Dispute between entrepreneurs and venture capitalists

The panel discussion at the i-net event started with a statement of Michael Bornhäusser. He is President of i-net, but also Partner and Managing Director Private Equity, Products & Services at Sallfort Privatbank. Bornhäusser mentioned three problems he has with Swiss start-ups in his role as investor. In his view Swiss start-ups are not aggressive enough, the valuation is too high and exit potential is too low. He is interested in companies with an exit-potential of USD 200 million or more. During the discussion he mentioned a special character of the Swiss private equity market which he thinks is one cause for this situation. In his view Swiss start-ups get too much money from business angels so that they can work too long on the development of their product without the need to raise further capital.

Two entrepreneurs took part in the panel discussion: Marc Gitzinger of Bioversys and Alfredo Bruno, CEO of Advanced Osteotomy Tools (AOT). Both disagreed with Bornhäusser. “Venture Capital is more and more disappearing in Switzerland”, said Alfredo Bruno, an experienced serial entrepreneur. Marc Gitzinger added: “The number of VCs in Europe is much lower than in the US which makes it harder to find money for European start-ups.” Bioversys closed its Series A round in the beginning of 2013 and pitched to investors in 2012. “At that time there were only 6 to 8 VCs in Europe that invested in young Biotech companies such as Bioversys”, said Gitzinger.

Nevertheless the two entrepreneurs agreed with Bornhäusser regarding the risk aversion in Switzerland. Gitzinger stressed however that the risk averse attitude of entrepreneurs is caused by the society as a whole. In Switzerland entrepreneurs who fail are still being blamed. That is one important reason for their prudent strategy.

Dominique Mégret of Swisscom Ventures explained that it is possible for investors to earn money even when a start-up has such a prudent strategy. The advantage of these start-ups is that they are very capital-efficient. Mégret mentioned Liberovision as an example. The ETH spin-off was acquired by Vizrt, a leading global player in its field, in 2010. Liberovision was a small company at that time and interesting for the buyer because of its technology. Because the start-up was small it never needed a second financing round. “For Swisscom it was a very nice exit”, said Mégret.

At the end of the discussion most of the participants said that they see an improvement in Switzerland and in Europe regarding VC investments. Mentality is changing slowly. “Starting a company is nowadays an option for students in Switzerland. That was totally different 15 years ago”, said Rudolf Gygax of Nextech Venture. In addition he is convinced that the European VC market will grow again. “There are signs that the situation improves after ten hard years.”

Frédéric Court of Advent Venture Partners shared this view. “It’s an amazing time to be in the market with money”, he said, “there was a lost decade for everyone but now conditions are really excellent.” It is to be hoped that such statements inspire pension funds and other investors to invest a part of their money into Venture Capital in the near future.