Slides about Swiss early-stage startup scene as an intro to Q&A at ETH Entrepreneur Club "Meet the Founder" evening

1. Swiss early-stage ecosystem
has gained momentum
Meet the founder event
Zurich 3rd Oct 2013
Redalpine Venture Partners Ltd, Pfingstweidstrasse 60, 8005 Zurich, Switzerland, +41 44 271 15 30, www.redalpine.com
early stage investments by entrepreneurs
NICOLAS BERG

2. Agenda
1. About me & Redalpine
2. Typical Top-10-Swiss-Startup
3. Conditions to enable a high-tech startup cluster
4. Impact of high-tech startup cluster
5. Swiss high-tech startups
6. Swiss early-stage investors
7. Challenges
8. Opportunity & risks
9. Wanted investor types
Copyright Redalpine Venture Partners AG, Switzerland 2

3. Intro
A typical successful Top-10-Swiss-Startup 2013
 From Zurich or Vaud
 20 out of 26 founders are not Swiss!
 ICT, Life Science or Electronics
 Links to ETH, UZH or EPFL
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4. Speaker: Nicolas Berg
 Serial entrepreneur with 10 start-ups (1984-2011)
e.g. founder of Borsalino 1998, sold 2000 at 20x multiple to Ringier
iCEO Sharoo June-September 2013
 Full time angel investor in 16 start-ups (2000-2006)
e.g. Investor & Country Manager XING 2004-2010
IPO at 30x multiple 2006
 Partner at Redalpine Venture Partners (since 2007)
Built a portfolio of 20 European high innovation start-ups with Redalpine Capital I & II
5 portfolio companies ranked among 13 Swiss top start-ups in 2011
 Lecturer, journalist and jury member
Teaching students & entrepreneurs at venturelab.ch since 2006
Jury member of business plan & seed money contests (Venture kick, SVC, Suvorov)
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5. Redalpine in a nutshell
 Manages Redalpine I CHF 20M micro VC fund (2007-2015)
 Manages Redalpine II CHF 30M* micro VC fund (2012-2020)
Seed/early-stage in continental Europe (* aims at CHF 60M in 2nd closing)
 Most innovative sectors in Europe
Technology/New Media and Life Science
 Fund thesis
European seed/early stage offers potential for superior exit multiples
Best choice in Switzerland – leading accelerator in Berlin
 Convincing track-record
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6. Conditions to become a high-tech cluster
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① Successful startup founders  role models 44
② Successful early-stage investors  Venture Capital 4
③ International Top-10-university  innovation, spin-offs 44
④ Qualified immigrants  recruiting, risk takers 44
⑤ Vital support ecosystem  entropy thru networking, training 444
⑥ Non bureaucratic research grants  transfer 44
⑦ Mature companies of same sector  cooperation, M&A, recruiting 44
⑧ General economic conditions & infrastructure image, recruiting 444
⑨ Attractive home market  faster & safer Proof of Market 4

7. Great job creation impact of startups
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Jobs
4m
3m
2m
1m
0
- 1m
- 2m
- 3m
- 4m
- 5m
Net job change startups <5 yrs
Net job change companies >5 yrs
 US start-ups create 3 million jobs per year,
existing firms slash 1 million jobs (Kauffman Foundation
Source: Kaufmann Foundation,
Business Dynamics Statistics, Tim Kane
US start-ups create 3 million jobs per year
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005

8. Spin-offs by international top-10-universities
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① Most Swiss university spin-offs by ETH, EPFL, UZH
② Number of spin-offs independent from economic sentiment (e.g. 2008/09)

9. Top exits of Swiss ICT startups
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1996 – 2008 (12 years)
① Oanda  Index Ventures
② Search.ch  Post  Tamedia
③ Scout24/Human Line  Ringier
④ Auktion24  Ricardo
⑤ Comparis  Investors
⑥ Borsalino  Cash Ringier
⑦ Kelkoo  Yahoo
⑧ LeShop  Bon appétit
⑨ Mediastreams  Microsoft
⑩ LeShop  Migros
11 Endoxon  Google
12 Jobs.ch  Tiger Fund
2009 – 2012 (4 years)
① Wuala  LaCie
② Svox  Nuance
③ DeinDeal  Ringier
④ Doodle  Tamedia
⑤ Liberovision  Vizrt
⑥ Procedural  Esri
⑦ Trigami  eBuzzing
⑧ Fashionfriends  Tamedia
⑨ Borsalino/Cash  Bankzwei
⑩ Umantis  Haufe
11 Jobs.ch  Ringier/Tamedia
12 Spontacts  Scout
13 Digitec  Migros
14 Housetrip  Index
15 NetBreeze  Microsoft

10. Top exits of Swiss life science startups
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1999-2004 (5 years)
① Actelion  IPO
② Prionics  30x pay-back
③ Axovan  Actelion
④ Jomed  IPO
2005 – 2008 (4 years)
① Arpida  IPO
② Glycart  Roche ($200m)
③ Serono  Merck (€10.2b)
④ Speedel  Novartis ($880m)
2009 – 2012 (3 years)
① Esbatech  Alcon ($589m)
② Neurimmune  Biogen
③ Levitronix  Thoratec
④ Okairos  GSK
⑤ Glycovaxyn  investors

11. About 2000 Swiss early-stage investors
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ICT: Early-stage VCs, angels
& founders with recent top exit
① Index Ventures
② VI Partners
③ Brains-to-ventures
④ Redalpine
⑤ Creathor
⑥ Beat Schillig
⑦ Peter Schüpbach
⑧ Klaus Hommels
⑨ Oliver Jung
⑩ Roland Zeller (…)
Live Science: Early-stage VCs, angels
& founders with recent top exit
① Index Ventures
② VI Partners
③ Redalpine
④ Nexgen
⑤ NVF
⑥ BioBAC Basel
⑦ Bruno Oesch
⑧ Peter Pfister
⑨ Jürg Geigy
⑩ George Haas (…)

12. Challenges for early-stage investors
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① Early-stage  smaller transactions  small fund  lower fees
② Active investment managers  higher returns  5 startups per manager
③ Diversified portfolio 15+  better risk return  3+ investment managers
④ Entrepreneurial skills needed to select winning early-stage deals

13. Opportunities & risks
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① Early-stage angel investments deliver 27% IRR
- 8 studies in US/UK on historical return in business angel markets, RSCM 2010
② But <10% of virtual portfolio (>6000) delivered >70% of returns
③ «Average» investor got 27% IRR, but median investor looses money

14. Wanted investor types for Switzerland
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① Serial entrepreneurs with at least one top exit
② Micro VC funds
managed by serial entrepreneurs (age 25-45) and successful angels
Very active investment approach in seed and early-stage
Diversified portfolio of 15+
Entrepreneurial LPs (serial entrepreneurs 50+, family offices)
③ Co-investment & side-car funds
Less active or passive investment manager approach
Government and corporate funded (e.g. HTGF)
Driven by economic impact, not returns only

15. Interfaces to Corporate Finance
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① Exit planning starts at deal selection & term-sheet negotiation
② Professional & fair term sheets & shareholder agreements
Tag along, drag along
Minority rights & corporate governance
Pooling
Single liquidation preference
Gentlemen rules (e.g. against excessive squeeze outs/dilution)
Business lawyers that offer broad range of templates & product pricing at early-stage
Big-4 consulting companies may further bigger rounds or exit
③ Early research & market reach cooperation M4E) might further better exit
Examples: Glycart, StudiVZ, Borsalino
④ Corporate investor at early-stage might reduce risks
But: might add cost, and
reduce maximized exit multiple

16. Bonus slides
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① Scouting talents delivers better multiples than acquiring stars
② Pro-active investors know where the puck is going to be
③ PE best asset class 10 out of 20 years (and worst 4 out of 20)
④ PE best in class if combined with commodities and healthy bonds*
(* = bonds from governments & corporations with little debt)

17. Grow big stars by scouting many talents
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Analogue to a football team you have 2 options:
 invest $100m to buy a star (Bale, Messi or Ronaldo)
 try to earn $110m extra with him (1.1x) or
 invest $5m to scout & train 20 young talents
 sell best one (Doumbia, Shaquiri) for $20m (4x)
  good Micro VCs prefer a movie rather than a photo (= 3 pitches)

18. Invest pro-active – don’t follow the crowd
An ice hockey player can either:
 skate to the place where the puck is now – as most players – or
 to the place where the puck is going to be (Wayne Gretzky)
Source: http://www.brainyquote.com/quotes/authors/w/wayne_gretzky.html
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19. 19
Private equity best in class – sometimes
Source: UBS QIS
Equally weighted Portfolio
Liquidity USD
Bonds USD
Corporate Bonds USD
Equitiy Developed Countries
Hedge Funds
Real Estate USA
Commodities
Private Equity USA
Returns year by year
1990 1992 1993 1994 1999 2000 2001 2002 2004 2005 2006 2007 2008 2010
29.1% 48.3% 14.2% 31.5% 5.3% 60.6% 36.8% 54.0% 48.5% 40.9% 49.7% 13.4% 32.1% 45.5% 32.2% 25.6% 36.4% 32.7% 6.6% 41.9% 28.3%
17.5% 41.0% 12.3% 26.3% 5.1% 22.2% 34.4% 18.6% 24.3% 34.6% 27.3% 10.3% 11.6% 36.4% 17.3% 12.9% 22.8% 9.0% 4.1% 30.0% 23.0%
9.0% 19.4% 9.7% 22.5% 4.4% 20.7% 33.9% 16.2% 8.7% 26.5% 11.3% 9.3% 10.1% 33.1% 15.6% 9.5% 20.1% 8.3% -4.9% 26.1% 11.9%
8.8% 18.5% 8.7% 14.0% 3.1% 20.6% 17.8% 15.8% 8.6% 24.9% 9.1% 4.9% 3.5% 20.7% 14.7% 8.5% 10.4% 7.4% -23.3% 19.7% 11.8%
7.1% 18.3% 8.2% 13.0% 1.7% 20.3% 14.4% 13.7% 5.8% 14.9% 8.7% 2.8% 2.0% 19.8% 11.8% 7.8% 9.3% 6.6% -25.4% 18.7% 9.0%
1.5% 16.7% 7.1% 12.2% 1.4% 16.6% 13.5% 10.2% 2.9% 5.6% 6.8% -3.9% 1.0% 12.0% 5.4% 3.4% 5.2% 5.7% -38.4% 13.5% 9.0%
-4.7% 14.5% 4.4% 10.3% -2.4% 12.1% 5.8% 8.2% -5.1% -0.7% 4.1% -16.8% 0.2% 8.2% 3.1% 2.7% 4.3% 4.6% -40.7% 13.4% 5.2%
-17.0% 7.1% 4.2% 3.5% -3.5% 11.1% 4.0% 6.0% -17.8% -2.0% -13.2% -18.0% -19.9% 3.2% 2.7% 2.0% 4.3% 4.2% -46.5% 3.3% 5.1%
-34.2% -6.1% -5.2% -12.3% -3.9% 6.5% 3.3% -14.1% -35.7% -6.0% -18.6% -31.9% -32.5% 1.3% 1.5% 1.7% -15.1% -17.1% -50.7% 1.4% 0.5%
BEST
ASSET
CLASS
Highest
return that
year
WORST
ASSET
CLASS
Lowest return
that year
Nur zur Veranschaulichung. Die Marktbedingungen können sich ändern und die Renditen schwanken. Bitte lesen Sie die Erklärungen unter «Simulierte historische Performance»
am Ende dieses Dokuments. Bitte beachten Sie, dass diese Seite immer in Verbindung mit den Risikoinformationen und Begriffserklärungen im Anhang zu dieser Präsentation zu
lesen ist.
1991 1995 1996 1997 1998 2003 2009

20. 20
PE always best in class – if combined
Go for a mix with low correlation and high returns:
Combine PE with commodities, corporate bonds or real estate
Source: UBS WMR; generated by QIS
Private Equity
Real Estate (REITS)
Hedge Funds
Commodities
Equity MSCI World
Bonds (USD)
Bonds(USD)
Commodities
HedgeFunds
RealEstateREITS
PrivateEquity
EquityMSCIWorld
0.12 0.18
0.18
0.12
0.27
0.27
0.72 1.00
1.00
1.00
1.00
1.00
1.00
0.72
0.42
0.42
0.160.18-0.07 0.04
0.480.09 0.16 0.16
0.160.040.28
0.18
0.08
0.08
0.09-0.07 0.28
0.48 0.30
0.30

21. «You miss 100%
of the shots you
don't take.»
Wayne
Gretzky, Hockey
legend
«To evaluate the potential
of a new idea requires a
clear understanding of the
market dynamics. We trust
in the team of Redalpine to
master this challenge
successfully.»
Jürg Staub,
Reichmuth & Co
www.redalpine.com
www.facebook.com/redalpine
www.twitter.com/redalpine
Redalpine Venture Partners AG
Pfingstweidstrasse 60
CH-8005 Zürich
Switzerland
phone +41 44 271 15 30