Tech Venture Funding H1 2024 in Switzerland - an unpopular and critical view

The Swiss venture capital landscape is undergoing a significant transformation, marked by a 35% decline in investments in 2023, with the Canton of Zurich experiencing an even steeper drop of 59%. As we move into the first half of 2024, the situation appears to be worsening, with investments down by an additional 9.5% compared to the same period last year. These trends raise critical questions about the future of startup financing in Switzerland and the overall health of the venture capital ecosystem. But wait - I have a different (perhaps unpopular and critical) opinion than Tech Venture Builder offer in the article.

Current Investment Climate

According to the Swiss Venture Capital Report 2024, the total amount invested in Swiss startups during the first half of 2024 was CHF 1.082 billion, a decrease of 9.5% from CHF 1.2 billion in the first half of 2023. The number of financing rounds also fell by 10.4%, dropping to 138 rounds from 154. This downturn reflects a broader trend of reduced investor confidence, particularly in the early-stage tech sector, where securing adequate funding has become increasingly challenging.

Sector-Specific Insights

While the overall investment climate is concerning, certain sectors are showing resilience. The biotech sector, in particular, has seen a resurgence in interest, contrasting sharply with the struggles faced by early-stage tech ventures. The report indicates that while investments in MedTech and biotech are thriving, early-stage tech startups are grappling with a significant funding gap. The lack of large financing rounds has been a critical factor in the decline, with only 26 rounds completed in the first half of 2024 compared to 45 in the same period of 2023.

Challenges for Tech Ventures

For tech entrepreneurs, the current funding landscape presents substantial hurdles. Many startups are being forced to tighten their belts, reducing hiring and scaling back on growth initiatives. The Swiss Venture Capital Report (published from SECA - Swiss Private Equity & Corporate Finance Association) highlights that despite a record number of new investment vehicles launched in recent years, the prevailing sentiment among investors is one of caution, with many expressing concerns about future fundraising capabilities. The report (Swiss Venture Capital Report 2024 ) also notes a troubling trend: while the number of late-stage investments has increased, early-stage funding has dwindled. This bifurcation in the investment landscape means that the very startups that drive innovation and future growth are being left behind.

MedTech and BioTech Thrive

The Swiss Venture Capital Report 2024 highlights the strong performance of MedTech and BioTech, which have captured a larger share of the investment pie compared to other sectors. This trend is particularly notable given the overall decline in venture capital funding. A decent amount went into FinTech & ICT Deals - but the majority of the money went into later-stage projects. For example, Alpian Bank and Sygnum Bank , two prominent Swiss fintech startups, collectively raised CHF 111 million in the first half of 2024, a testament to their growth and investor confidence.

Lacking Early Stage Tech Funding

Despite the overall resilience of the Swiss startup ecosystem, early-stage tech ventures, particularly those in the pre-revenue phase and outside of deep tech sectors, are facing significant challenges in securing adequate funding. The Swiss Venture Capital Report 2024 highlights that while investments in MedTech and biotech are thriving, early-stage tech startups are grappling with a substantial funding gap.

The limited capital available through grants and accelerator programs, which often provide only five to low six-figure amounts, is insufficient to meet the needs of these early-stage tech ventures.

This scarcity of capital is particularly detrimental for startups that typically require between CHF 0.75 million to CHF 5 million to reach a sustainable operational level. Checkout the Funding Map for Tech Ventures .

Looking Ahead

Looking ahead, investor sentiment appears cautiously optimistic. A survey conducted by SECA revealed that many investors have ?dry powder?, or available funds for investment, and expect an increase in both investment opportunities and the number of deals over the next year. However, the fundraising environment remains challenging, particularly for early-stage ventures, as investors continue to exercise caution in their funding decisions.

But - the outlook for the Swiss startup ecosystem remains uncertain. Observations from the U.S. market, which often leads trends, suggest a gradual recovery, but it may take one to two years for Swiss tech sectors, particularly ICT, to rebound. The influx of foreign investment could provide a lifeline, yet it raises questions about the risk appetite of Swiss investors and their willingness to embrace unconventional opportunities.

Thanks to Peter Walker from Carta for the visualized data. I recommend following his feed.

So in general startups are hiring much more slowly than they have in many years and open positions are thin on the ground.

Conclusion

As we navigate these challenging times, it is crucial for founders, investors, and ecosystem partners to engage in open discussions about the state of Swiss venture capital. The community must collaborate to support innovation and address the funding gaps that have emerged. While the path ahead may be fraught with difficulties, shared insights and collective efforts can foster resilience and pave the way for future success.

The current downturn in the Swiss venture capital market presents significant challenges and especially for Tech Startups based in Switzerland it's hard.

However, it's important to recognize that a market correction can also have positive aspects. This period of reduced investment serves as a natural selection process, separating the viable startups with strong business models from those that may have struggled to gain traction. Building a successful tech venture in Switzerland is already an uphill battle due to the risk-averse nature of investors, the high costs associated with operating in Switzerland, and the inherent challenges of launching a startup.

In this challenging environment, it's essential for founders to be resilient, adaptable, and laser-focused on building sustainable businesses. While the current downturn may force some startups to make difficult decisions, those that can weather the storm and emerge stronger will be well-positioned to thrive in the long run.

So it's going to be good again and don't forget to enjoy the summer too. The startup and corporate world both have their peculiarities - and you can always have a beer together ;-)