Between concentration of capital, sophistication of processes and increased pressure on performance, venture capital is changing in scale and nature. For Michael Sidler, co-founder of Redalpine, this transformation does not signal a break with the past, but a rise to maturity in which rigor, selection and support are becoming more decisive than ever.
What structural changes do you see shaping the venture capital landscape over the next few years?
Two major developments stand out on a global scale. The first is the rise of what is sometimes referred to as the "Big VC". Multi-billion-dollar funds are investing considerable sums in a limited number of technology companies, often alongside governments and large corporations. This gives rise to powerful ecosystems built around critical technologies.
This dynamic can be seen in players such as SpaceX and OpenAI. Governments increasingly regard certain technologies as strategic assets. They therefore support the associated ecosystems through public policies. For venture capitalists, this creates exceptional opportunities, but also introduces a form of political dependency.
The second transformation concerns artificial intelligence, not only as an investment theme, but also as a technology that redefines the venture capital process itself. AI makes it possible to analyze thousands of opportunities and identify promising ones. Yet venture capital remains fundamentally a human activity. Assessing founders and supporting entrepreneurs still relies on human interaction.
How have investors' perceptions of venture capital changed in the current context of interest rates and liquidity?
Venture capital works in cycles. Between 2013 and 2022, the market experienced a long expansion phase, marked by rising valuations and the arrival of numerous funds. Many investors had never experienced a downturn before.
When interest rates rose and valuations corrected, some recorded losses for the first time. Sentiment then reversed sharply. Today, we're not seeing a retreat from venture capital, but rather a clear "flight to quality". Investors are still active, but they are much more selective, preferring management teams with a solid track record.
What distinguishes venture capital from private equity in terms of investment approach, time horizon and value creation?
These are two fundamentally different asset classes. Private equity typically acquires majority stakes in established companies, often from other shareholders, then restructures operations and optimizes operational efficiency before selling its stake.
Venture capitalists, on the other hand, are minority shareholders who typically hold between 10% and 20% of the capital. The funds injected are used to finance the company's growth directly, rather than to buy existing shares.
The aim is to support talented founders and strengthen their capabilities. If the founders aren't up to the task, we don't invest. In this sense, venture capital is about creating new companies and new industries, while private equity is about improving and developing existing companies.
Do you see convergences emerging between venture capital and private equity?
I can think of a few. The first concerns exits. Some venture capital-backed companies are bought out by private equity funds once they reach a certain size. This is a natural exit route.
Another convergence concerns value creation. VC funds are increasingly adopting structured approaches inspired by private equity. At Redalpine, for example, we support founders in recruitment strategies, organization structuring, sales execution, international expansion and subsequent fund-raising. These methods enable young companies to professionalize more rapidly. Despite these commonalities, the two models remain profoundly distinct.
How are VC funds adapting their strategies in the face of longer exit cycles and more selective financing conditions?
There is a perception that exits have become extremely difficult, but the reality is more nuanced. If we neutralize the exceptional effects of the covid period, exit activity in Europe is actually close to a ten-year high.
In our own portfolio, we continue to see a healthy number of exits. The talk of an exits "drought" mainly reflects the experience of funds that entered the market during the euphoric years and never experienced a correction. In reality, the market is simply returning to a more normal environment.
What is the current state of the venture capital market in Switzerland, and how does it compare with the major innovation hubs?
In terms of innovation, Switzerland has developed an exceptionally solid ecosystem, notably around ETH Zurich and EPFL. The quality of technological innovation is very high. The main challenge lies in financing. Much of the capital invested in Swiss startups comes from international investors, particularly from the USA. While this testifies to the attractiveness of Swiss innovation, it also means that a significant proportion of the financial returns go abroad.
Europe's structural weakness lies above all in growth capital. Early-stage financing has improved significantly over the past two decades, but the gap with the USA remains wide when companies reach an advanced stage of development.
Which sectors or technologies are attracting the most attention from investors in Switzerland and Europe?
Much of Switzerland's innovation comes from ETH Zurich and EPFL, which explains the dynamism in fields such as robotics, drones, artificial intelligence and deep tech.
Other sectors of growing interest include fintech, synthetic biology, biotechnology and advanced materials. Overall, Switzerland and Europe today stand out as particularly strong high-tech ecosystems.
In the future, what will differentiate successful venture capital players from those who run into difficulties?
One major mistake is to specialize excessively in a single sector. Investment themes come in waves - crypto, foodtech, ESG or defense technologies. Focusing exclusively on one theme exposes the whole portfolio to these cycles. At Redalpine, we take a generalist, diversified approach across several technology waves.
Another key factor is the composition of our investment teams. Nearly half of our staff are scientists, which enables us to gain an in-depth understanding of complex technologies and to dialogue with founders on an equal footing.
Finally, success is increasingly based on discipline and process. We analyze more than 5,000 dossiers a year, and then select just ten or so. Identifying the few companies that generate the greatest returns requires an extremely rigorous approach.
Is venture capital becoming the new private equity in terms of maturity, discipline and value creation?
Discipline has always been essential in venture capital, even if public perception sometimes suggests otherwise. In this asset class, the majority of returns come from one or two exceptional companies. The challenge is to identify these "outliers" and support them in realizing their full potential.
Venture capital has become more professional and structured over time. But its fundamental mission remains different from that of private equity. It's about building the next generation of companies, not restructuring existing ones.
Are evergreen structures and secondary markets transforming the venture capital model?
Yes, potentially, significantly. Traditional venture capital is based on closed funds with long lock-up periods, capital calls and the famous J-curve effect. For many investors, particularly private ones, this structure is difficult to access and not compatible with holding funds via a traditional bank account.
At Redalpine, we have developed an evergreen platform, the Summit Fund, which invests both in our early stage funds and directly in more mature companies in our portfolio or in the ecosystem.
The advantage lies in its flexibility. Investors can access venture capital without committing to a rigid ten-year structure, while we can continuously reinvest and support our best holdings. At the same time, the development of secondary markets could bring more liquidity to this asset class.