Investor Michael Bornhäusser wonders that in Switzerland you only ever hear about financing rounds in the startup sector, but never about successful exits. There is silence in the forest, he says in this interview.
Mr. Bornhäusser, you have already started various club deals. Why only abroad and mainly in the USA?
This is not due to the investment model but to the asset class . I used to be a software entrepreneur with an international footprint, and technology venture capital (VC) is still the most successful in the US.
Here the growth rates are highest, there is enough capital and good entrepreneurs who are able to grow companies in a relatively short time. The number of exits per year in California alone is around 80 times greater than in Germany, for example.
«I still see far too many financial analysts with little idea of startup culture»
With Bulb Capital, we invest in companies with at least $ 10 million in revenue, and our ticket is between $ 5 and $ 20 million. Such growth companies have relatively many in the US. For startups that have reached this stage in their corporate development, the risks are manageable. It makes sense to enter. In Switzerland, there are very few opportunities in this environment.
Where do you get your know-how in this business?
If you have never founded, led, or at least worked in a tech startup, you should stay away from it. Developing a startup has its own laws and is not comparable to a corporate job. Unfortunately, I still see far too many financial analysts working as VC managers in technology and having little idea of startup culture and international technology markets – let alone reading the software.
One is the one side, the other is to have a global network of high caliber investors who invest early in companies and want professional investors in the next phase of growth. Here we work together with companies like Google, Accel Partners, Morgan Stanley or Advent Ventures for ten years.
Which club deals are there in the Swiss VC scene?
Club deals are still new in VC, and we (formerly Sallfort Privatbank) were the first to offer such deals professionally.
«One would think that there are no Swiss exits or just very few»
In Switzerland, there are relatively few internationally oriented VC companies apart from the “Angel Funds”. VC funds investing at our level operate primarily in the US, Asia and the UK.
VC investments mostly talk about enormous returns. All you really hear about the exit, ie the exit from an investment, is very rare. Why?
That’s what I’m asking too, especially in Switzerland. Many VC funds and also the media report with great on new investments in Swiss startups and growth companies. You often hear that XY has completed a 5-million-round or VC-Fund XY has invested 3 million in YZ.
I would rather read about the successful exits that should follow such investments. One would think that there are no Swiss exits or just very few. Has not the sale been or has not been given? Is the company no longer available? Silence in the forest! We publish media information for each exit and are publicly happy about good returns.
What experience have you had with your investments so far?
In seven years, we made eleven investments in 16 investment rounds, including five rounds as lead investor. So far, we have completed seven exits with an average return of 300% per investment after an average of three years.
«We always invest private money in our club deals»
While this is not performance like Facebook or Google, it’s a great return for us. The investments that are still active, are also running well. As they currently show, attractive exits are approaching us as well.
Are venture capital club deals not very risky? What is the average loss ratio for Venture Capital Club Deals?
Venture Capital is certainly riskier than an investment in Nestlé or IBM, though, as you never know, see 2008. But if you have a partner with a good foundation, that is, a partner that evaluates the right deals, a clean one Market analysis and due diligence, and also actively helping the company to develop, significantly reduces the risk.
We always invest our own private money in our club deals and not small amounts. We are therefore always interested in keeping the risk as small as possible. “Skin in the Game” is always the best risk management. So far we have a “100 Percent Hit Rate” – that is, we have not had a single copyist yet.
Michael Bornhäusser is Chairman and Managing Partner of the Swiss company Bulb Capital, founded in 2019, where he is responsible for club deals in the area of venture capital (VC). Prior to that, he headed the private equity and product area at the Swiss private bank Sallfort in Basel. In the 1990s, Bornhäusser worked as an entrepreneur in the IT industry, including as co-founder of Pixelpark, which went public in 1999, or the software company SDC. In 2009 he made his first VC investment as an investor in the company Uniquisys, which was sold in 2013 to the US group Cisco.
Also published on Medium.