Swiss venture funding stabilised

Management team of Cytos Biotechnology, one of 52 firms to receive venture capital funding last year swissinfo.ch

While other countries report that venture capital funding of innovative firms is still in a free fall since peaking in 1999, it appears investment in innovative firms has stabilized in Switzerland.

In 2002, some 52 firms raised €260 million ($382 million), while slightly more was invested, €276 in 49 companies in 2001, according to statistics drawn from Tornado Insider’s “Deals in Europe” database. The amount invested in 2000 was similar.

Pharmaceutical and biotechnology firms, such as Cytos Biotechnology, Axovan, Speedel and Addex, attracted the most capital and dominate the list of ten largest deals.

Companies in the field of optoelectronics and microtechnology, such as Opto Speed and Colibrys, were the second most popular category in the list of the top ten deals. Internet services, such as Unit.Net, and software firms, such as Brightrivers, which supplies industrial software to the likes of Nestle, were the token representatives of their sectors.

Most of these firms raised expansion capital, whereas in 2001 at least three of the top 10 were early stage investments. Philipp Gysler, Co-Head Venture Capital at Partners Group, a fund manager, says that this is to be expected in the current investing climate. Proven business concepts and an existing revenue base are required to attract capital in these risk adverse times.

The impact on Swiss innovative firms means that “bootstrapping”, or funding growth from cash flow, is the order of the day.

Resilient innovators

The country’s tech sector is not suffering as much as Ireland or Israel. Nick Blaydes of Ernst and Young, whose firm works with VentureOne, an international research and publishing firm, to track deals here, says that the results for Switzerland are “marginally” better than those for Europe as a whole.

“Swiss entrepreneurs are incredibly resilient,” says Pascal Marmier, a specialist in entrepreneurship at the Swiss Consulate in Boston. He feels more venture capital will be flowing into Switzerland due to commercialization of university research.

Marmier sees the budget increase for the CTI Start-up initiative (an outgrowth of the Federal Office for Professional Education and Technology) as helping to build “momentum” in science and technology in Switzerland.

This is something that has not escaped the notice of foreign venture capital investors who are increasingly looking over the Swiss border. At least six out of the top ten deals in 2002 were dominated by foreign venture funds.

That trend is likely to continue as the strong attendance by foreign VCs at the recent European Tech Tour event suggests.

Clusters drive venture opportunities in 2002

“Given the life sciences clusters in Switzerland, ranging from big pharma and specialty chemical companies, to small specialized healthcare firms, the share of life sciences in venture investing is comparably high, says the president of the Swiss private equity and corporate finance association (SECA), Massimo Lattmann.

“Life Science is still able to attract significant money, but this is not the case with telecommunications, media and technology,” says Lattmann, co-founder and senior partner at Venture Partners AG in Zurich.

The biggest problem for lead investors is that co-investors are not following in subsequent financing rounds. “Some won’t and most can’t,” says Lattmann.