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10 Zurich-area investors on Switzerland’s 2020 startup outlook
European entrepreneurs who want to launch startups could do worse than Switzerland.
In a report analyzing Europe’s general economic health, cost of doing business, business environment and labor force quality, analysts looked for highly educated populations, strong economies, healthy business environments and relatively low costs for conducting business. Switzerland ended up ranking third out of 31 European nations, according to Nimblefins. (Germany and the UK came out first and second, respectively).
According to official estimates, the number of new Swiss startups has skyrocketed by 700% since 1996. Zurich tends to take the lion’s share, as the city’s embrace of startups has jump-started development, although Geneva and Lausanne are also hotspots.
As well as traditional software engineering startups, Switzerland’s largest city boasts a startup culture that emphasizes life sciences, mechanical engineering and robotics. Compared to other European countries, Switzerland has a low regulatory burden and a well-educated, highly qualified workforce. Google’s largest R&D center outside of the United States is in Zurich.
But it’s also one of the more expensive places to start a business, due to its high cost of living, salary expectations and relatively small labor market. Native startups will need 25,000 Swiss Francs to open an LLC and 50,000 more to incorporate. While they can withdraw those funds from the business the next day, local founders must still secure decent backing to even begin the work.
This means Switzerland has gained a reputation as a place to startup — and a place to relocate, which is something quite different. It’s one reason why the region is home to many fintech businesses born elsewhere that need proximity to a large banking ecosystem, as well as the blockchain/crypto crowd, which have found a highly amenable regulatory environment in Zug, right next door to Zurich. Zurich/Zug’s “Crypto Valley” is a global blockchain hotspot and is home to, among others, the Ethereum Foundation.
Lawyers and accountants tend to err on the conservative side, leading to a low failure rate of businesses but less “moonshot innovation,” shall we say.
But in recent years, corporate docs are being drawn up in English to facilitate communication both inside Switzerland’s various language regions and foreign capital, and investment documentation is modeled after the U.S.
Ten years ago startups were unusual. Today, pitch competitions, incubators, accelerators, VCs and angel groups proliferate.
The country’s Federal Commission for Technology and Innovation (KTI) supports CTI-Startup and CTI-Invest, providing startups with investment and support. Venture Kick was launched in 2007 with the vision to double the number of spin-offs from Swiss universities and draws from a jury of more than 150 leading startup experts in Switzerland. It grants up to CHF 130,000 per company. Fundraising platforms such as Investiere have boosted the angel community support of early funding rounds.
Swiss companies, like almost all European companies, tend to raise lower early-stage rounds than U.S. ones. A CHF 1-2 million Series A or a CHF 5 million Series B investment is common. This has meant smaller exits, and thus less development for the ecosystem.
These are the investors we interviewed:
- Jasmin Heimann, partner, Ringier Digital Ventures
- Katrin Siebenbuerger Hacki, founder, Medows
- Philipp Stauffer, partner, FYRFLY Venture Partners
- Claude Donzé, partner, Tomahawk.VC
- Lucian Wagner, partner, Privilège Ventures
- Maximilian Spelmeyer, partner, SIX Fintech Ventures
- Olaf Hannemann, partner, CV VC AG
- Andreas Iten, partner, F10
- Michael Blank, partner, investiere
- Ninja Struye de Swielande, partner, Lakestar
Jasmin Heimann, partner, Ringier Digital Ventures
What trends are you most excited about investing in, generally?
Consumer-facing startups with first revenues.
What’s your latest, most exciting investment?
AirConsole — a cloud-gaming platform where you don’t need a console and can play with all your friends and family.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I really wish that the business case for social and ecological startups will finally be proven (kind of like Oatly showed with the Blackstone investment). I also think that femtech is a hyped category but funding as well as renown exits are still missing.
What are you looking for in your next investment, in general?
I am looking for easy, scalable solutions with a great team.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
I think the whole scooter/mobility space is super hyped but also super capital intensive so I think to compete in this market at this stage is hard. I also think that the whole edtech space is an important area of investment, but there are already quite a lot of players and it oftentimes requires cooperation with governments and schools, which makes it much more difficult to operate in. Lastly, I don’t get why people still start fitness startups as I feel like the market has reached its limits.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Switzerland makes — maximum — half of our investments. We are also interested in Germany and Austria as well as the Nordics.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Zurich and Lausanne are for sure the most exciting cities, just because they host great engineering universities. Berne is still lagging behind but I am hoping to see some more startups emerging from there, especially in the medtech industry.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Overall, Switzerland is a great market for a startup to be in — although small, buying power is huge! So investors should always keep this in mind when thinking about coming to Switzerland. The startup scene is pretty small and well connected, so it helps to get access through somebody already familiar with the space. Unfortunately for us, typical B2C cases are rather scarce.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I think it is hard to make any kind of predictions. But on the one hand, I could see this happening. On the other hand, I also think that the magic of cities is that there are serendipity moments where you can find your co-founder at a random networking dinner or come across an idea for a new venture while talking to a stranger. These moments will most likely be much harder to encounter now and in the next couple of months.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
I think travel is a big question mark still. The same goes for luxury goods, as people are more worried about the economic situation they are in. On the other hand, remote work has seen a surge in investments. Also sustainability will hopefully be put back on the agenda.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Not much. I think we allocated a bit more for the existing portfolio but otherwise we continue to look at and discuss the best cases. The biggest worries are the uncertainties about [what] the future might look like and the related planning. We tell them to first and foremost secure cash flow.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Totally! Some portfolio companies have really profited from the crisis, especially our subscription-based models that offer a variety of different options to spend time at home. The challenge now is to keep up the momentum after the lockdown.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
What gives me hope is to see that people find ways to still work together — the amount of online events, office hours, etc. is incredible. I see the pandemic also as a big opportunity to make changes in the way we worked and the way things were without ever questioning them.
Katrin Siebenbuerger Hacki, founder, Medows
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Typewise taps $1M to build an offline next word prediction engine
Swiss keyboard startup Typewise has bagged a $1 million seed round to build out a typo-busting, ‘privacy-safe’ next word prediction engine designed to run entirely offline. No cloud connectivity, no data mining risk is the basic idea.
They also intend the tech to work on text inputs made on any device, be it a smartphone or desktop, a wearable, VR — or something weirder that Elon Musk might want to plug into your brain in future.
For now they’ve got a smartphone keyboard app that’s had around 250,000 downloads — with some 65,000 active users at this point.
The seed funding breaks down into $700K from more than a dozen local business angels; and $340K via the Swiss government through a mechanism (called “Innosuisse projects“), akin to a research grant, which is paying for the startup to employ machine learning experts at Zurich’s ETH research university to build out the core AI.
The team soft launched a smartphone keyboard app late last year, which includes some additional tweaks (such as an optional honeycomb layout they tout as more efficient; and the ability to edit next word predictions so the keyboard quickly groks your slang) to get users to start feeding in data to build out their AI.
Their main focus is on developing an offline next word prediction engine which could be licensed for use anywhere users are texting, not just on a mobile device.
“The goal is to develop a world-leading text prediction engine that runs completely on-device,” says co-founder David Eberle. “The smartphone keyboard really is a first use case. It’s great to test and develop our algorithms in a real-life setting with tens of thousands of users. The larger play is to bring word/sentence completion to any application that involves text entry, on mobiles or desktop (or in future also wearables/VR/Brain-Computer Interfaces).
“Currently it’s pretty much only Google working on this (see Gmail’s auto completion feature). Applications such as Microsoft Teams, Slack, Telegram, or even SAP, Oracle, Salesforce would want such productivity increase – and at that level privacy/data security matters a lot. Ultimately we envision that every “human-machine interface” is, at least on the text-input level, powered by Typewise.”
You’d be forgiven for thinking all this sounds a bit retro, given the earlier boom in smartphone AI keyboards — such as SwiftKey (now owned by Microsoft).
The founders have also pushed specific elements of their current keyboard app — such as the distinctive honeycomb layout — before, going down a crowdfunding route back in 2015, when they were calling the concept Wrio. But they reckon it’s now time to go all in — hence relaunching the business as Typewise and shooting to build a licensing business for offline next word prediction.
“We’ll use the funds to develop advanced text predictions… first launching it in the keyboard app and then bringing it to the desktop to start building partnerships with relevant software vendors,” says Eberle, noting they’re working on various enhancements to the keyboard app and also plan to spend on marketing to try to hit 1M active users next year.
“We have more ‘innovative stuff’ [incoming] on the UX side as well, e.g. interacting with auto correction (so the user can easily intervene when it does something wrong — in many countries users just turn it off on all keyboards because it gets annoying), gamifying the general typing experience (big opportunity for kids/teenagers, also making them more aware of what and how they type), etc.”
The competitive landscape around smartphone keyboard tech, largely dominated by tech giants, has left room for indie plays, is the thinking. Nor is Typewise the only startup thinking that way (Fleksy has similar ambitions, for one). However gaining traction vs such giants — and over long established typing methods — is the tricky bit.
Android maker Google has ploughed resource into its Gboard AI keyboard — larding it with features. While, on iOS, Apple’s interface for switching to a third party keyboard is infamously frustrating and finicky; the opposite of a seamless experience. Plus the native keyboard offers next word prediction baked in — and Apple has plenty of privacy credit. So why would a user bother switching is the problem there.
Competing for smartphone users’ fingers as an indie certainly isn’t easy. Alternative keyboard layouts and input mechanism are always a very tough sell as they disrupt people’s muscle memory and hit mobile users hard in their comfort and productivity zone. Unless the user is patient and/or stubborn enough to stick with a frustratingly different experience they’ll soon ditch for the keyboard devil they know. (‘Qwerty’ is an ancient typewriter layout turned typing habit we English speakers just can’t kick.)
Given all that, Typewise’s retooled focus on offline next word prediction to do white label b2b licensing makes more sense — assuming they can pull off the core tech.
And, again, they’re competing at a data disadvantage on that front vs more established tech giant keyboard players, even as they argue that’s also a market opportunity.
“Google and Microsoft (thanks to the acquisition of SwiftKey) have a solid technology in place and have started to offer text predictions outside of the keyboard; many of their competitors, however, will want to embed a proprietary (difficult to build) or independent technology, especially if their value proposition is focused on privacy/confidentiality,” Eberle argues.
“Would Telegram want to use Google’s text predictions? Would SAP want that their clients’ data goes through Microsoft’s prediction algorithms? That’s where we see our right to win: world-class text predictions that run on-device (privacy) and are made in Switzerland (independent environment, no security back doors, etc).”
Early impressions of Typewise’s next word prediction smarts (gleaned by via checking out its iOS app) are pretty low key (ha!). But it’s v1 of the AI — and Eberle talks bullishly of having “world class” developers working on it.
“The collaboration with ETH just started a few weeks ago and thus there are no significant improvements yet visible in the live app,” he tells TechCrunch. “As the collaboration runs until the end of 2021 (with the opportunity of extension) the vast majority of innovation is still to come.”
He also tells us Typewise is working with ETH’s Prof. Thomas Hofmann (chair of the Data Analytic Lab, formerly at Google), as well as having has two PhDs in NLP/ML and one MSc in ML contributing to the effort.
“We get exclusive rights to the [ETH] technology; they don’t hold equity but they get paid by the Swiss government on our behalf,” Eberle also notes.
Typewise says its smartphone app supports more than 35 languages. But its next word prediction AI can only handle English, German, French, Italian and Spanish at this point. The startup says more are being added.
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Scandit raises $80M as COVID-19 drives demand for contactless deliveries
Enterprise barcode scanner company Scandit has closed an $80 million Series C round, led by Silicon Valley VC firm G2VP. Atomico, GV, Kreos, NGP Capital, Salesforce Ventures and Swisscom Ventures also participated in the round — which brings its total raised to date to $123M.
The Zurich-based firm offers a platform that combines computer vision and machine learning tech with barcode scanning, text recognition (OCR), object recognition and augmented reality which is designed for any camera-equipped smart device — from smartphones to drones, wearables (e.g. AR glasses for warehouse workers) and even robots.
Use-cases include mobile apps or websites for mobile shopping; self checkout; inventory management; proof of delivery; asset tracking and maintenance — including in healthcare where its tech can be used to power the scanning of patient IDs, samples, medication and supplies.
It bills its software as “unmatched” in terms of speed and accuracy, as well as the ability to scan in bad light; at any angle; and with damaged labels. Target industries include retail, healthcare, industrial/manufacturing, travel, transport & logistics and more.
The latest funding injection follows a $30M Series B round back in 2018. Since then Scandit says it’s tripled recurring revenues, more than doubling the number of blue-chip enterprise customers, and doubling the size of its global team.
Global customers for its tech include the likes of 7-Eleven, Alaska Airlines, Carrefour, DPD, FedEx, Instacart, Johns Hopkins Hospital, La Poste, Levi Strauss & Co, Mount Sinai Hospital and Toyota — with the company touting “tens of billions of scans” per year on 100+ million active devices at this stage of its business.
It says the new funding will go on further pressing on the gas to grow in new markets, including APAC and Latin America, as well as building out its footprint and ops in North America and Europe. Also on the slate: Funding more R&D to devise new ways for enterprises to transform their core business processes using computer vision and AR.
The need for social distancing during the coronavirus pandemic has also accelerated demand for mobile computer vision on personal smart devices, according to Scandit, which says customers are looking for ways to enable more contactless interactions.
Another demand spike it’s seeing is coming from the pandemic-related boom in ‘Click & Collect’ retail and “millions” of extra home deliveries — something its tech is well positioned to cater to because its scanning apps support BYOD (bring your own device), rather than requiring proprietary hardware.
“COVID-19 has shone a spotlight on the need for rapid digital transformation in these uncertain times, and the need to blend the physical and digital plays a crucial role,” said CEO Samuel Mueller in a statement. “Our new funding makes it possible for us to help even more enterprises to quickly adapt to the new demand for ‘contactless business’, and be better positioned to succeed, whatever the new normal is.”
Also commenting on the funding in a supporting statement, Ben Kortlang, general partner at G2VP, added: “Scandit’s platform puts an enterprise-grade scanning solution in the pocket of every employee and customer without requiring legacy hardware. This bridge between the physical and digital worlds will be increasingly critical as the world accelerates its shift to online purchasing and delivery, distributed supply chains and cashierless retail.”
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GetYourGuide picks up $484M, passes 25M tickets sold through its tourism activity app
As we swing into the summer tourist season, a company poised to capitalise on that has raised a huge round of funding. GetYourGuide — a Berlin startup that has built a popular marketplace for people to discover and book sightseeing tours, tickets for attractions and other experiences around the world — is today announcing that it has picked up $484 million, a Series E round of funding that will catapult its valuation above the $1 billion mark.
The funding is a milestone for a couple of reasons. GetYourGuide says it is the highest-ever round of funding for a company in the area of “travel experiences” (tours and other activities) — a market estimated to be worth $150 billion this year and rising to $183 billion in 2020. And this Series E is also one of the biggest-ever growth rounds for any European startup, period.
The company has now sold 25 million tickets for tours, attractions and other experiences, with a current catalog of some 50,000 experiences on offer. That’s a sign of strong growth: in 2017 it sold 10 million tickets, and its last reported catalog number was 35,000. It will be using the funding to build more of its own “Originals” tour experiences — which have now passed the 40,000 tickets sold mark — as well as to build up more activities in Asia and the U.S., two fast-growing markets for the startup.
The funding is being led by SoftBank, via its Vision Fund, with Temasek, Lakestar, Heartcore Capital (formerly Sunstone Capital) and Swisscanto Invest among others also participating. (Swisscanto is part of Zürcher Kantonalbank: GetYourGuide was originally founded in Zurich, where the founders had studied, and it still runs some R&D operations there.) The company has now raised well over $600 million.
It’s notable how SoftBank — which is on the hunt for interesting opportunities to invest its $100 billion superfund — has been stepping up a gear in Germany to tap into some of the bigger tech players that have emerged out of that market, which today is the biggest in Europe. Other big plays have included €460 million into Auto1 and €900 million into payments provider Wirecard. Other companies it has backed, such as hotel company Oyo out of India, are using its funding to break into Europe (and buy German companies in the process).
There had been reports over the last several months that GetYouGuide was in the process of raising anywhere between $300 million and more than $500 million. In late April, we were told by sources that the round hadn’t yet closed, and that numbers published in the media up to then had been inaccurate, even as we nailed down that SoftBank was indeed involved in the round.
The valuation in this round is not being disclosed, but CEO Johannes Reck (who co-founded the app with Martin Sieber, Pascal Mathis, Tobias Rein and Tao Tao) said in an interview with TechCrunch that it was definitely “now a unicorn” — meaning that its valuation had passed the $1 billion mark. For additional context, the rumor last month was that GetYourGuide’s valuation was up to €1.6 billion ($1.78 billion), but I have not been able to get firm confirmation of that number.
From hip replacements to hipsters
GetYourGuide’s growth — and investor interest in it — has closely followed the rise of new platforms like Airbnb that have changed the face of how we travel, and what we do when we get somewhere. We have moved far beyond the days of visiting a travel agent that books everything, from flight to hotel to all your activities, as you sit on the other side of a desk from her or him. Now with the tap of a finger or the click of a mouse, we have thousands of choices.
Within that, GetYourGuide thinks that it has jumped on an interesting opportunity to rethink the activity aspect of tourism. Tour packages and other highly organized travel experiences are often associated with older people, or those with families — essentially people who need more predictability when they are not at home.
Reck noted that the earliest users of GetYourGuide in 2010 were precisely those people — or at least those who were more inclined to use digital platforms to begin with: the demographic, he said, was 40-50 year olds, most likely travelling with family.
That is one thing that has really started to change, in no small part because of GetYourGuide itself. Making the experience of booking experiences mobile-friendly, GetYourGuide has played into the culture of doing and showing, which has propelled the rise of social media.
“They want to do things, to have something to post on Instagram,” he said. The average age of a GetYourGuide user now, he said, is 25-40.
This has even evolved into what GetYourGuide provides to users. “At some point, staff in Asia had the idea of crafting a ‘GetYourGuide Instagram Tour of Bali.’ That really took off, and now this is the number-one tour booked in the region.” It has since expanded the concept to 50 destinations.
Not by coincidence, today the company is also announcing that Ameet Ranadive is joining as the company’s first chief product officer. Ranadive comes from Instagram, where he led the Well-being product team (the company’s health and safety team). He’d also been VP and GM of Revenue Product at Twitter. Nils Chrestin is also coming on as CFO, having recently been at Rocket Internet-incubated Global Fashion Group.
That has also led GetYourGuide to conclude it has a ways to go to continue developing its model and scope further, expanding into longer sightseeing excursions, beyond one or two-hour tours into day trips and even overnight experiences.
As it continues to play around with some of these offerings, it’s also increasingly taking a more direct role in the branding and the provision of the content. Initially, all tickets and tours were posted on GetYourGuide by third parties. Now, GetYourGuide is building more of what Reck calls “Originals” — which it might develop in partnership with others but ultimately handles as its own first-party content. (That Instagram tour was one of those Originals.)
It’s worth noting that others are closing in on the same “experiences” model that forms the core of GetYourGuide’s business: Airbnb, to diversify how it makes revenues and to extend its touchpoints with guests beyond basic accommodation bookings, has also started to sell experiences. Meanwhile, daily deals pioneer Groupon has also positioned itself as a destination for purchasing “experiences” as a way to offset declines in other areas of its business. Similarly, travel portals that sell plane tickets regularly default to pushing more activities on you.
Reck pointed out that the area of business where GetYourGuide is active is becoming increasingly attractive to these players as other aspects of the travel industry become increasingly commoditised. Indeed, you can visit dozens of sites to compare pricing on plane tickets, and if you are flexible, pick up even more of a bargain at the last minute. And the rise of multiple Airbnb-style platforms offering private accommodation has made competition among those supplying those platforms — as well as hotels — increasingly fierce.
All of that leaves experiences — for now at least — as the place where these companies can differentiate themselves from the pack. Reck believes that focusing on this, however, means you just do it much better than companies that have added experiences on to a platform that is not a native destination for discovering or buying that kind of content or product. (That doesn’t mean there aren’t others natively tackling “experiences” from the world of startups. Klook is one also funded by SoftBank.)
“Consumers, especially millennials, are spending an increasing portion of their disposable income on travel experiences. We believe GetYourGuide is leading this seismic shift by consolidating the fragmented global supply base of tour operators and modernizing access for travelers globally,” said Ted Fike, partner at SoftBank Investment Advisers, in a statement. “This combination creates powerful network effects for their business that is fueling their strong growth. We are excited to partner with their passionate and talented leadership team.” Fike is joining the board with this round.
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DeepCode cleans your code with the power of AI
Zurich-based DeepCode claims that their system — essentially a tool for analyzing and improving code — is like Grammarly for programmers. The system, which uses a corpus of 250,000 rules, reads your public and private GitHub repositories and tells you how to fix problems, remain compatible and generally improve your programs.
Founded by Veselin Raychev, advisor Martin Vechev and Boris Paskalev, the team has extensive experience in machine learning and AI research. This project is a spin-off from ETH in Switzerland and is a standalone research project turned programming utility.
How does it work? Pretty well. I ran one of my public repositories through the system and received 49 suggestions in 449 files. The fixes range from literal code changes — changing name: String, to name: {type: String}, — to suggestions for code that might be actually missing in function calls. It’s an interesting tool, especially if you need help finding hidden bugs in your code. The advice this tool gives is also surprisingly precise. Because it can build its own recommendations based on large amounts of code it finds things humans might miss.
“We built a platform that understands the intent of the code,” said Paskalev. “We autonomously understand millions of repositories and note the changes developers are making. Then we train our AI engine with those changes and can provide unique suggestions to every single line of code analyzed by our platform.”
“Today we have more than 250K rules and growing daily,” said Paskalev. “Our competition has to manually create rules and the biggest competitor has 3-4,000 rules and they’ve been working for years.
The company is self-funded and recently raised $1.1 million from btov. The founders are serial entrepreneurs. Paskalev worked at VistaPrint and PPAG and Raychev worked for Google and is a researcher in the field of machine learning in programming language semantics.
More than a simple debugger, DeepCode “reads” and tries to compare code to other implementations, giving you best-of-class performance from every line. Now the team just has to get programmers to use it.
“We have a unique platform that understands software code the same way Grammarly understands written language,” Paskalev said. “This unique proposition is positioned us save billions of dollars within the software development community with our first service and then to be on the front end of transforming the industry towards fully autonomous code synthesis.”
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