemic]. The good thing is that we strongly believe that in the long run those industries will become more digital, which is playing in favor of many of our startups that offer exactly those digital solutions.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
We build long-term investment theses and therefore don’t see a strong impact of COVID-19 yet. Some of those theses are rather reconfirmed by the current developments in certain industries. However, the current restrictions in the travel and event industry are certainly affecting some of our portfolio companies. In those cases the founders need to manage and monitor cash and costs very closely.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
During those turbulent times you can build real trust and intensify relationships with clients and partners. We have seen very positive examples in our portfolio with this regard. One example would be our portfolio company Seervision, which offers AI-assisted video production and camera operation. Their main focus has been sports and event business. However, during the pandemic many corporations saw the need for larger, mostly internal remote events and approached Seervision. During the pandemic Seervision opened up their first pop-up video studio for those kinds of customers, which is now a huge success. Another example is our portfolio company Beekeeper that offers a communication platform for frontline workers. During the pandemic their communication platform became an essential tool for many institutions in the healthcare system such as hospitals and retirement homes. Even an entire Swiss village signed up to the platform during the lockdown.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
Team spirit and solidarity. For me it was amazing to see the reaction of so many startup teams to the pandemic. How they stuck together and worked harder than ever to overcome this situation and to make the best out of it. Everyone talks about looking for resilience in founders and startup teams, but it is great to see this actually work out in such a crisis.
Ninja Struye de Swielande, partner, Lakestar
What trends are you most excited about investing in, generally?
Structural change to established industries is accelerating at an unprecedented scale. In the past, we experienced the first wave of digitization with a proliferation of information, commerce and communication, followed by a second wave, which saw an upheaval in markets through platforms and software as a service (SaaS) businesses. We are now experiencing the beginning of the third wave, underpinned by advances in machine learning and automation fostered by unprecedented computing and storage resources. It holds the potential to fundamentally transform entire, previously untapped industry sectors such as healthcare, transportation, finance and food, reshaping the competitive advantage of entire nations.
What’s your latest, most exciting investment?
sennder: Disrupting the freight forwarding space (performing strongly, recent acquisition of Uber Freight/DACH region/old industry being disrupted).
Public.com: Democratizing access to wealth creation through fractional share trading and increasing financial literacy by making the stock market social (social aspect/good traction).
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Several traditional industries such as healthcare, transportation, finance and food are ripe for disruption.
What are you looking for in your next investment, in general?
- Outstanding technology-driven entrepreneurs/founding teams.
- Big markets, global relevance.
- Potential to disrupt through innovation.
- High scalability.
- Solving real-life problems.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Machine learning, AI and blockchain have been buzzwords for quite a while now and there are several startups as well as investors specializing in the space. While there certainly are a number of opportunities that have the potential for significant disruption there are also numerous initiatives simply using these buzzwords to get funding for business models that aren’t really disruptive or as hands off as they might claim. Hence, for Lakestar it is key to perform thorough in-house tech DD and make sure that the product addresses real-life problems.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Lakestar has a European investment focus (>50%) but also supports outstanding startups and entrepreneurs across all borders.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
In general, the local ecosystem brings out interesting opportunities in health/medtech as well as deep tech due to the strong technical universities. Some highly interesting opportunities outside of the health tech space that we are currently seeing are Planted (meat made from plants), GetYourGuide (travel attractions) and Auterion (drone software).
How should investors in other cities think about the overall investment climate and opportunities in your city?
While there certainly are very interesting opportunities emerging from the ETH, the local top-tier technical university, there oftentimes still is a lack of support at the growth stage to scale internationally. This is largely a result of the local ecosystem with only few later/growth-stage investors. In recent years a positive trend can be observed. However, many investors (especially pension funds and insurance companies) are still on the fence and hesitant to deploy significant capital into Venture Capital.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Yes, this is certainly a trend that we foresee. In particular we expect talent to migrate to countries with strong benefit and support programs in place. The pandemic has shown that Europe with its short-term work regime and funding schemes is well-positioned to benefit. However, the value of being in a hub and having the opportunity to physically meet clients as well as investors will remain high.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Intercontinental travel tech. However, over the long term people will want to get back to exploring the world, which is why in this segment we only foresee a medium-term decline. The pandemic has been the largest driver for digitization within traditional businesses. It has advanced technology adoption by years, which poses a great opportunity, particularly for B2B companies not only in edtech and remote collaboration but also other traditional business such as [in the] insurance, healthcare and fintech [industries] to name a few.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
The pandemic did not materially impact Lakestar’s investment strategy, as already going into the crisis the fund was focusing on tech-enabled, highly scalable business with global ambitions. Going into the crisis founders were mostly concerned about securing sufficient runway and keeping key talent. Lakestar supported them early on to make sure that they are well-financed to withstand the pandemic and make the most of the accelerated digital adoption. The key advise to our portfolio companies is to focus on delivering intuitive and innovative products addressing the key pain points of their client base to make sure they’re rightly positioned for the rebound.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Examples of such green shoots:
- Several portfolio companies, in particular in the multicategory-delivery and community space saw their customer acquisition cost fall to zero.
- Some sectors recovering much faster than anticipated with activity numbers already at or ahead of pre-pandemic levels.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
I think it was great to see how quick policy and decision-makers reacted to the COVID-19 pandemic in terms of aid for startups to bridge liquidity constraints and extend runway. These young companies needed quick financing solutions. Usually, they can rely on four essential pillars: Venture capital firms and business angels that will fund new rounds or refund startups in their portfolio; national investment banks that will play a key role as direct investors in startups or as limited partners for venture capitalists; traditional banks; and equity crowdfunding platforms. In the uncertainty of the ongoing crisis, policymakers, the state and investors acted in sync and, more importantly, with immediate effect. Within only one-and-a-half months, the German government issued a two-billion-euro aid package, to ensure that the innovative growth sector with its many thousands of jobs gets through the crisis in good shape. In that way, we could safeguard the ecosystem. This was especially important as classic credit instruments are often a poor fit for young, innovative companies.
This particularly showcased the beneficial environment for entrepreneurs and startup employees in Europe with government aid programs — especially short-term work — in place to weather such a crisis. This contrasts to the U.S. where a hire-and-fire mentality can be observed, which leads to a lot of uncertainty and entrepreneurs being forced to let key talent go. This gives hope, not just in the light of the crisis but also for the importance of a vibrant future and innovation in Europe.
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