Sustainable investing is also gaining importance for startups

Many students seek to solve social problems with their startups. This idealism is important for communicating with potential investors. The stronger focus on sustainability aspects falls on open ears with investors.

The tense political and economic situation is also affecting startups. This is revealed in a current supplement to the 'Swiss Venture Capital Report 2022'. Investments in startups are likely to decline in Switzerland for the first time in ten years. Dietmar Grichnik, Professor of Entrepreneurship and Technology Management at the University of St. Gallen (HSG), classifies what this means for young companies in various industries in an interview.

Technology-based startups now have a harder time

As he explains, it is now even more important for founders that startups have a unique selling proposition and can communicate this well. According to Grichnik, this can be a particularly innovative solution or great scaling potential in the business model. However, technology-based startups, such as those in the food and biotech or blockchain sectors, are now likely to have a somewhat more challenging time, he says. Their products often take longer to develop because of medical and other studies, for example, and therefore have longer scaling cycles. Startups that focus on digital solutions, on the other hand, should have an easier time of it, he believes, because they can scale more quickly. He is referring to financial products, ICT developments in general and digital tools in the healthcare sector.

Cleantech is now on the rise

The predicted decline in investment is also a consolidation, especially in the biotech sector. Corona was a shock, which subsequently massively promoted government investments in pharmaceutical startups, for example. The cleantech sector, which focuses on technological solutions for CO2 reduction and sustainable energy supply, is now on the upswing.

Investors follow a certain herd instinct

Current events have a strong influence on which startups venture capital is invested in, confirms Grichnik. There is definitely a certain herd instinct. Investors look at what the competition is doing and follow suit. The shift toward cleantech is also strongly influenced by the current energy crisis.

Financing is a core element when starting a business

In startup education, financing is a core element, so that future founders could better compete for investor funding, Grichnik continues. After all, in the early stages, a startup primarily costs time rather than money, but the startup runway - the financial runway - is an issue from the very beginning, he says, and is a permanent preoccupation for notoriously penniless founders. However, the issue of financing has become more complex.

Many founders want to solve social problems with their business ideas

Many founders want to solve social problems with their business ideas and not primarily make a profit, says Grichnik. This means that they have a deep conviction for their idea, have often already invested a lot of work and therefore also have an ambitious vision. This is important in order to communicate clearly with potential investors. And the founders' stronger focus on sustainability aspects meets with an open ear among investors: In the sense of "sustainable due diligence," they are increasingly looking at whether and how sustainability is integrated into a business model.