SIF Swiss Investment Fund - SECA. Calendar... · SIF – Swiss Investment Fund Fostering Innovative...

Swiss Private Equity & Corporate Finance Association Schweizerische Vereinigung für Unternehmensfinanzierung Association Suisse des Investisseurs en Capital et de Financement

SIF – Swiss Investment Fund Fostering Innovative Entrepreneurship in Switzerland

Zurich, 3rd of July 2013

Jean-Philippe Tripet, Thomas Heimann (SECA) Jean-Pierre Vuilleumier (CTI Invest)

in collaboration with

http://www.cti-invest.ch/


Friday, 05 July 2013

Leadership of the project

Jean-Philippe Tripet Managing Partner and Founder of Aravis, Chairman of Chapter VC at SECA [email protected] +43 499 20 00

Jean-Pierre Vuilleumier Managing Director CTI Invest [email protected] +41 79 251 32 09

Thomas Heimann Controller & Equity Analyst HBM Partners, Research & Statistics at SECA [email protected] + 41 79 709 02 96

Yvonne Störzer Investment Manager Verium [email protected] + 41 79 788 80 18


mailto:[email protected]









Switzerland – Benefit of Rankings?

1st place 2nd place 3rd place 4th place

The World Competitiveness

Scoreboard 2012

Global Innovation

Index 2011

WEF World Competitiveness

Index 2010 – 2011

European Innovation

Scoreboard 2010




• Product

• Market timing

• Competition

• Sales/Marketing

• Financing

(years) 0 - 2 - 10 + 3

Potential of

success

Scientific

research

Market

CTI Entrepreneurship

CTI Start-up

CTI Invest

CTI Projects

Innovation

Valley of death?




Deal flow of Start-ups in Switzerland

Industrial Focus of Companies entering the Swiss

Coaching Program in 2011 and 2012

12%

17%

36%

22%

4%4% 5%

Biotech/Pharma

Medtech

ICT

Engineering in general

Energy/Green Tech

Micro-/Nanotech

Interdisciplinary

Around 30 companies are VC-ready each year (CTI Phase III and IV)




The Reality of Fund raising in Switzerland

Average Duration to close a financing round: > 1 Year

Source: CTI Invest Research for 2003-2013 conducted by Jan Sobhani




Switzerland – We have a Problem!

Waiting is no longer an option!




19.11.2011 Euro 291 Mio. Private contribution: Euro 36,5 Mio., 12,3% Investments abroad possible (e.g. CH)

Initiatives of our Neighbours: Follow-up Fund of HTGF in Germany (19.11.2011)




Key Messages:

• start-ups are crucial for the economic development of Austria

• Let us welcome and attract talented foreign people

• Starting 1.1.2013 a first Austrian Euro 110 Mio. fund to support start-ups

• Austria Minister of Finance

Initiatives of our Neighbours: 29.11.2012 in Vienna




Initiatives of our Neighbours: BA Matching Fund in France (11.12.2012)




Initiatives of our Neighbours: Merkel with Start-ups in Germany (7.3.2013)




Initiatives of our Neighbours: 150 Mio. for BA in Germany (23.4.2013)




Initiatives of Other Countries




In the meantime in Switzerland (30.10.2012)




Switzerland is Facing a Structural Growth Problem

Average GDP growth way behind (1989-2008: 1.8% vs OECD: 2.8%)* - only Italy behind

Low growth of labor productivity (1994-2008: 1.32% vs OECD: 1.84%) – only Belgium, Danemark, Spain and Italy behind

Technological innovation is one of the most important sources of long

term sustainable economic growth for high-income economies with a

small domestic market (e.g. Switzerland).

Source: OECD Observer 2009

* Average annual, constant PPPs




The Innovation Ecosystem: Annual Budget „discrepancy“

Academia

Incubators

Coaching

Angels & Foundations

Venture

Entrepreneurs

1-2M

9bn 1-2M

180M+ 180M *

30-50M

0.5bn

Source: Aravis Estimates * Swiss and foreign VC’s without Corporate venture funds




No Government Support: A Problem for Swiss VCs

Source: EVCA Yearbook 2012. Perep Analytics.




The Risk of Know how and Growth Outflow is accelerating

Investments by Swiss-based VCs is declining faster than overall VC investments

0

100

200

300

400

500

600

2007 2008 2009 2010 2011 2012

Investments by Swiss-based VCs

Investments in Swiss portfolio companies

EUR million

Net import of VC

Source: EVCA Yearbook 2012. Perep Analytics.

Risk to lose economic growth to abroad




„Bottlenecks“ of Swiss Innovation – „Demand “ side

330‘000 registered companies, of which 20‘000 (6%) can be considered as innovative

High-income countries, like Switzerland, have relatively low early-stage entrepreneurial activity

Only a small percentage (17%) of new established enterprises in Switzerland have high or very high potential

Low growth expectations – Only 5% plan to recruit more than 20 employees within the first 5 years (one of the lowest percentage worldwide!)

Comparably lower birth rate, but the rate of survival is higher (after 5 years) compared to the U.S. (maybe lower risky businesses = lower innovative businesses?)

Lack of International Orientation

Majority of patents registered by large (multinational) companies

Source: Global Entrepreneurship Monitor 2011 - Report on Switzerland




„Bottlenecks“ of Swiss Innovation – „Supply“ side

Money for startups is scarce – Very few Swiss-based (lead) investors and only about 70 early stage companies have received VC funding in 2012, mostly from BA

„The Winner takes it all“ – Top 5 VC Investments in Switzerland account for 54% of total VC transaction volume

Higher barriers of entry for investors compared to other asset classes; no/limit access to high quality managers

Reasons for declining number of Swiss-based professional VCs:

Competitive disadvantage (no access to EIF)

available money is shrinking

VCs are very cost sensitive (cost / income – competence is hardly scalable)

European and Swiss innovation has a problem:

„the lack of private sector investors in Venture Capital“




„Bottlenecks“ of Swiss Innovation – Government activism

No government action for VC industry until now (other than regulatory)

High budget discrepancy (public vs private)

No lifecycle funding source available (after seed phase)

High geographic discrepancy in VC financing and entrepreneurial actitivity (Arc Lémanique, Greater Zurich Area, Biovalley Basel)

High concentration of VC financing in only few industry sectors (80% Life Sciences)

No immediate pressure for Swiss government

Reluctance of Swiss government to intervene: History shows that (direct) State involvement does not work and provides for inefficient use of funds

Calls for Public-Private Partnerships are growing




Conclusions – Position Paper „Swiss Investment Fund“

1. Immediate threat to lose the position as a Global Leader in Innovation

2. The risk of know how and economic growth outflow is immense (start-ups go where the money is)

3. Swiss-based VC funds have competitive disadvantage

URGENT action is needed address structural disadvantages for Swiss start-ups and VCs,

including:

Allow new funding sources to reach start-ups and Venture Capital

Allow new VC funds to be created and consolidate existing

Secure stability of start-ups and know how with life cycle funding source

Increase level of investment also in sectors other than Life Sciences

Create incentives for entrepreneurs / investors (regulation, tax, downside protection)

Position Switzerland as a country for start-ups and innovation (raise awareness and attractiveness of and for Swiss VC industry)




How do we build a concept of Swiss Investment Fund?




Principles of fund construction

A multi step process




Bring people around the table


http://www.google.ch/url?sa=i&rct=j&q=kti&source=images&cd=&cad=rja&docid=TY0EAV6ZP5QpgM&tbnid=BeOzRmJzmGlNvM:&ved=0CAUQjRw&url=http://blog.zhaw.ch/forschungssupport/kti-wahlt-die-leitenden-innovationsmentoren/&ei=x7iDUebMEcPEPObvgdAJ&bvm=bv.45960087,d.ZWU&psig=AFQjCNG3B_-HvqvTnLjcepsnIHtSioIR5w&ust=1367673401950054

http://www.aravis.ch/

http://www.eclosion.com/en

http://www.google.ch/url?sa=i&rct=j&q=roche&source=images&cd=&cad=rja&docid=aM5Chj2VNGgitM&tbnid=GjMqu0MIqIHaAM:&ved=0CAUQjRw&url=http://www.mba.unisg.ch/about-us/news.php?p_id=19&ac=show&id=193&ei=RriDUY2jAY6xPMSsgMAG&bvm=bv.45960087,d.ZWU&psig=AFQjCNGbRIXxyPtnOek2l1asb8lwmIFryg&ust=1367673276945673

http://www.zkb.ch/de/startseite.html

http://www.redalpine.com/

http://www.adveq.com/home.html

https://www.publica.ch/



SIF Advisory Board: a fair representation of the ecosystem

SECA Jean-Philippe Tripet, Thomas Heimann, Alain Nicod

CTI Invest Jean-Pierre Vuilleumier, Yvonne Störzer, Christian Wenger

Academia Pascal Gantenbein

Le Réseau Pierre Kladny

Venture Kick Beat Schillig

Fondations Pascale Vonmont

Angels Florian Schweitzer, Caroline Geissaz

Fund of fund

Adveq: Rainer Ender

Euro PE: Marc-Antoine Voissard

LGT: Roberto Paganoni

Partners Group: Felix Haldner




Advisory board next steps

Constitution of working groups, definition of responsibilities of each group incl group leader (contact person to the project leader), definition of timelines

Strategy of SIF (objective)

Set-up, organizational & legal structure of SIF

Fund of Fund porfolio construction

Investment strategy

Fund raising, political activities

PR + Internet presence via LinkedIn?, Twitter ?

Administration & Project coordination

Meetings with WBF (SECO, SBFI) and FINMA

Meetings with Government agencies/initiators from other countries

Finalise a Business Plan by year end




Swiss Investment Fund concept




Concept

Fund of fund expertise will help us structure an attractive product

Manager selection is critical: this is a people business

Research shows that past returns are important – ie older funds are less risky – but do not forget the performance of first-time funds in particular with former entrepreneurs’

Co-Investment models work well if focused and selective

Must keep operating fees at a TER below 3% for the fund, commercial standard terms

But...FINMA has never approved a Swiss LP as fund of fund




General structure

Swiss Investment

Fund

General Partner

Expert FoF managers

CHF 500M - Portfolio of 15-20 funds

Catalytic role

200 and 300 companies financed over 5 years

Total investment at least CHF 1Bn

AHV

Pension fund

Familly Offices

Insurances

HNWI

Corporates

Swiss Confederation




Portfolio construction criteria

40% early stage 60% later and growth

Diversify tech and non tech Allow first funds

Invested amount must be spent in Switzerland

Build a diversified portfolio

Build a commercially attractive and relevant proposition for investors

Maximum ownership in a single fund 50% - matching principle

Fund: Swiss and non Swiss funds

Contribute to a standardization of Swiss LP to attract international players




Next steps

Objectives of the fund and key open questions Provide a commercially attractive investment vehicle (financial return focus)

Improve the risk return profile of venture alone

Professionally managed by recognized managers

Hard to get, validating money

Target size: CHF 500M

Legal structure: Swiss Limited Partnership / foundation (?)

Fund life: 10-12 years, Investment period 5 years (CHF 100M/per year)

Fee: Budget based fees

Investors: Pension fund, Corporates, Family offices, Insurance, HNWI (qualified investors only)

Who own/runs the General Partner ?




What’s in for me ?

• I am a start-up

• More money will flow in early stages

• New sectors will get financed

• International growth will become easier to finance

• I am a Venture firm

• New source of capital

• Qualifying and professional LP

• I am a qualified investor

• Venture risk becomes accessible

• Fund of funds offer a professional investment process

• Institutional reporting – FINMA approved product

• I am a citizen/politician

• Intellectual property based and high capital intensive businesses will flourish

• My kids will have a better access to entrepreneurship and jobs

• Such a Private/Public partnership profits to the whole ecosystem


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