In 2023, Switzerland was one of the top five European countries for Venture Capital Investments. Businesses across multiple sectors, such as fintech and biotech, raised funds totaling $2.3 billion. This shows that the appetite for Swiss-based companies is growing in some sectors.
As we enter the third quarter of the year, let's explore the shifting trends in VC funding for Swiss startups. We will highlight the most significant investor activities in the economy and the outlook for businesses in the most robust sectors.
A Look at Swiss VC Funding in Switzerland
In 2023, the Swiss venture capital landscape experienced a significant downturn, ending a decade of continuous growth. Investment levels dropped by 34.8% compared to the previous year, with a total of CHF 2.6 billion invested, the third-highest amount in the past decade. However, despite the decline, the number of financing rounds reached a record high, indicating many attractive start-up projects, though often receiving smaller individual investments.
This is evidenced by the increase in foreign investment projects that went up by 50% to about 89 projects, while in the backdrop, Europe faced a 4% decline in projects of a similar nature.
Notable Investment Trends
The latest Swiss Venture Capital report makes a good case for growing VC activity in Switzerland. Here are some of the significant trends for VC funding in Switzerland.
The Top 3 VC Investments
To summarize the investment trends in this period, we can list the top investments that made headlines:
Atlas Agro (Cleantech, ZG): Topped the investment charts with CHF 282.7 million, focusing on reducing CO2 emissions in agricultural fertilizer production using renewable energy.
Distal motion (Medtech, VD): Received CHF 133.8 million for its robotic surgical platform, Dexter, widely used in Europe for various high-volume procedures.
Noema Pharma (Biotech, BS): Secured CHF 103 million for advancing clinical trials targeting central nervous system disorders.
Sector Analysis
Several sectors did not perform well in contrast to previous years. This is especially true for the ICT Sector, which experienced a sharp decline, with investments falling by 62% to CHF 786 million. The downturn affected many ICT companies, including fintech, biotech, and healthtech startups. In contrast, the Micro/Nano sectors saw increased investments. Thus highlighting their growing importance in the Swiss start-up ecosystem. Cleantech was another outstanding industry as it received significant attention despite a drop in capital investment. This truly reflects a strong interest in sustainable technologies.
Cantonal Insights
As economic activity in Switzerland is also segmented by canton, ventures in different locations tend to face varying funding outcomes. Looking at the top 3 cantons for VC activity, Zurich experienced a significant drop in investment (59%), heavily impacted by the downturn in the ICT sector. Conversely, Vaud showed more stability, benefiting from a diversified sectoral presence. VC funding in Zug continued to grow, setting a new record of CHF 457 million, driven mainly by the cleantech and micro/nano sectors.
Investor Activity
The number of active VC funds remained high, with 52 funds engaged in fundraising activities. Investment sizes were polarized, with smaller funds (up to CHF 50 million) focusing more on Switzerland, while more considerable funds (over CHF 250 million) had a broader international scope. The investor sentiment was more optimistic than the previous year, with many anticipating increased fundraising and investment activities.
Exits
The number of exits in 2023 dropped by 43%, with a more significant decline among Swiss buyers than international ones. The total trade sales were significantly lower, reflecting the challenging economic environment. However, global interest in Swiss start-ups remained strong, providing some stability.
Challenges and Opportunities
The Swiss venture capital ecosystem faced several challenges in 2023, which still need to be addressed this year. There was a notable decrease in mid-sized investments (CHF 10-20 million), a traditional weakness in the Swiss market. This investment gap could potentially stifle the growth of smaller enterprises, especially in niche businesses. Early-stage investments remained relatively stable, with only a 2% decline, indicating continued interest in nascent start-ups. This gives a positive picture when Switzerland is experiencing record-breaking company registrations.
There has been a significant shift towards the biotech, medtech, and cleantech sectors, which show tremendous growth potential. With such notable sectoral shifts in the flow of funding, these specific industries have shown resilience in the face of the moderate-paced economic growth now engulfing Europe.
Strategic Insights
The total capital raised in the Venture Capital market in Switzerland is projected to reach €651.2m in 2024. In the background of this estimate stands several assumptions that the low level of funding for start-ups in Switzerland in the first half of 2024 will pick up pace. Venture capital invested in the first two quarters of the year fell by 9.5% to CHF1.1 billion as opposed to the same period in 2023.
The Swiss venture capital ecosystem stakeholders will find the trends highlighted here point to the need for diversification across sectors. This approach will help mitigate risks associated with downturns in specific industries that are either underperforming or have slowed growth.
Another strategy to consider is scaling investments. This solution addresses the gap in mid-sized investments to support start-ups in scaling their operations. Swiss start-ups would benefit more from maintaining a global perspective, leveraging international investors to drive growth and stability.
Exploring Swiss Investments
Sigtax can be a valuable partner for investors and entrepreneurs looking to leverage these insights on the Swiss startup landscape. By offering a comprehensive package of corporate services, our company provides business establishment and management support in Switzerland, ensuring that legal, administrative, and compliance requirements are met efficiently.
For investors, Sigtax’s expertise in corporate administration and tax planning can help structure investments optimally to maximize returns and ensure compliance with Swiss regulations. We provide company formation services, crucial for setting up new investment entities, and bookkeeping and audit services to maintain transparent and accurate financial records, critical for making informed investment decisions based on reliable data.
Entrepreneurs can benefit from Sigtax’s support in setting up and running a business in Switzerland. This includes assistance with obtaining necessary permits, compliance with local statutory obligations, and ongoing corporate administration. By handling the back-office processes, such as correspondence, record maintenance, and statutory filings, our team enables you to focus on growth and strategic initiatives. Moreover, our expert knowledge of legislative changes and local business environments can help entrepreneurs navigate the Swiss market effectively while remaining competitive and compliant.
Conclusion
The recent trends in the Swiss venture capital landscape provide a cautiously optimistic view of Switzerland’s thriving industries. Despite a significant downturn in investments in sectors like IT and exits, the high number of financing rounds and the resilience of industries like biotech and cleantech offer a positive outlook for the future. In highlighting both the challenges and opportunities ahead, VC investors and entrepreneurs alike can better understand the outlook for Switzerland in the second half of 2024.
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