EPFL's startups cautiously moving forward
The lockdown has been a real headache for most EPFL startups. All but a few were forced to halt their development. The pace of the economic recovery will play a decisive role, and experts are cautiously optimistic about fundraising opportunities going forward.
Startups may be dynamic, flexible companies, but they’re also vulnerable during times of crisis. There are many reasons why young companies struggle when the economy is flagging: research and development can take longer, revenues may be low or even nil for a couple of years, and significant outside investment may be needed. To stay afloat for the next few months, more than a quarter of the 208 companies in EPFL’s Innovation Park (EIP) applied for a loan under the federal government’s guarantee program. How well the economy picks up will, of course, play a key role in these companies’ future development. So far, none of them has gone under, but campus experts are calling for caution over the coming months. They nevertheless remain optimistic about fundraising opportunities.
Some startups have kept growing
EIP didn’t shut down completely. Many startups were able to continue developing their devices, provided they complied with the strict hygiene rules. “Some people involved in testing equipment continued to come to work,” says Laurent Coulot, the CEO of Insolight. Other young companies, like Ouay, which was founded by EPFL students and whose workshop is located in an EPFL lab, were able to take their equipment home just before the campus closed.
Medical startups were hit particularly hard by the two-month lockdown – hospital-based tests were stopped short, in some cases forfeiting several months of work and financial investment.
But some startups were able to quickly adapt their devices to meet new needs. Examples include Technis’s people-counting solutions, Rovenso’s cleaning robots and Abionic’s sepsis tests. Other startups have been developing technologies over the past few years that are now proving particularly useful, like the transparent face masks developed by Hello Mask.
No panic among investors
But most startups did not fare well during the pandemic, and observers think that close to half of them may be in danger. Jean-Philippe Lallement, EIP director, initially sensed a bit of panic about the lack of visibility. But that was soon allayed by the guarantees announced by the federal government at the end of April. A lot of companies on campus have made use of them, and some 10 million Swiss francs in support have also been granted by the Canton of Vaud.
“The support is very welcome but it’s not ideal for a startup,” explains Jordi Montserrat, the head of Venture Kick in French-speaking Switzerland. “The loans have to be repaid over five years, so it might end up taking that long for the company to start turning a profit.” EPFL Innovation Park has also set up a support plan, which 70 companies from EPFL and Campus Biotech have applied for. The financial aid will go towards rental costs and other park-related expenses. For a large number of companies, costs have already been cut because of the lockdown, so they should be in a better position as they wait for the economy to pick up again. “It’s going to take somewhere between four and 12 months for business to get back to normal,” says Montserrat. “Provided there isn’t a second lockdown, that is.”
But not everything came to a standstill for the past two months: a number of large funding rounds still took place. Lunaphore, for instance, raised 25 million Swiss francs, and Flybotix 1.5 million francs. There’s as much money available now as there was before, especially since two new Swiss-based venture capital funds aimed specifically at domestic startups were created recently.
But things are out of kilter, and investors may well proceed cautiously over the months ahead. “Companies might find they have less room to negotiate fundraising terms and conditions,” says Lallement. Montserrat adds, “Unless we see a rapid V-shaped recovery, as some experts hope, it might be worth being a little conservative for a change.”
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