Switzerland is associated with banks, mountains, and watches. Corporate venture capital is rather more recent. That being said, Switzerland is slowly emerging as a homegrown corporate venture capital centre, pushing ahead of South Korea, Brazil, and Spain with 27 deals in 2018.
Switzerland still lags behind the traditional innovation hotbeds, and by deal value it also drops beneath the aforementioned countries too. South Korea had an estimated $2,445m of corporate-backed venture deals last year, Brazil had $1,680m, and Spain had $484m. Switzerland had $419m by comparison.
Swiss corporate venture capital is unusually domestic. By far the most dominant corporate investor since 2011 is Swisscom, with 43 deals. Novartis is the nearest domestic competitor, with just eight, and there are only three non-European corporates with multiple deals: Sony, Mannai, and Johnson & Johnson.
The Swiss innovation system’s success stories are dominated by health startups, like Prexton Therapeutics, not surprising given the wealth of healthcare expertise centred in Switzerland in companies like Novartis.
2017 saw $1,345m of corporate-backed venture deals, those numbers significantly inflated by $1,156m of healthcare deals signed, almost all of which was Roivant Sciences’ mammoth Series A round of $1.1bn. 2015 did not see a non-healthcare deal signed. Other countries are reliant on some sectors, but none have the monoculture of Switzerland, where almost all of the corporate venture capital money spent there is going on health startups.
It is not just deals either, but exits too. Exits are thin on the ground, at barely more than one a year, and they are almost always within the healthcare sector.
That being said, the deal count shows that Switzerland is diversifying, even if deal values suggest that is not the case. Of 2018’s 27 deals, only nine were in healthcare, with both IT and financial services beginning to contribute, with a combined 30 deals over the last three years.
Universities are increasingly productive, with Switzerland’ excellent higher education system proving its worth. Seven deals were signed last year from university spinouts, worth $108m. That said, the number of successful spinouts have fluctuated up and down over the last few years, with 2016 seeing a low of just three deals signed, albeit at an increased value of $151m.
There are more corporate initiatives in Switzerland emerging, although the numbers remain in single figures each year: five in 2018, three in 2017, and four in 2016.
Due to the strong domestic nature of Switzerland’s ecosystem, the slow creep upwards of corporate initiatives is reflected in the slow climb in deal count over the last few years. 27 in 2018, up from nine in 2011, an increase of 300%. Compared to Israel’s increase of 827%, it looks pretty unremarkable, but GCV’s data suggests a broader central European malaise, with recent years seeing deal counts stagnating. Germany saw a peak in 2017 of 81 deals, dropping to 79 in 2018, and the Netherlands saw a larger drop from 20 in 2017 to 16 in 2018.
Switzerland is diversifying beyond the dominant healthcare sector, but the data suggests it is at current still too dependent on a single sector to deliver value compared to other countries.