Swiss ICT Investor Club (SICTIC) is an angel investor club, a matchmaker between founders of high-tech innovative start-ups and angel investors, who tend to be different from usual investors. It is a non-profit association with the mission of matching smart money investors with the best early-stage tech start-ups in Switzerland. Investors tend to invest relatively small sums in each given start-up, at SICTIC the minimum is CHF 20,000 per investor and investment, but all are free to not invest at all. Each individual investor pays a small annual fee to get access to the online dealflow database and pitching events. Each of these angel investors must also, however, sign an agreement which binds an investor to confidentiality in investor deals, fair and ethical behavior towards other investors and the start-up, and also stipulates that an investor must be ready to support SICTIC when it comes to the running of its various governance functions. Also some family firms have joined SICTIC’s investor community. The fee is significantly larger, however, for so-called “preferred co-investors”, which include certain banks (currently just Zürcher Kantonalbank) as well as venture funds (SEED X Liechtenstein, Wingman Ventures, Alpana Ventures, Tomahawk.vc, and two more). This group of currently seven are professional investors they invest between CHF 200,000 and about CHF 1,500,000 in one particular start-up alongside angel investors. There are around 340 angel investors that are a part of the SICTIC investor club – large and small!
It goes without saying that most of the angel investors are indeed undertaking other activities, such as running a company or a large company division and also attending to their own investment portfolios, attending to various private investments, and angel investing is more like a leisure activity to them. And, as noted, these angel investors have also agreed to help the start-ups they invest in out in different ways by giving access to their business network, coaching the founders, making introductions to potential customers or joining an advisory board.
This non-profit network was founded in 2014. It charges no transaction fee of any sort, nor does it go for any overall profits or carries. Legally, as noted, it is an association. As of present it has a Board, with twelve members, an operations team with around 3.5 full time job equivalents (five persons) and a start-up jury that acts as evaluation committee of around eight, which can be expanded/exchanged among a total of around 20 persons. This includes savvy angel investors, financial, legal and technical experts, and so on.
SICTIC might be seen as very highly focused, perhaps in contrast to most other such “matchmaking” organizations, which often tend to be broader in scope. Specifically, its focus is on:
Technology-based companies exclusively, but of the kind of technology where one might often have to build a product first and hence most start-ups typically have no cash-flow for, say, the first two years.
Star-ups tend to be in so-called “seed stage” or “early stage”
They must be scalable
There must be a balanced team in its leadership
It shall be in need of maximum of 2M in financing.
SICTIC is not a fit for life science start-ups, consultancy firms, real estate investments or for companies with their domicile outside Switzerland.
As of today, SICTIC is screening around 400 start-ups per annum. The jury rejects many of these, and only around 100 end up being deemed strong enough to be pitch at one of SICTIC’s Investor Days, where many angel investors are present. In the end, only between 40 and 50 end up being qualified to receive funding from the SICTIC network of angel investors. Prominent “meeting places” between angel investors and fintech start-ups are the two annual Swiss Fintech Investor Days, where, say, 12 or so Fintech start-ups “pitch” to more than 200 investors.
Many of the proposed start-ups have their origins in Switzerland’s technical universities, above all ETH (Zurich) or EPFL (Lausanne). While a lot of good research is done, by faculty and students, at academic institutions such as these, there may be some lack in these institutions’ capabilities to commercialize good research ideas. Partly, this may be due to a perhaps natural resistance to build on government-funded research for later commercial efforts. Partly, it may simply also be that such institutions in general may simply not have very good access to broader investor bases. There are, of course, dedicated technology transfer offices in most such academic institutions, but these might, in general, not be large and effective enough to be able to fully cope with the challenge of finding sufficiently many good investors. These are thus perhaps not as effective as one might have hoped when it comes to stimulating effective commercialization.
SICTIC has two offices as of present, listed below in terms of how many funded projects they each stand for:
Zurich
Lausanne
And, the plan is to soon open a third office in the Italian speaking part of Switzerland.
In order to stimulate more effective “matchmaking” there too.
What are the formal steps that a start-up proposer shall have to go through? First, each project proposer must send in an actual application with a 90s video pitch, a 2-3 page fact sheet and a short pitch slide deck. As noted, there are around 400 such applications per year. These proposed projects should be based on an innovative, scalable, technological business idea, as also noted. It is often found, however, that while many of these products may be built around a basically strong idea, many projects are lacking in one or more other dimension, the most common being the following three:
The project’s organization may have an uneven competence mix in its team. A clear leader, for instance, is often missing. Business development and financial competence is also often absent.
The marketing strategy may be lacking in realism. Many of the proposers are, perhaps, overly technical. And some may not even have considered who their customers might be! They may simply not have put much thought into this!
Legal and ethical aspects. Often, these typically relatively young, and unexperienced individual proposers might not even be aware of the fact that there might potentially be illegal sides with their proposals, such as, for instance, a need to have a license from FINMA (the Swiss regulator of financial institutions).
The start-up applications are judged through a formalized panel with typically eight jury members. This panel might, however, at times be larger, in that specialist judges as well as other alternates might be drawn from a total group of around 20 judges, as noted. They all work pro bono. But they are of course benefitting from a flow of diverse learning inputs, from each of the many submissions, as well as from interacting with fellow jurors. Thus, jurors are indeed learners! Approximately half of the panel of jurors, say four, tend to come from the pool of SICTIC board members. The other half is coming from the members of angel investors and preferred co-investors.
Each project is rated by each juror according to the following rating criteria:
Factor 1: People. Is the project team able to deliver and appropriately put together?
Factor 2: How high is the business potential?
Factor 3: How innovative is the project?
Factor 4: How well is it all presented, i.e. the quality of the proposal documents that has been submitted?
Throughout this evaluation process each juror is also being encouraged to look out for “red flags” in any given proposal. It is clear that this evaluation process is both time and energy-consuming for each juror. The contrast between SICTIC and each angel investor indicates that each person must indeed be prepared to invest both money and time in activities such as this, even though each is doing the jury work pro bono.
There are “matchmaking” meetings between angel investors and those founders that have passed the screening by the panel of jurors. Most prominent among these is the so-called Swiss Fintech Investor Day. As noted, there are two large annual conferences, each with 200 or more angel investor participants, there are also another 12, or so, additional events annually, as well as more than 40 luncheons, apéros, seminars, and so on per year. There is a common principle for all of these events, however: A large majority must be angel investors with the aim being around 90%.
Impacts from the Corona Virus threat
A survey among the around 340 angel investors members was sent out in connection with how each of these might consider the Corona virus threat. This revealed the following:
Investment profile
A majority, around 80%, will modify their investment startegy only moderately or not at all due to impact from the Corona crisis.
Around 40% intend to invest less than before but shall focus more on the quality of each start-up instead.
Only a small fraction, around 6%, said to have stopped investing.
In contrast to c. a very small group of members plan to invest more than before in new start-ups.
The Swiss Economy
Around 89% of the angel investors foresee a significant slow-down in the Swiss economy as a consequence of the Corona crisis.
Thereof, around 10% even expect even a depression.
Only around 11% foresee a mild impact on the Swiss economy.
44% of the respondents expect that we shall be back to normal economic activity in Switzerland from before April 2021.
37%, however, expect a return to normality only after the middle of next year.
In general, there seems to be considerable pessimism among the angel investors in light of the present Corona virus crisis.
Project Valuation
There now seems to be around a 25% decrease in the valuation of typical start-ups. This implies that the start-up founder’s ownership parts may tend to go down, while in contrast angel investors might tend to end up with the same or higher ownership share as before! The dilution effect falls on the start-up founders!
Rounds for funding tend to be smaller.
The start-up managements has to be able to cope with less abundance of funds than before and has to be more prudent in “burn rate” management!
SICTIC’s financing and position relative to other investor/project matching entities
As noted, SICTIC charges no finder’s fee to start-ups, neither before nor after actual funding, nor any exit fee when a start-up is sold.
The financing of SICTIC is thus largely financed through the annual fees from the angel investors as well as the preferred co-investors fees. In addition, there is also financial support from corporate partners, namely:
Some law firms
PostFinance
Vandoise
Digital Switzerland
Other
Appendix: Mr. Thomas Dübendorfer, President and Co-Founder of Swiss ICT Investor Club (SICTIC)
Profile. He did his first startup investment in 2010. In the last ten years he has directly invested in 28 startups, out of which he has exited 4 so far. He is currently pro-actively involved in about ten start-up companies. He holds a Ph.D. in Computer Science from ETH Zurich and is co-founder and president of the Swiss ICT Investor Club (SICTIC), the largest and most active angel investor club in Switzerland with a focus on Swiss early-stage technology product startups. He has worked in Silicon Valley and at Google as tech lead and security software engineer. He is an angel investor, co-founder and board member in several Swiss tech startups, and has had several successful startup exits. He was among the “Top 100 Digital Shapers of Switzerland” and featured as one of the “Top 200 Most Prominent Personalities” in the 2019 edition of Who Is Who in Zurich. He spends around one day per week on SICTIC related activities. This is the second association that he has been president of. His first one was for information security professionals and he has more than doubled the member base to sustainably more than 1000 members. Growing it in the French speaking part was a big challenge, and the lessons he had learnt the hard way, he applied when growing SICTIC in the regions of Lausanne and Geneva.
Potential Conflict of Interest regarding investments. Is there a potential conflict of interest between the deal flow at SICTIC and Mr. Dübendorfer’s own agenda, i.e. in the sense that he may be perceived by some of the angel investors as possibly getting himself into the best “deals”? In reality, however, this does not seem to be an issue. On the contrary, there may be investment projects where a given proposer might not actually prefer a relatively large set of angel investors to participate but might prefer only one or two investors. In such situations, where SICTIC’s pool of angel investors is thus not a realistic financing alternative, Mr. Dübendorfer has at times decided to participate, in order that such specific projects might also “get off the ground”. Furthermore, he gets a large number of high quality start-up deals that are not a fit for him personally but for SICTIC and he encourages the founders to apply to SICTIC.
Luxembourg. Mr. Dübendorfer is also a panel member of FNR, the Luxembourg-based research foundation funded by its government, to support spin-offs from universities.
Summary: Key factors to SICTIC’s success
SICTIC is indeed highly successful as might perhaps be evidenced by its growth of angel investors and the high number of startup investments done. As of end-2015 there were only around 24 angel investors, while at the end of 2019 there were more than 330! Key contributing factors were:
An effective matchmaker between angel investors and technology start-up founders.
clear focus: Swiss, technology innovation (but not med-tech!), scalable, plausible business rationale, and realistic organizational capabilities.
Effective in matchmaking conferences and other events: Two flagship events (Swiss Fintech Investor Day, Swiss Blockchain Investor Day), about 12 smaller events, more than 40 unique investor workshops and lunches, etc.
Panel of expert judges with a formalized screening and ranking of projects.
No finder’s fee, nor any exit fees. SICTIC is financed exclusively through fees and corporate partners, i.e. with no conflict of interest.
A clear and simple governance structure and a very lean organization.
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