A risk averse first quarter for Swiss venture funds

Swiss venture-backed firms disclosed raising funds of 129.2 million SFr this quarter (1Q02), according to data gathered and analysed by Swiss Venture Update, an independent newsletter about the Swiss high tech and venture capital scene.

It looks like this year the funding of innovative, Swiss firms is echoing the same trends established in 2001. In the first quarter of 2002, eleven Swiss firms raised some 129 million francs in venture capital. Last year, the total number of investments in Swiss companies (disclosed) was 49 firms raising 409 million francs. That averages out to 12 deals a quarter with each quarter raising about 100 million francs in capital.

If it weren’t for foreign investors, there would be very little venture capital activity in Switzerland to report indeed. All of the transactions disclosed this quarter involved foreign venture capital investors taking equity in Swiss companies, except for one, the Speedel/Novartis Venture fund transaction.

Seasoned Swiss venture capital houses, such as Aventic, BCV, and Innoventure have made some follow on investments, but no new investments, according to research performed by Swiss Venture Update. Index Ventures was active, but put its money into foreign firms this quarter.

Money going to later stage deals

As for early stage deals, Swiss firms find themselves in a risk-averse era. Only two of the transactions this quarter involved very young companies. These companies were Neocast, a video compression technology vendor, and Thales Technologies, a start up active in the chemicals industry.

Two first rounds went to Brightrivers, a young process industry software vendors and SwissRisk. The other seven disclosed deals were follow-on or expansion financing transactions. Such deals are generally considered less risky, making clear that risk tolerance is not very high at the moment.

Software equity sought

The sectors attracting fresh money reflect trends in other parts of the world. Software seems to dominate, with four out of 11 disclosed deals involving software companies. The other transactions are spread over traditional Swiss high tech sectors, life science, chemical industry, and semiconductor/optics.

Based on a search of publicly available information, Swiss Venture Update found that actually 26 innovative, privately owned, high tech firms raised capital in the first quarter of 2002. But of those, only 11 firms publicly disclosed the amount of the investment and the names of investors. These 11 companies who announced financing rounds in the first quarter in Switzerland raised 129.2 million SFr.

The outlook for the rest of the year should see some higher volume in the venture capital industry here. Swiss Venture Update expects some larger rounds in the coming quarters when firms such as SoftPlumbers SA, Avalon Photonics AG, Bridgeco, e-vision AG, echovox SA, and Acqiris SA, to name a few, will raise capital upwards of 10 million francs each to expand their current markets and/ or move to the next stage of growth.

Summary of activity in the first three months of 2002 based on research by Swiss Venture Update

· Software firms dominate the Swiss venture capital fund raising scene with Brightrivers SA, SwissRisk, Obtree Technologies and Neocast raising capital.
· Foreign investors dominate Swiss venture backed sector
· The biggest deal of the quarter was OptoSpeed, a fast growing opto-electronics manufacturers that raised 33.5 mln from The Carlyle Group. Pharma company, Speedel raised 22.2 mln SFr from Novartis Venture Fund.
· Only two of the transactions were very early stage: Neocast, a video compression technology vendor, and Thales Technologies, active in the chemicals industry.
· The new activity (in Switzerland) of Swiss venture capital houses, such as Aventic, Innoventure, BCV, and Index Ventures was nil
· Sectors attracting finance in Switzerland are the same as last year: software, pharma, semiconductor/optical.

By Valerie Thompson