The Swiss Venture Capital Landscape in 2024: Resilience and Transformation
In the ever-evolving venture capital world, 2024 is a pivotal year for Switzerland. Amid global economic turbulence, the Swiss market showcases a story of resilience and strategic recalibration, offering a beacon of hope and innovation.
The year began with Swiss startups attracting CHF 1,082.4 million across 138 financing rounds in the first half, marking a 9.5% decline compared to the previous year. While this contraction is notable, it is modest compared to the steeper declines seen in the US and European markets. This relative stability signals the robustness of Switzerland’s venture capital ecosystem, a testament to its adaptive strength.
Biotech: The Vanguard of Innovation
Biotech has not just survived but thrived in these uncertain times. Biotech has emerged as a powerhouse with a remarkable 44% increase in capital inflow, reaching CHF 405.3 million. This surge is fueled by a post-pandemic emphasis on healthcare innovation, the maturation of Switzerland’s biotech ecosystem, and a supportive regulatory environment. Landmark deals include Bright Peak Therapeutics raising CHF 80 million and iOnctura securing CHF 76.5 million, underscoring the sector’s dynamism.
In stark contrast, the ICT sector, including fintech, witnessed a significant downturn, with investments plunging by over 40% to CHF 211.7 million. This decline reflects a global trend where software investments face heightened scrutiny and reduced inflows.
The Rise of New Innovation Hubs
Traditionally, Zurich and Vaud have been the epicentres of Swiss venture capital activity. However, the first half 2024 saw their combined share drop to 39% of total investments, a significant shift. Emerging regions such as Bern and Geneva are now rising, showcasing impressive growth. Bern set a record high of CHF 98.5 million, while Geneva achieved its second-best historical performance with CHF 178.9 million. This geographical diversification highlights the development of specialized innovation clusters, promoting a more balanced economic growth across Switzerland.
Early-Stage Investments: A Beacon of Hope
Amidst these shifting sands, early-stage investments have shown remarkable resilience. Total capital invested in early-stage startups reached CHF 344 million, a 57% increase from the previous year. Early-stage deals also rose, reflecting continued investor confidence in innovation and long-term value creation. However, later-stage investments have also not fared, with deals falling from 45 to 26. This trend underscores the increased scrutiny of growth metrics and challenges in achieving exits.
Navigating Valuation Dynamics
Despite market headwinds, seed and early-stage valuations have remained robust. The average seed round valuation is CHF 11 million, significantly higher than in previous years, while early-stage valuations are slightly below CHF 27 million. Conversely, later-stage valuations have faced downward pressure, averaging CHF 138 million, indicating a recalibrated risk-reward profile by investors.
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A Challenging Exit Environment
The exit landscape remains challenging, with only 20 exits recorded in the first half of 2024. Trade sales to strategic buyers accounted for 35% of exits, IPOs represented only 10%, and secondary market transactions constituted 14%. The limited exit activity can be attributed to misalignment between seller and buyer valuation expectations and a cautious approach to corporate M&A activity. This mirrors global difficulties in achieving exits, with fewer IPOs and trade sales than in previous years.
Investor Sentiment: Cautious Optimism
Despite these challenges, investor sentiment remains cautiously optimistic. Survey data from the Swiss Private Equity & Corporate Finance Association (SECA) reveals that many venture capitalists report having substantial ‘dry powder’ available for investment, with 50% indicating an average of 60% uninvested capital. Additionally, 79% of investors have allocated funds to new and existing deals over the past 12 months, and 73% consider current entry prices attractive. These metrics suggest significant capital is available for deployment, reflecting continued investor appetite for new opportunities despite market uncertainties.
Strategic Insights for the Future
As we navigate these evolving market conditions, startup founders must prioritize capital efficiency and manage valuation expectations, particularly at later stages. Aligning with sectors like biotech and cleantech, which offer favourable funding environments, and exploring opportunities in emerging innovation regions can be beneficial.
Venture capital investors should rebalance their portfolios to capitalize on the biotech sector’s growth while maintaining selective exposure to high-quality ICT opportunities. Developing stage-specific strategies and preparing for extended hold periods are crucial. Geographical diversification to access specialized innovation clusters can also enhance investment outcomes.
Limited partners should assess the deployment capabilities of general partners and increase allocations to life sciences and cleantech-focused funds. Exploring opportunities with emerging managers with unique sectoral or regional deal flows and considering secondary market opportunities for potential liquidity can be advantageous.
Policymakers and ecosystem supporters should develop targeted programs to support growth in strategic sectors, nurture emerging innovation hubs outside traditional regions, and implement mechanisms to facilitate liquidity events. Attracting and retaining top talent is essential to maintain Switzerland’s competitive edge in key innovation sectors.
In 2024, the Swiss venture capital ecosystem presents a landscape of both challenges and opportunities. While overall investment volumes have contracted, the market demonstrates resilience in critical sectors and at early investment stages. The geographical diversification of investments and dry powder availability suggest a foundation for future growth. Navigating these evolving market conditions with strategic agility and data-driven decision-making will be crucial for success in the coming years.
This analysis is informed by the insightful data provided by the Swiss Private Equity & Corporate Finance Association (SECA), whose work continues to illuminate the intricacies of our venture ecosystem. Their comprehensive reports and detailed surveys have been invaluable in understanding the current landscape and projecting future trends in Swiss venture capital.
