VC surveys

Auto Added by WPeMatico

10 Zurich-area investors on Switzerland’s 2020 startup outlook

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

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

As investors and founders mature, Vienna emerges as a European startup hub

According to Austrian Startup Monitor, entrepreneurs have founded more than 2,200 startups in Austria since 2008, with the number of tech companies growing 12% per year since then, significantly faster than the 3% growth rate for traditional companies.

Home to roughly 50% of Austria’s startups, Vienna has a plethora of VC, corporate and university investors. Top VCs include 3TS Capital Partners, AC & Friends, Cudos Capital, FSP Ventures, Hansmen Group, i4g Investment, i5invest, LilO Ventures, next.march, primeCROWD, Speedinvest and Venionaire Capital, among others.

The local ecosystem benefits from several initiatives, including the Social Impact Awards, Vienna Startup Awards, Design Week, Climate KIC Stage, Innovation Incubation Center and INiTS Accelerator. The well-run Pioneers Festival contributed massively to the ecosystem for several years after a certain TechCrunch editor-at-large gave the organizers an excuse to expand on a simple TechCrunch meetup. But the festival was shuttered last year after its sale to a local accelerator meant that the event itself ran out of steam. Perhaps it was just as well, given this year’s pandemic.

State support for startups is also there. The Austrian government created a comprehensive startup program in 2016 to make the country more attractive to startups setting up there.

Standout exits include fitness app maker Runtastic, acquired by Adidas for $240 million in 2015, as well as listings marketplace Shpock, which was acquired by Norwegian publishing conglomerate Schibsted in 2015. Other notable startups originally from Vienna include mySugr, wikifolio, kompany and Codeship.

There have been jitters on the way, however. The Austrian Private Equity and Venture Capital Organization’s 2019 report found that Austria’s startups saw €237.6 million invested in 2018, but, this number fell 8.2% to €218 million in 2019; the number of deals exceeding €500,000 also dipped by 8.7%. Foreign funding also slowed in 2019 after a few years of a bull run — between 40% and 63% of deals sized €0.25-€1.99 million were significantly funded by foreign investors in 2018.

Despite the decline, local investors have started to pick up the slack, boosting the number of funding rounds over €5 million to 12 deals in 2019 from 11 in 2018. In both years, all but one of those deals drew a substantial part of the funding round from foreign investors.

We expect more to emerge from Vienna’s tech scene in the future. The Pioneers Festival (RIP) proved that Vienna is a fascinating bridge between Western European capital and entrepreneurial culture, and East European entrepreneurs and talent, which it will no doubt continue to benefit from in years to come. But — just as will happen with Lisbon this year and the loss of Web Summit — the loss of a major conference in Vienna to shine a light on the city and ecosystem, combined with the pandemic, may have cooling effects for the next couple of years.


Notable Vienna startups:

  • Newsadoo: Uses artificial intelligence to personalize news.
  • Cashpresso: Links customers, merchants and banks to offer consumer financing options.
  • Jobrocker: An online job search portal that connects applicants’ CVs with job openings.
  • Storyblok: A headless content management system.
  • Byrd: First-mile shipping service that allows customers to ship items hassle-free.
  • Music Traveler: A marketplace that centralizes spaces with musical instruments and equipment.
  • PAYUCA: Provides flexible access to parking spaces in private office and residential buildings.
  • Refurbed: Fast-growing marketplace for refurbished electronics, across the German-speaking world.
  • Presono: A web platform for creating, managing and showing presentations in companies.
  • Blockpit: Develops software for portfolio tracking, tax calculation and compliance reporting of transactions for cryptocurrencies and crypto assets.
  • Robo Wunderkind: A robot for kids to build and program.
  • Medicus: Converts health data with their cryptic numbers and medical language into an easy-to-understand visual experience.
  • Cybershoes: VR accessory that allows you to walk through your favorite VR games.

Here’s who we interviewed:

Eva Arh, principal, Capital 300

What trends are you most excited about investing in, generally?
B2B software, robotics, no/low-code automation, AI-enabled vertical solutions, e-health, companies enabling others to hire and engage talent remotely.

What’s your latest, most exciting investment?
Lokalise.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Companies that enable others to manage and automate billing even further (e.g., per API call), next-gen video conferencing, solutions guiding women through menopause, providing solutions that help companies to offer mental health services to distributed teams, bringing cloud kitchens to the next level (not running central kitchens).

What are you looking for in your next investment, in general?
As always, ambitious, smart, hard-working teams eager to build a category leader in a huge market.

What other types of products/services are you wary or concerned about?
Concerned about solutions that leverage behavioral data to influence people for the sake of optimizing profit, overload of sales and marketing tech, overload of chatbot providers. [It is] hard to compete with players that have benefited from huge network effects such as food delivery.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We focus on German-speaking areas and Central Eastern Europe. Opportunistically we would also invest outside of the region, still in Europe.

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?
Austria — no specific industry focus within software. However, well-positioned in the biotech space, CEE — given the strong presence of IT outsourcing companies, the region is well-positioned to build solutions in the business-process automation, dev tool space. Storyblok (our portfolio). Others to watch: Anyline, Adverity, Bitpanda, PlanRadar, Refurbed.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Regarding Vienna — we are seeing the first generation of entrepreneurs building global companies. Their and their team experience will be at utmost value creating a new wave of tech companies that compete on a global level.

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, we already see this — exciting companies coming out of small cities in Poland, Germany, etc. and companies going remote.

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?
Telemedicine, online education has been accelerated. We see a shift that otherwise would have taken years, especially in the relatively conservative German-speaking area. As mentioned previously, mental health solutions, hiring and employing remotely are some of the opportunities highlighted by COVID-19. Companies that are heavily exposed are those that have been serving the long tail of companies, small merchants, and local businesses that were closed down or experienced much less traffic in past months and hence are extremely sensitive around their cost base, discontinuing services that are not 110% essential.

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 have always been very selective and focused, partnering up three to four times a year. We continue at the same pace. The companies that perform well despite COVID-19 are still in a strong position for attracting external capital. Of course, we help our portfolio to secure a runway and have a discussion how/whether the situation has impacted their offering/GTM. Some companies have to rethink their value proposition, some rethink their target groups either to make up for slower sales cycles or on the other hand to leverage and benefit from the current situation.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Yes, we see that Lokalise is growing heavily with the current customer base as their customers expand to new markets, likely to make up for slower revenue growth in their existing markets. We see that Nethone (fraud prevention) is able to double down on e-commerce. Online fraud and online transactions are skyrocketing as people spend much more time online. (On the other hand, their airline customers of course show a different trajectory.)

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 is inspiring to see how founders go through the current situation, act instead of reacting, especially in those countries where there is less government support incentives in place. Personally, I am also happy to see that people use the work from home time to rethink and introduce healthier habits.

Any other thoughts you want to share with TechCrunch readers?
As the world has gone online and the location matters much less, there is an opportunity to distribute the created value and wealth more evenly — be it a company founded in a “non-tech-hub” location or be it talent hired remotely.

Helsinki rides the Slush wave toward a booming startup future

In September 2020, Helsinki’s City Council approved plans for an expansion of the existing “Maria 01 Campus,” a former downtown hospital complex. Even before it starts spreading its acreage, the facility is already home to 120 startups and 12 venture capital funds. The campus is owned by the biggest startup conference in the Nordics, Slush, the City of Helsinki and Helsinki Enterprise Agency and is slated to become one of the largest, if not — possibly — the largest tech startup campus in Europe, at 70,000 square meters (or 75,3473 square feet) by 2023.

The scale of the project speaks to the confidence and ambition of the Helsinki startup ecosystem, which has grown immeasurably over the last 10-15 years.

The fact that Slush, a conference, is involved is no accident. The event is a nonprofit created by the university. This has enabled it to scale to one of Europe’s largest tech events (pre-COVID) at over 20,000 attendees. Its success has also led to traditionally conservative Finns embracing entrepreneurship. The entire city gets involved, and thousands of university students volunteer for the good of the city and the ecosystem. The collegiate nature of the Slush experience has reflected how Helsinki has grabbed the opportunities of tech with both hands.

Born of Aalto University and its student society for entrepreneurship, AaltoES, Slush originally started as a tech meetup. Indeed, I went to some of the first ones. But with the 2010’s success of local startup Rovio, creator of Angry Birds, as well as Supercell, creator of Clash of Clans, the event took off. It helped that Peter Vesterbacka (previously a pioneer at HP Bazaar Labs) was a tireless promoter of Slush and egged it on from being a meetup into a full-blown conference that could attract the biggest names in tech.

Slush’s ability to attract VCs to a Northern European country in the middle of winter was impressive. The city rolled out the red carpet. That meant inbound VC exploded. According to the Finnish Venture Capital Association (FVCA), VC investment into Finland grew almost five times to €188 million between 2014 and 2018. Finland is now a European leader in terms of venture capital (says the FVCA) as a percentage of GDP, and foreign VC investments grew by 58% between 2017-18.

VC has grown leaps and bounds in the city itself. Crunchbase lists 54 venture funds of various guises in Helsinki. They include Conor Venture Partners, Inventure, VNT Management, Icebreaker.vc, Superhero Capital, Evli Growth Partners, OpenOcean, Loudspring, Norsepower Oy, Tesi, NordicNinja VC and Maki.vc.

Slush has even seen ex-employees go on to found big startups. Food delivery startup Wolt, co-founded by Miki Kuusi an early CEO of Slush, has raised $160 million. Other big startup companies from Helsinki’s ecosystem include Smartly, Singa, Giosg, ZenRobotics and Blok. And let’s not forget it produced MySQL and CRF Health back in the day. In 2018, Small Giant Games, was acquired by Zynga in a deal worth up to $700 million.

Startup Genome marks out Helsinki as one of the top global ecosystems. For 2020, it valued the Helsinki startup ecosystem at $5.8 billion, with total early-stage funding of $511 million, higher than the global average for emerging ecosystems.

Helsinki has around 250 gaming enterprises and 30 of them exceed $1 million in annual sales. In 2017 Finland was the first EU country to publish a national AI strategy and the University of Helsinki created a free AI education program that saw approximately 90,000 people from 80 different countries enroll in the first four months.

Over the whole country, nearly 300,000 Finns work in tech, an enormous amount when you consider the population of Helsinki is 1.3 million.

According to analysts Tracxn top startups include:

  • Canatu (transparent conductive films and touch sensors using carbon nanomaterial): Raised $74 million.
  • Kiosked (smart native advertising technology): Raised $64 million.
  • ICEYE (developer of SAR microsatellite for earth observation applications): Raised $152 million.
  • Varjo (provider of head-mounted display with resolution matching a human eye): Raised $100 million.

To learn more about Finland’s startup ecosystem, we spoke to these investors:

Pirkka Palomaki, partner, Maki.vc

What trends are you most excited about investing in, generally?
We are a generalist but are keen on deep tech and brand-driven companies both in B2C and B2B. We have been tracking closely new materials-based innovations, as well as breakthrough innovations in quantum computing. Breakthroughs happen also elsewhere and [we] have invested in B2B SaaS as well as one cloud-native massive multiplayer game company.

What’s your latest, most exciting investment?
One the latest investments is in a Swedish company called Carbon Cloud. They make it easy to discover your climate footprint and show it to the world — they can be found, for example, on the side of Oatly’s packaging. Carbon dioxide impact of consumer goods should be as visible as the nutrition values in food.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Femtech. There’s still quite little competition, but tremendous amount of work to do. Our team is keen to see more solutions on reproductive health, but also going beyond to solutions e.g., in syncing female’s personal cycle with optimal nutrition or training.

What are you looking for in your next investment, in general?
The team is always in the center and we are looking for entrepreneurs that are rewriting the future in global markets.

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?
Free-to-play games is a tough and competitive market. There will likely be new winners, but also even greater number of companies that don’t make it compared to many other industries.

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 global mandate, but the Nordics is our home and where we have done most of our investments.

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?
There are several, but the first on the top of mind is sustainability and new materials. Spinnova is a great example providing the textile industry with the most sustainable fibre in the world, produced with minimal harm to the environment, at a reasonable cost. With the stretch and strength qualities of cotton and the insulation of lamb’s wool, it can suit apparel, footwear, accessories, [and] home textiles to name a few applications. I’m also looking forward to seeing a great ecosystem and several startups being built around quantum computing. There are already a number of promising quantum technology companies, such as the Finnish IQM that builds world-class quantum computers and Bluefors that specialize in cryogen-free dilution refrigerator systems for quantum computing.

How should investors in other cities think about the overall investment climate and opportunities in your city?
There is strong supporting ecosystem in Finland for startups, strong engineering history and great culture of getting things done.

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?
The beauty of the startup ecosystem is that is built on innovation. We will most likely see more distributed organizations in the future, but I believe the major hubs will maintain their attractiveness in the future as well.

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 has naturally taken a big hit. It will take time for the industry to fully recover and I would expect innovations in the domain in the future, whether it is in virtual travel or creating confidence in worry-free travel in the future.

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?
Extending the runway has been a general rule for many and making the company stronger and more competitive when things start picking up again.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Customer support agents have been strained during the pandemic. Our portfolio company Ultimate.ai has been well-positioned to scale the customer support with their virtual agents while maintaining or even improving customer experience. I’ve been super happy to see them grow and expand rapidly.

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.