2018 was a record year for investments in Swiss startups with CHF 1.2 billion invested. Has investiere profited from this development as well?
We’ve almost doubled the volume invested on our platform. We did it again, we should say, because it is the third year in a row that we managed to double our deal volume. Last year, early-stage startups in Switzerland doing rounds of less than CHF 20 million raised CHF 721 million in total. As an anchor investor in 29 of these rounds we enabled funding of CHF 150 million, representing 20% of the total funding. While the market grew 30%, we grew 100%, so we enlarged our footprint significantly.

Speaking about the growth of the market, what about the lament that institutional investors, especially pension funds, still hesitate to invest in venture capital?
We’re convinced that with the right offering and the necessary competence you can also garner strong interest from institutional investors. At investiere, they already make up a third of our invested volume. The pension fund Nest started investing on our platform in 2017 and will continue to do so. The same is true for corporates like Post and Tamedia, and the banks ZKB and AKB, which work with us. We’re confident that we’ll double the number of institutional investors on our platform in 2019. Furthermore, there are other offers in the market that demonstrate pension funds’ growing interest in venture capital as an element of diversification and a way to capture returns in a challenging market environment. Both  Swisscom and Swisscanto, which has chosen us as a trusted partner, have raised sizeable VC funds with large contributions by pension funds.

“At investiere, institutional investors already make up a third of our invested volume.”

Did private investors show a comparable enthusiasm?
Indeed. More than 300 individuals made at least one investment on investiere last year. Half of them invested with us for the first time, underscoring the attractiveness of our model. In addition to that, many of our repeat investors are well on their way to building nicely diversified portfolios of startup investments. The most active investor on our platform added 17 new investments in 2018 and now has a total of 67 holdings! But even those that only invest once or twice per year will eventually achieve the goal of owning a well-diversified startup portfolio.

How would you describe your typical private investor?
There is a lot of variety. But we’re proud that we can count a sizeable number of C-level executives and board members of blue-chip firms among the investor pool that trusts us. These are people that can open any door in their industry. Time and again, we have connected startups with investors that have ample networks and tons of experience that is relevant for them. Furthermore, we see a growing number of successful entrepreneurs who have changed sides and now invest in startups, often in fields they know first-hand.  

As an open-ended venture capital platform, you have to strike a balance between new investment opportunities and your investors’ firepower. Where is the bottleneck at the moment?
At the moment, we have room for more investors and this is where our focus lies. In the past, we have considerably strengthened our deals team, which now consists of 4 investment managers and 3 analysts. All in all investiere has grown to 25 people. The deals team is systematically sourcing new opportunities not just from Switzerland, but from other European countries too. And with a good flow of exciting new deals, in which we co-invest with other renowned VCs, the attention of new investors will surely follow.

“We have considerably strengthened our deals team.”

investiere now does a lot more deals than in the past. Are today’s founders any different from those when you started?
There has been a remarkable change in how founders are viewed. In 2009, when we started out, many university graduates still wanted to work in banking or strategy consulting. If somebody decided to found a company or work in a startup, people would ask if they were sure about it, because it might damage their career prospects. Now it’s the other way around. Startups are rightfully perceived to be an exciting place to work. You can always join the corporate world later, and you’ll get recognition even if the startup didn’t grow to the point of becoming a household name. This has also considerably lowered the difficulties for a startup to hire top-notch talent.    

Let’s talk about the difficulties in raising money then. In a typical financing round on investiere, you pool 20 to 30 different investors for a sum of around CHF 1 million. Which investment proposals go well with your investor base and which are more challenging?
One argument that is usually very persuasive for our investor base is traction. If you’re a startup that achieves CHF 2 million of revenues after just two years, that’s impressive. The other argument that will never go out of favor is technological substance. Switzerland has a strong reputation for solid technology. If your startup can show clear technical superiority over the competition, it convinces investors. On the other hand, there are sectors that investors struggle with, sometimes for a reason and sometimes unjustly. Solar is an example for the latter. Many investors got burned with solar stocks in the past. But this doesn’t mean that disruptive technologies don’t stand a chance in the future.

Given these differences between sectors, which ones do you want to focus on?
We believe that broad diversification makes sense. We just made our third biotech investment, attesting to Switzerland’s strength in life sciences. Besides ICT and life sciences, one large field where we were active since the beginning and will continue to do so is high-tech hardware and materials. This is another domain where Switzerland has incredible talent and global relevance. Just recently a well-known startup told us that they came to us because we’re seen as a dedicated hardware investor, and there are not that many VCs out there that can say that.

In all of your deals, investiere co-invests with business angels and other VC firms. What is investiere’s relationship with these players?
It is a form of collaboration, and with many of them such as Lakestar, Airbus Ventures, Beiersdorf, Johnson& Johnson and Fyrfly we have done many deals together. Furthermore, investment teams as diverse as Swisscanto’s growth fund, the CVC unit of Swiss Post or the Business Angels Aargau use our tools. investiere acts like a service and syndication hub for a widespread and growing network.   

“investiere acts like a service and syndication hub of a widespread and growing network.”

Coming back to the point of increased investors’ appetite for venture capital, have startups’ initial valuations increased to a point where it’s getting worrisome?
As we mentioned, some topics receive a lot of attention while others languish. But it is certainly true that when investiere started in 2009, a first financing round came with a valuation of, say, CHF 2.5 million, while today, say, CHF 4 million might be acceptable. One possible explanation is that founders are aware that there is more money available today, and that they try to skim off more of it. Another explanation would be that some investors overpay when they don’t know the market comparables or invest without much knowledge or due diligence and accept a valuation proposed by founders at face value without challenging it. In a few cases, we’ve seen that this leads to completely unrealistic expectations on the founder’s side. If you just invented something cool and have no real product or sales, you shouldn’t bet on raising money at a valuation of CHF 25 million.

What does investiere do in such cases?
It is typically one of the duties of a lead investor to educate founders about the mechanics of raising money. Intelligent entrepreneurs realize the danger an exaggerated valuation poses for their future, as all those who had to participate in a subsequent down round can attest. But entrepreneurs make their own decisions. If we don’t find a common ground, we will walk away, not least in the interest of our investors.  

What kind of deals will 2019 bring?
We’re starting to systematically increase our international deal flow, so you’ll see not just more Swiss deals, but also more foreign deals. We’ll strive to have a good mix of deals in different stages as well. And last but not least, we’re working on an offering that would once again change how people invest in startups.