As a Swiss-based Angel Investor I’m continually asked about this so this is my attempt at a coherent answer. It’s a bit biased towards the Swiss French part of Switzerland.
Where are the angels?
The main active Angel Networks in Switzerland are (alphabetically):
A3 angels (a3angels.ch) based at EPFL and focusing on EPFL spinouts. A3 has a strong tech focus.
Business Angels Switzerland (businessangels.ch) with an active group in Lausanne and a less active one in Zurich. BAS is a traditional Angel Network and most of it’s members are successful business people.
Go Beyond (go-beyond.biz) with groups in Geneva, Lausanne, and a couple of separate groups in Zurich (as well as groups internationally). There’s a mix of people. Go Beyond have done a lot of ground work to make Angel networks scale and open Angel investing to a wider group of people.
Start Angels (startangels.ch) based in Zurich.
Here’s a list www.biobac.ch/about-us_links.php with a few more.
Updated: B-to-V is based in Switzerland (St Gallen) and is both an angel Network and VC. They are actively sourcing deal-flow in Switzerland but most of their recent angel investments have been outside Switzerland.
Angel Networks are dedicated but they’re small
The total investment across all these networks is less than 10M CHF per year in Switzerland. Typically 200k to 500k CHF are invested per deal, but a couple of times per year it’s over 1M CHF. (2014 has already started strong so it could be a good year!).
What these figures show is that:
Most deals are done outside the Angel Networks
Looking at the EPFL spinouts (currently the biggest source of Swiss startups) there’s seems to be an equal number who have taken seed money from formal networks (Angel Networks, seed funds like Swisscom, Debiopharm, etc.) and those who have taken money from FFF (friends, family and fools) or an individual High Net Worth person who’s making a one-off investment. And the EPFL spinouts are generally the startups which are most attractive to Angel Networks.
AngelList has 3642 Investors in (or focused on) Switzerland angel.co/switzerland/investors (registration required) – most of these are outside the Angel Networks.
It’s hard to hunt out Angels who are not part of Angel Networks, but a lot of angel-style funding comes from them. They probably won’t advertise the fact they invest, and any startup who has found one will keep their investor to themselves rather than recommend other deals (in case they need him/her for a further investment).
FFF are Angels too
Because Switzerland is a rich country a lot of startups have access to FFF (Friends, Family & Fools) money for the first seed round. These people wouldn’t call themselves Angels but they invest similar amounts to Angels and are behaving a lot like Angels.
Spinouts with IP from the tech universities can get up to 500k CHF or even more as grants & loans as their first financing – effectively replacing the need for an Angel financed seed A round.
Other “Angel-like” Investors
There are a couple of investment platforms who are crowd sourcing investors in Switzerland (eg. c-crowd, Investiere). This is a potential way to get investment or to connect to those elusive individual Angel investors because there are a lot of passive members.
Updated: And Red Alpine sits somewhere here – it’s an Entrepreneur run seed fund based in Zurich with a Swiss and International focus.
There are no Super Angels
There are several people investing in Swiss startups who are close to being Super Angels. But instead of building a big Angel portfolio, they limit themselves to one or two deals per year where they are very hands on. For example at an A3 Angels event in 2013, Martin Valesco said that he’s done a lot of Angel investing in the past but now he’s focused on co-founding startups. Serial entrepreneurs are increasingly trying this Personal Incubator model.
I suspect the following factors are stopping anyone building a big Angel portfolio:
- There are not enough exits and the valuations are not high enough. Eg. Venturekick has supported over 200 startups and only 3 have exited so far. Note. This is a Europe-wide problem: eg. Seedcamp has a similar ratio.
- Most startups don’t have the right DNA (lacking business, sales, network). It’s a lot of effort to sort this out. Unlike Silicon Valley, there isn’t a supply of business people with a track record of scaling startups.
- The very-high-tech startups are difficult to invest in. They tend to have a very specific product which is difficult to understand (unless you’re an expert in that sector) and it can take a lot of cash and time to get to being a viable business. And each exit is different. From an investor perspective, it’s difficult to get synergies and the investment cycles are too long.
- The tax situation is really unclear. In Switzerland if you are a private investor then you pay zero capital gains tax. If you’re classified as a professional investor for tax then you pay ~50% tax (income tax & social charges) on capital gains. In fact it’s even more complex than this and there are no clear rules from the tax authorities – you may have to wait years before you know. If you are trying to recycle money to the next investment this is exactly the situation you don’t want.
How Angels Networks invest
The Networks typically have a monthly meeting where 2 or 3 startups each give a short presentation (10 to 15 minutes) followed by questions and networking.
After the startups have left the Angels discuss the merits of each startup and whether they want to start due diligence (assessing the product, market, business & investment structure) with a view to making an investment. Most of the time they don’t proceed. If they do invest then the whole process typically takes 3 months, sometimes much longer – in fact I’d say the average at the moment is 6 months. It takes this long because:
- Unless the deal gets put on super high priority, the Angel Network process relies on the monthly meeting to push the deal forward to the next step.
- In the most cases startups have some work to do – eg. Their team needs strengthening, they need to understand their market better, they need to fix some legal/IP/shareholder issue.
- Also it takes a while for investors to be comfortable with the founders – it’s a dating process.
Swiss wide there are about (my estimate) 15 to 20 startups financed by Angel Networks per year. The investment amounts vary between 300k and 1M CHF. In addition to this there are several more startups who had a single Angel invest who met the startup through a pitch at an Angel Network.
Angel networks can only cope with evaluating a handful of startups. If you are unlucky and they already have a bunch of startups that they’ve been looking at for a couple of months then the network will have no bandwidth to increase the list until they either close (sign) or drop one of their current deals.
What do Angel Networks invest in?
A broad range of technology: software/Internet, some hardware/microtechnology and occasionally medtech. And mostly spinouts from ETZ and EPFL which have been “packaged up” by the CTI and others. By “packaged” I mean:
- They have been given a lot of business coaching by the university tech transfer team, the CTI (government), and organisations like venturekick/ventureleaders
- They’ve had a couple of 100k CHF of grants to progress the business (and in some cases launch the product)
- The technology has already been properly evaluated (tech transfer and CTI) by good patent agents. “Freedom to operate” searches have also been done.
The concerns of the Angels are usually are on the go-to-market strategy and the capabilities of the team to deliver.
Swiss Angel Networks didn’t invest in Housetrip or GetYourGuide, but some individual Swiss Angels did. it’s difficult for networks to judge these super high potential startups and to move quick enough for them. The Angel Networks are mostly focused on slightly less risky startups who have solid technology.
How to approach Angel Networks
You need to fill out the formal application (details on each of the Network’s web site) otherwise you wont get into their process. This is still true if you have met a member of the Network and he/she will introduce you to the Network.
If you hang out at startup events you are likely to meet Angels who are members of the Networks and you should be able to get some valuable feedback about how to pitch your startup to the Angel Networks.
It’s difficult. Some startups have left Switzerland because they can’t find investors. Some startups come to Switzerland and find investors. There are no rules.