Swiss-German nanotech venture capital fund suffers setback
After one year and many discussions with potential partners, Capital Stage, a Hamburg-based financial service firm, has decided not to back the Capital Stage Nanotech Invest fund.
It was “sponsoring” the Zurich-based team led by Berndt Samsinger in an effort to raise a new €100 million venture capital nanotechnology fund.
The fund would have targeted makers of instruments used to measure nanosized structures, biotechnology, and advanced materials that could be used for special coatings and thin films.
Despite the retreat by the German investment company, Samsinger, a Swiss investment manager, is undaunted, saying he is “negotiating with a number of interested parties across Europe” who might still be interested in sponsoring the “first fully dedicated European fund in this domain”.
According to industry experts, such a fund will not achieve a fast closing because the investment team is new and it has a narrow focus.
“Investors have become increasingly reluctant to backing so-called first time funds,” says Philipp Gysler, co-head of venture capital and a partner at Partners Group.
These days a broad investment focus for a venture capital fund is preferred. “Since the Internet and communications bubbles burst, investors shy away from so-called theme funds,” says Gysler.
“There is no need for venture capitalists to know more about the industry than their portfolio firms,” asserts Tim Harper of CMP Cientifica, a consulting and publishing firm that specialises in nanotechnology.
“If you want to do technical due diligence there is no shortage of places you can go,” says Harper, his firm being one of them.
He says that among the VCs he knows, the point of view is that it is not the quality of the technology that determines a company’s success. It is the management team and its ability to execute its business plan.
The amount targeted by the fund comes under criticism too. “It will be difficult and risky to invest €100 million in only nanotechnology projects,” says Harper.
The typical nanotechnology deal is small, ranging between €.5 and €5 million and they are frequently syndicated, meaning that is the total amount of the investment is spread out over three or four investment funds.
The total amount invested is only about €250 million in 32 deals worldwide, according to Harper.
The experience of another fund-based company with a similar instrumentation and advanced materials investment focus, MicroVenture, could be indicative of the speed of investment in the field in Germany.
The evergreen fund backed by the government-owned Technologie-Beteiligungs-Gesellschaft and Westdeutsche Kapitalbeteiligungsgesellschaft & Co KGaA, has invested €15 million in only ten companies since 1999.
Industry insiders believe that there mainstream venture investors in the region will pick up any nanotech investments that would be targeted by the Capital Stage fund. Polytechnos, Apax, Earlybird and Wellington Partners.
But these are all German based funds and one of the unique things about Capital Stage’s fund was that it specifically was targeting Swiss firms, in addition to international firms.
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