VC during COVID-19

Why the promotion of the start-up ecosystem does not stand still at EquityPitcher and in Switzerland despite COVID-19


Young entrepreneurs in particular are feeling the effects of the now worldwide economic crisis caused by COVID-19. Start-ups, which often have low liquidity, can quickly face financial bottlenecks due to declining sales. Depending on the industry, many start-ups are facing great challenges and are therefore more than ever dependent on additional financial resources from investors or loans. According to a survey by Venturelab 3% of the 660 surveyed start-ups in an existential danger and are uncertain whether they will survive this crisis.

In such times of uncertainty it would be a natural and understandable reaction as an investor to reduce investments and wait and see. The risk and the uncertainty whether the start-up will get through the crisis and can nevertheless be successful is too great.

However, we at EquityPitcher do not adopt this way of thinking for various reasons. We are convinced that especially during this crisis the start-ups are dependent on our support. Likewise, previously innovative and successful start-ups should not have to stop generating value in society because of the pandemic, which would be a loss for all of us. For this reason, we have not put a stop to investments and attach great importance to actively accompanying our portfolio through these difficult times.

However, it is important to distinguish between companies that have only experienced financial difficulties as a result of the pandemic and those that were already in difficulties before the pandemic. For the latter, this crisis should be an occasion to address the problems that have usually already existed for some time, which have become even more obvious due to the increasing pressure of the pandemic, and to work together on them. As these companies would most likely have run into a liquidity bottleneck in the future even without COVID-19, support in the sense of a purely social assistance service towards investors is not justifiable.

At this point in time, we note that a large part of the companies from our Portfolio has mastered the current situation very well and is developing well despite the crisis. Due to their already existing dynamic and agile way of working, the start-ups can react quickly to changes in the outside world. It is admirable how many of our portfolio companies are taking concrete measures and in some cases adapting their business units. In this way, the companies can contain the negative effects of the pandemic.

From an overall portfolio perspective, we therefore feel confirmed that a diversifizierte Investitionsstrategie is the right approach to ensure that a portfolio can continue to perform through a crisis. The near future will show what new possibilities and opportunities will open up for us, especially in the healthcare, media and telecommunications sectors, but also in the entire field of digitalization.

The Swiss government is also increasingly recognising the importance of young companies and will offer supplementary support for innovative start-ups from May 2020. The previous bridging loans have provided little relief for start-ups, which is why the federal government is now joining forces with the cantons to provide loans of up to 154 Millionen Swiss francs vouched for. This measure is to be warmly welcomed and shows that the Swiss government is not ignoring the importance of the start-up ecosystem and that Switzerland will continue to be promoted as a location for innovation.

The combination of the proactive, forward-looking start-ups with their dynamic and agile structure, coupled with government assistance and our support as a VC allows us to look forward to a thoroughly positive future. If many start-ups survive this crisis with the help of the government and their investors, Switzerland's start-up ecosystem will continue to grow in the long term and provide for innovation, value creation and prosperity.