World-class startup pitches in Geneva

One of the criticisms often levelled on Swiss startups is that typically their pitches are very dry and not aspirational. They focus on features & engineering and not their passion: about what’s inspired them to solve their problem and why they are motivated.

in Feb there’s a rare opportunity to experience startup pitches from around the world here in Geneva. After a world-wide tour and a series of regional pitch competitions, Seedstars World are now bringing their regional winners to Geneva to select the winner. Here’s the list of finalists http://www.seedstarsworld.com/finalists/

The event is on the 4th Feb (the day before the LIFT conference & same location) and there are some discounted tickets available http://www.amiando.com/em/seedstarsworld13/UOGLE1GY which means that it costs 50 CHF (price for startups) to come along and watch.

Why don’t Swiss pension funds invest in Swiss venture capital?

This was the subject of a short debate between Swiss VCs and pension fund managers at Le Réseau.

Investment managers at the pension funds don’t have the skills to invest in VCs (let alone Swiss focused VCs). Fundamentally the risk profile of Swiss pension funds investments is lower than in the US where 14% goes into VC and private equity. So, apart from a few exceptions, they don’t do it.

The view from the innovation ecosystem is: pension funds look long term, and so they need a strong economy long term, and this needs innovative companies, and so it’s in their interest to help finance this. The construction workers’ pension fund is alone in recognising this (they see that a healthy construction industry needs a strong economy that continues to innovate).

But it’s also a chicken and egg problem: The only VCs demonstrating good returns are the big US ones. If Swiss focused VCs could demonstrate good returns then some pension funds would try investing. Outside a few exceptions (eg. Vinci Capital who were represented at the discussion) there isn’t an asset class for investors. Many agreed with Vinci’s approach which is a mix of VC and private equity (using leverage to improve returns). Vinci’s opinion was that their model can scale up a bit (maybe to a few hundred million CHF of investment per year) but certainly not to even 1% of pension fund assets.

Another interesting model is Swisscom Ventures where it’s clearly part of the swiss ecosystem but achieves it’s scale by investing both in Switzerland and abroad (mainly in Silicon Valley).

Non of the panel thought that an alternative to later-stage investing is pump a lot more money into seed funding – there are not the returns to justify it. This is something I’ve never understood: each year there are reports showing that EPFL & ETZ spinouts are mostly successful (money raised, high long term  survival rate, etc.) yet there’s no VC systematically investing in the seed funding of all this as a mini asset class and then following on with growth capital.

So even though Switzerland tops the innovation charts there is just not the scale for big investors to invest. So big investors are not going to jump-start a “silicon valley” here. Without the big investors, seed funding is going to remain a long slow process (as he seed investors have to be prepared to finance startups through to break-even).

Maybe the fundamental problem here is not about scale but the speed of value creation. If we created value quicker at the current scale then the returns will be better and the ecosystem would become more investible and would grow. This is a big focus of Venturekickkicking startups forward.

Switzerland needs more entrepreneurial investors & co-investment

Nicolas Berg of RedAlpine in Zurich has a great presentation about the momentum in the Swiss early-stage Ecosystem (embedded below). He says:

Wanted investor types for Switzerland

1. Serial entrepreneurs with at least one top exit

2. Micro VC funds

    • managed by serial entrepreneurs (age 25-45) and successful angels
    • very active investment approach in seed and early-stage
    • diversified portfolio of 15+
    • Entrepreneurial LPs (serial entrepreneurs 50+, family offices)

3. Co-investment and side-car funds

    • less active or passive investment manager approach
    • government and corporate funded
    • driven by economic impact, not returns only

The maturing of start-up markets

Recently announced:

Uber (taxi rental) getting $360m investment plus rumoured access to significant debt financing
http://pandodaily.com/2013/08/25/will-uber-use-its-360m-war-chest-to-become-the-exact-thing-it-hates/

NumberFour in Berlin gets $38m seed financing (yet to launch) for small business productivity apps
http://indexventures.com/news/index/news_id/373

Smart investors are betting big

I suspect that this means they think well funded, well connected startups can dominate these sectors (Pandodaily speculates that’s why Uber wants this war chest). So it looks like these sectors are changing from emerging sectors to maturing sectors. These are investors who 3 or 4 years ago were saying that they see rapid change everywhere “its a great time to start a business”. What we’re seeing now is a logical follow on from that.

It’s worth watching to see if this trend picks up momentum. In which case I think it’s going to be difficult for regional or niche startups to convince investors that they’re be able to go big. Instead, these startups will have to seek out new sectors & ideas.

Update:

Kelblog has a good post http://kellblog.com/2013/10/21/thoughts-on-mongodbs-humongous-150m-round/ on this

In the 1980s and 1990s VCs used to fund categories and cage-fights.  A new category would be identified, 5-10 companies would get created around it, each might raise $20-$30M in venture capital and then there would be one heck of a cage-fight for market leadership.

Today that seems less true.  VCs seem to prefer funding companies to categories.  (Does anyone know what category Box is in?  Does anyone care about any other vendor in it?)  Today, it seems that VCs fund fewer players, create fewer cage-fights, and prefer to invest much more, much later in a company that appears to be a clear winner.

This, so-called “momentum investing” itself helps to anoint winners because if Box can raise $309M, then it doesn’t really matter how smart the folks at WatchDox are or how clever their technology.

Growth Hacking isn’t a skill in Switzerland

It’s a bold statement “Growth Hacking isn’t a skill in Switzerland“, given that growth hacking is a buzz in the main Internet startup hubs around the world.

But here’s my simple proof:

No one has registered growthhacker.ch, growthhacking.ch etc. And by definition, a real growth hacker would do this (as it’s a no-brainer SEO way to get clients, build his own brand).

Addendum: I’ve just bought them.

The last 3 software startups I’ve talked to all have a growth hacker “to be hired” on their org chart, so it is becoming a hot topic. Yet there’s no culture of growth hacking in Switzerland. I think we are going to hear more and more about this over the next year. Ultimately the ideas of growth hacking are nothing new – the really successful Internet startups have used some of these techniques since the 1990s. What’s new, is the general acceptance of it’s importance. It’s driven by examples such as Twitter’s where growth was plateauing until they applied growth hacking (and not marketing) techniques to welcoming new users and making Twitter compelling for these new users.

There is small flaw in my proof – there are a few growth hackers in Switzerland but they are working full-time at companies so their services are not for hire.

Expect to see the first Swiss Growth Hacking meetups soon!

ABB’s Startup day

This week ABB Switzerland organised a Startup day at their HQ in Baden.

The format was presentations in the morning (ABB on innovation, followed by 15 minute pitches from each startup), then lunch, followed by 20 minute one-on-one meetings between ABB management and the startups in the afternoon.

The attendees were about 40 top managers at ABB and 11 startups picked by ABB with the help of the CTI startup ecosystem. The managers included many business unit heads so there really were decision makers present. What is impressive is how seriously the ABB top management took this day – most of them scheduled one-on-one meetings all afternoon.

Reno Lütolf, ABB Switzerland country manager

kicked off the presentations with ABB’s vision: Power and productivity for a better world

  • Improve operation performance, whilst using less energy
  • Drive innovation
  • Attract talent
  • Act responsibly

ABB has145,000 employees, $39 billion of revenue split across 5 divisions: Power products, Power systems, Low voltage system, discrete automation and motion, process automation. 8000 of these employees are R&D engineers – “Innovation is key to ABB’s competitive advantage”.

Kurt Kaltenegger, ABB Technology Ventures

followed up with some more details:

ABB has always been a big innovator: 1st synthetic diamond, 1st industrial robot, 1st liquid crystal tech, several 1sts in electric/hybrid motors. And more recently the 1st high voltage DC breaker. This last invention has put ABB on the MIT Technology Review list of the 50 most disruptive companies because this technology makes it practical to build high-voltage DC electric power grids which are needed to bring power long distances (from windfarms, solar farms, etc. to the main population areas).

The goals of the Startup day are to leverage the innovation ecosystem in Switzerland and to envisage co-operation of all kinds

ABB Technology Ventures  sees 3 global innovation hotspots with startup activity: North America (US,CA) Israel, and Central/Northern Europe. In fact this innovation day in Switzerland follows on from one they ran last year with Israeli companies.

He explained that ABB engages with startups in any of the following ways:

  • Partnership and co-operation with local and global business units and R&D
  • Equity investment (with different levels of business support)
  • Pre-acquistion or Acquisition by the M&A team

ABB are looking for win-win deals and are not risk adverse –  a high risk is OK if there’s a high market potential. Areas of interest include big data, Internet of things, sensors, Software as a Service and every disruptive Technology in proximity to ABB’s today and/or future business

They’ve made more than a dozen investments so far.

The CTI startup president Lutz Nolte, who helped ABB select the startups presenting, gave a CTI intro pitch – explaining the role of the CTI as a catalyst between public funded innovation and Industry.

And the startups? Given ABB’s stated areas of interest (big data, Internet of things, sensors, Software as a Service) it’s not a surprise that they were in these areas. Note: as it was a private event I’m not going to list them.

The event was organised by Michael Daiber, Innovation Agent and Franziska Bossart, Head of Innovation at ABB Switzerland.

More data on innovation in Switzerland

Startupticker.ch is reporting about the latest annual update from the Global Entrepreneurship Monitor (GEM). This is hot on the heels of the KOF innovation study.

It covers all entrepreneurship in Switzerland, so it isn’t specific to our focus high-tech innovation. But there’s some interesting data:

Switzerland shows no great potential with regard to creating new jobs via young companies.

A clear orientation on (combined product-market) innovation and orientation to international markets is clear.

Switzerland achieves outstanding results in finance, commercial infrastructure, tertiary education, and knowledge and technology transfer, as well as in stable internal market dynamics.

The age structure of entrepreneurial activity in Switzerland is noteworthy. Entrepreneurial activity among the young
in Switzerland (18-24) is the lowest of all comparable countries, whereas the 35-44 age group shows the highest entrenpreneurial activity.

Entrepreneurial activity for both first and the second generation migrants is significantly higher than the Swiss average.

Stéphane Garelli at IMD: Innovation is good, but Swiss SMEs are not expanding

SwissInfo has posted a great interview with Stéphane Garelli (head of the IMD World Competitiveness Center) where he discusses innovation in Switzerland. (thanks to Andy Ryan at 3baysover for the pointer)

It’s really worth reading the whole interview, but here’s my summary:

1) lack of growth capital (he thinks there’s enough seed capital)

2) lack of ambition (focus on work/life balance)

3) small local market (compared to eg. the US) makes it difficult to get to critical mass to then go big

4) focus on small scale high added value & not big manufacturing

5) being risk averse is in Switzerland’s DNA

The interview is in response to the  recent KOF innovation study which show Swiss innovation as healthy but that other European countries are catching up (especially Findland & Belgium) or overtaking (Denmark).

Swiss Startup Secrecy

The Swiss startup scene is hidden away. It’s secret to the wider world and also within Switzerland.

Switzerland heads the global innovation index. So where are the big disruptive ideas and new companies being created?

Well for a start, it’s not being reported:

Just this week, Techcrunch announced the $13 million series A VC round for Urturn. No single mention of “Lausanne” where Urturn is based.

Apple buying Siri in 2011: again no mention of the Swiss connection unless you dig deep:
“Decades of SRI research in artificial intelligence, including leadership of the largest known artificial intelligence project in U.S. history, as well as joint work with EPFL, the Swiss institute of technology in Lausanne, led to Siri’s development. “

Ebay/Paypal buying Zong: no mention that it was founded in Geneva and there for most of it’s life

There is plenty more to add to this list. But I guess it doesn’t help that a lot of the successful Swiss startups move part or most of their operations to a more high profile place? Typesafe (home of the Scala language used by Twitter etc.) has moved it’s HQ to San Francisco, Housetrip has gone to London and Get Your Guide to Berlin.

Does Switzerland exist on the European tech startup scene?

Sebastien Flury has a series of posts (part 1, part 2, part 3, part 4) on his blog where he’s asked guest bloggers outside Switzerland to answer this question and there’s some pretty good observations including “the Swiss startup scene is Europe’s equivalent to what Elon Musk is trying to build in the States

Europe’s next billion dollar tech businesses

When Saul Klein at Index Ventures pronounced his list of European billion dollar businesses in the making there were no Swiss businesses on there.

Should Swissquote be on his list?  Started by Marc Bürki and Paolo Buzzi in 1999, market cap today about $500m, Swissquote is bigger than a lot of the companies he lists. Index Ventures (where Saul Klein works) was founded in Geneva and it’s still one of their bases, so shouldn’t he have a bit of knowledge of the Swiss tech ecosystem?? But then Swissquote doesn’t seem to have ever wanted to be part of the recognised startup ecosystem – it hasn’t filled in it’s crunchbase profile. Yet Swissquote is as much of a tech business as Wonga or Betfair who are on his list.

More recently Swiss Space Systems raises $265 million . Will we see that on the next list?

Who’s problem?

Is it Switzerland which doesn’t want to be part of the international tech startup ecosystem?

Or is it the international tech startup ecosystem that doesn’t want Switzerland?

The answer seems to be a bit of both

Switzerland is discrete by nature. High profile people (like rock stars and racing drivers) live their lives undisturbed. Similarly tech startup successes are not really celebrated.

Many of the best high-growth startups are serious B2B companies who don’t want buzz and recognition is a distraction: they already have a list of who their serious customers will be.

Martin Coul of the Coul Room observes that “when you make a list of countries which need help of any sort, Switzerland is last on the list“. Maybe this explain why Seedcamp, StartupBootCamp and other international incubators tour the whole of Europe but haven’t come to Switzerland?