Zurich-based VC firm Founderful has closed its second fund — this time a $140m vehicle — to back founders based in Switzerland.
According to the firm’s founders, the Swiss ecosystem is often overlooked but is bursting with potential.
Three entrepreneurs and investors set up the VC in 2019: traveltech GetYourGuide cofounder Pascal Mathis, former Creathor Ventures Switzerland Lead Alex Stöckl and robotic kitchen startup EAT.ch co-founder Lukas Weder.
The generalist VC focuses on backing pre-seed technology startups originating in the Swiss ecosystem that have “global potential”, says Stöckl.
Its portfolio includes manufacturing analytics startup Ethon AI, which raised a $16.5m Series A round led by Index Ventures in May this year; Corintis, which has developed a cooling technology based on liquid cooling directly inside chips; and DePoly, which is building a commercial demonstration plant able to recycle 500 tons of plastic waste per year.
“The tech and VC world is done with e-commerce, marketplaces, and simple SaaS solutions — the next generation of value creation will come from real technological innovation. What better place for that than the world’s most innovative country, Europe’s most stable economy and the continent’s tech ecosystem with the highest number of unicorns per capita?” says Stöckl.
The fund strategy
Founderful will write cheques between €1.1m-1.6m into 40 pre-seed startups, backing around 10 companies per year. It prefers to be the lead investor and reserves 40% of the capital for follow-on seed investments.
The VC’s portfolio across its two funds is “heavily weighted” towards founders from Switzerland’s top technical universities: ETH Zurich and EPF Lausanne, as well as former employees of large tech companies such as Google and Nvidia.
“We’ve learned this founder profile is proving to be successful and we are doubling down on this,” says Stöckl.
The firm has already backed 15 companies from its second fund, including ETH spinoff Chiral Nano, which produces alternative silicon chips, and Eightinks, which builds lithium-ion batteries.
LPs in the new fund include fund-of-funds, pension funds and private banks which Founderful declined to name, as well as founders of unicorn companies such as language learning app Duolingo, CO2 air capture company Climeworks and smart data capture company Scandit.
The potential of Switzerland
Switzerland was Europe’s fifth-largest ecosystem for funding in 2023, according to Dealroom. As of June 2023, ETH Zurich had produced more spinouts than any other academic institution in the continent. The university has also produced some of Europe’s startup stars, including Climeworks (which is the world’s best-funded carbon removal startup)and gene therapy techbio CRISPR Therapeutics that went public on the NASDAQ this year.
Despite this, Switzerland is often “overlooked” as an innovation ecosystem, simply because it is not part of the European Union, says Stöckl.
The EU has boosted entrepreneurship and venture capital “massively” over the last two decades, he explains, but its flagship funds like the EIF, KfW Capital, Bpifrance or the Danish growth fund Vaekstfonden are all tied to EU or domestic allocations.
“As Europe’s largest LP in VC funds, the EIF pushed fund managers to focus on EU countries — Switzerland had to compete with the US and Israel for the minority outside-of-EU quotas and of course, it was tough,” explains Stöckl.
Additionally, Switzerland’s small domestic market wasn’t attractive for the “low-tech, execution-driven business models” which fueled VC returns in the 2000s and 2010s, he adds.
With its top universities and research institutions, a strong flow of big tech talent and a new generation of bold and ambitious entrepreneurs inspired by the success stories of billion-dollar companies like Climeworks and Scandit, Stöckl is confident Switzerland will become more visible on the international stage.
“Now, we are in an era where tech means tech again, and there are few places globally that are as attractive in terms of engineering education and local context for innovation as this charming and beautiful country,” he says.
But, despite all of Switzerland’s potential, Founderful is backing deeptech business models that are expensive to develop, bringing a higher level of risk than investing in the B2B SaaS models that have made VCs their riches. To be successful, they’ll have to help their portfolio companies to access growth capital from outside of the country, to fill the funding gap that comes from operating outside of the EU.
Read the orginal article: https://sifted.eu/articles/founderful-fund-swiss-startup-news/
