In a recent conversation with PharmaBoardroom, Michael Sidler of Redalpine Venture Partners, a venture capital (VC) firm aiming to support founders and start-ups in Europe, highlighted how the European VC & the Switzerland Biotech Investment space has evolved over the past decade and the funding challenges that remain. He also touched on why Switzerland is well-positioned to leverage its innovation ecosystem and create more biotech start-ups as well as the areas in which these companies are currently lacking.
On the Evolution of Europe’s VC Space
“What has happened in Europe over the last couple of decades has been truly amazing. The whole field has emerged from a very embryonic stage to a vibrant and much more professional ecosystem. As a prime example, when we started, start-up entrepreneurs were viewed with suspicion in Europe. People would think they decided to start companies because they did not manage to get jobs with large corporates like Novartis or UBS or Siemens. Today, start-up founders and entrepreneurs are rock stars. There is a lot more social recognition.
The whole field has emerged from a very embryonic stage to a vibrant and much more professional ecosystem
“This also means that some of the best and brightest students from all the universities in Europe are deciding to become start-up founders. They see it as a valuable career alternative. The quality and quantity of start-up founders has strongly increased. Now, there are many more investors and VCs, as well as many more investment opportunities of higher quality. It has been a tremendous ride.
“This has also been recognized overseas. In 90 percent of the large follow-on rounds here, US or Asian investors take the lead, in recognition of the fantastic opportunities in Europe.
“An aspect that has been lacking in Europe until a couple of years ago is serial entrepreneurs. But now we are starting to see this type of profile, which is very positive. We are now able to find very experienced teams that know exactly what they need and what they want.”
Funding in Europe & Catching up to the US
“The funding levels of companies in Europe are still insufficient and it has been – and still is, to a certain extent – quite difficult to get proper funding. Having said that, that is changing and new teams with more professional attitudes and more global ambitions are now able to raise amounts at completely different levels. Sometimes they even attract US investors in seed or Series A rounds, which puts them on the global map immediately and helps them escape the European funding situation. An example is ADC Therapeutics.
“In my opinion, one of the greatest challenges we have had in Europe is Germany during the early 2000s. There used to be a vibrant biotech ecosystem in Germany but once the German government stopped their subsidies to the industry, it collapsed. A lot of investors lost money as a result and it really stigmatized the sector. Even now, European investors are returning hesitantly.
“But things are improving. Certainly, there are many factors, including culture and risk appetites. However, the innovation being generated in Europe today is world-class. Seven out of the ten most innovative countries in the world are in Europe. The investor community needs more time to catch up, and it will help that US investors and also Chinese investors are looking at Europe.
“That said, I do not like to hear companies complain about the lack of funding. Ultimately, if the company is good, it will be financed. They just have to leave their comfort zone and pitch investors.”
“Switzerland is of course very strong in biotech, specifically in areas like antibody technology, immuno-oncology, cell-based therapies as well as diagnostics applications, driven both by the universities here as well as the big corporates like Novartis, Roche, etc.
“It has been amazing to see how strong the Swiss ecosystem is. We have the large players, strong universities, investors and so on – all the different elements required to have a very vibrant ecosystem – and all without large government or public funding. I do think that is probably a good way to establish an ecosystem. If it is artificially inflated with government money or other structures, it could implode once that source ends. I am pleased in that sense that the ecosystem in Switzerland has established itself organically over the years.”
“I have observed that Swiss start-ups tend to focus too much on technology and not enough on sales. I would venture that could be a Germanic problem. Germanic people tend to believe that the mission is to build the best possible technology and once that is done, people will rip it out of your hands because it is so good. That is not true, obviously. As a VC, I often have to tell my start-ups that they need to hire people for marketing, communication and so on. They need people who think about the market and their equity story. Ultimately, start-ups build products that eventually have to be sold on the market – and not just the Swiss market but global markets. If they do not know what the market wants, they will not build the right product. This is an ongoing conversation I have with Swiss start-ups. I think it is a question of culture and education.
Having a wonder-cure that nobody can afford is of no use
“Taking manufacturing into account from the beginning is important too. For biotech companies, CMC is a very important element. Having a wonder-cure that nobody can afford is of no use. Novel therapies still have to be priced affordably, at the end of the day, and that is where manufacturing comes in.”