Swiss and German venture peaks in Q3 2019

There were 21 Swiss venture deals in Q3 2019, an all-time volume high that outstrips the previous high point of 15 deals reached in Q2 2000, Q2 2008 and Q3 2017. It also saw the aggregate value of venture deals in Germany soar to more than €2.73bn across 85 deals. This figure was boosted by large late-stage financing rounds, such as the Permira-backed €500m series-F for FlixMobility in July. Peter Möllmann, a partner at Schnittker Möllmann Partners, says: "Those rounds would have been real outliers five years ago, but now it is the new normal as the companies involved have matured."

Both Möllmann and Andreas Goeldi, a partner at venture player BtoV, agree that the amount of capital available in the Swiss and German markets has been key, leaving significant reserves for early-stage and growth financing. Says Möllmann: "Valuations have increased due to the sheer amount of money involved in the market right now and the competition on the investor side."

"One trend that particularly speaks for the growth and maturity of the Swiss ecosystem is that you have more companies raising later-stage rounds," says Michael Blank of Investiere. In spite of this, Goeldi notes the problem of demand for financing that this raises: "There is a gap in later-stage financing from European venture capital firms, so global money is filling that gap. It is a fairly recent phenomenon that there is significant investment from outside Europe."

Strengthening startups
Goeldi says that the establishment of the Swiss Financial Market Supervisory Authority-backed Swiss Entrepreneurs Fund, which invests in Swiss startups and SMEs seeking financing of CHF 5-20m, is an important development in bolstering Swiss growth capital.

Goeldi also sees a diversification of Swiss VC investment interests as a factor behind the dynamic scene: "Recently we have seen a lot more openness for consumer-facing companies, such as GetYourGuide, which was started in Switzerland. These types of role-model companies really help shape the market."

The healthcare sector remains a key source of startup innovation in Switzerland, supported by strong university research and innovation. However, according to Goeldi, IT is reaching critical mass. Figures from Unquote Data support this view: more than a third of the Q3 deals were for companies in the software or internet sectors, with 10 investors participating in the $45m series-B for remote working platform Beekeeper. Participants in this round included Investiere, as well as UK-based VCs and corporate venture arm Samsung Ventures.

Winds of change
A generational shift is affecting the market in both Germany and Switzerland. Says Goeldi: "More former operators are going into venture capital and raising their own funds or joining an existing fund. Traditionally, Swiss venture capital was very dominated by people with a finance background, but now you see operators who bring a different perspective." Möllmann paints a similar picture for the German market: "We are seeing the next generation of founders and companies – they started their businesses three to five years ago and their companies have matured now."

The German economic slowdown, which has seen growth fall to -0.2% in Q2 2019 and rise to a mere 0.1% in Q3, is not a development that Möllmann views as a danger to venture capital. "Firms still need to invest, and there is innovation all over the place. Companies are not interesting because the economy is doing well, but because they have a very good business model," he says. Indeed, according to Unquote Data, Q2 2008 saw the second highest aggregate value of venture capital deals, of more than €2.6bn across 57 deals.

The trend towards large financing rounds seems set to continue in Germany: the largest funding round of Q4 2019 saw Arena, Accel and 83North back Celonis in a series-C for €260m at a valuation of €2.25bn. In Switzerland, with Q4 drawing to a close, Goeldi cites the activity of emerging founder-backed firms, such as Wingman Ventures as a key part of Switzerland’s dynamic founder and entrepreneur scene and a strong grounds for optimism.

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• Topics
• DACH
• Investments
• Venture
• Germany
• Switzerland