Swiss tech firms vie for scarce venture capital

Miromico's system on a chip technology is key to its plans for slim, low-power heart monitors. ST

Competition among budding Swiss entrepreneurs for funding is fierce, as venture capital companies become more risk-averse.

Young companies with new tech innovations are finding themselves in a battle to survive, rather than being able to grow into influential firms.

Despite some investors reporting that they are willing to invest, the venture capital companies in Switzerland, as in the rest of Europe, are tending to shy away from high-risk undertakings.

One company that is feeling the effects is Miromico, a company based in the Technopark in Zurich.

Miromico is facing possible delays in getting its advanced chips onto market because it has had to do consulting work for other chip companies in Germany in order to get the capital needed.

The Swiss Federal Institute of Technology spinoff wants to make super slim and battery-efficient heart monitors based on its system-on-a-chip technology.

Another tiny startup firm, DNASign, has had to rethink its business plan to accommodate a dearth of risk-taking capital.

The Zug based company has patented a way to watermark inks, drugs, or even biological products.

Grim situation

“At the moment the situation is grim,” said venture capital investor, Alfred Scheidegger, of Nexttech Ventures.

There is consolidation in the venture capital industry in line with the stock market boom and bust cycle.

But an expected new wave of more “professional” investors has yet to emerge and as a result only the most secure of the best prospects seem to get funded.

The consolidation in the venture industry is taking place at a time when the number of Swiss trying to turn a science project into a business is increasing.

According to the Swiss business newspaper, Handelszeitung, the Swiss Federal Institutes of Technology are spinning off more companies at a great rate than ever.

Glimmer of hope

Two events in the coming days aim to ease the situation for some entrepreneurs and more than 30 of them will be participating in the upcoming confabs.

Create Switzerland will run its 3rd Venture Capital Investment Day at Technopark in Zurich in September.

The organisers have told Swiss Venture that there has been an increase in investor interest compared to last year.

More than 50 venture capital money-men (no VC women this year) have signed up to attend and some 20 companies will present.

In mid-October, the second annual Swiss Praesenzboerse, organised by U Bridge AG and Comreal Partners, both consulting companies, will take place at the Technopark in Lucerne. Some 10 companies will be selected.

Beyond the science project

Companies that have received capital lately are the ones that have managed to develop commercial products and find reference customers to the degree demanded by venture investors.

Two such firms are the bioinformatics startup, TheraStrat, and medical sensor firm, Sentec.

Venture capital experts say the main reason that business plans are turned down is that companies are unable to prove that they have something really unique that is way ahead of the market.

“Some of the plans that come to us are rejected because the teams have not been able to prove that they are real innovation leaders,” says Jan Bomholt of BrainstoVentures.

But this rule is not written in stone. Sometimes very advanced ideas, such as those that come from university spinoffs, don’t get financed because the technology is “too early” or lacks a clear application.

Investment in development

Because venture investors will rarely invest in a science project or lab prototype, despite the odd exception that proves the rule, the “D” part of Research & Development, has to be financed before they will even look at the deal.

The problem is that such financing is nigh on impossible to find, according to Xavier Comtesse of Avenir Suisse, a think tank that has been studying the Swiss innovation ecosystem.

Comtesse believes that the money for development has to come from the state, as is the case in Finland.

“For every three francs spent on basic research, there is only one franc spent on development or innovation in Switzerland,” says Comtesse.

In Finland the exact opposite ratio is the norm, three dollars are invested in innovation for every one spent on publicly funded basic research.

by Valerie Thompson