redalpine founding partners Michael Sidler and Peter Niederhauser
Swiss-based venture capital firm redalpine will today announce it has raised $200 million for its seventh European investment fund, taking its total assets under management above $1 billion for the first time. The fund, redalpine capital VII (RAC VII) will invest in seed and early-stage technology businesses from across Europe, pursuing a similar strategy to the six previous funds it has launched since 2006.
“We describe our approach as ‘empowering game changers’,” says redalpine founding partner Michael Sidler. “We are interested in businesses at the forefront of new technologies that have the power to be highly disruptive.”
Naturally, the nature of those businesses has changed dramatically in the near two decades since the venture capital firm launched its first fund. Its initial investments focused on disruptive social networks; today, Sidler is more interested in technologies such as nuclear fusion, gene editing, advanced materials science and artificial intelligence (AI).
Sidler expects RAC VII to make between 15 and 20 investments over time, but the new fund has already invested in nine companies in these areas.
They include Germany’s Proxima Fusion, a Max Planck Institute for Plasma Physics spin-off that is focused on the future of clean energy production through fusion technology, LegalFly, a Belgian business employing AI to transform legal workflows, and Expression Edits, a gene-editing company in the UK that aims to streamline and accelerate the development of life-saving therapies.
In practice, Sidler says, the most exciting businesses are often using a panoply of cutting-edge technologies in tandem to pursue their goal. He points to Proxima Fusion, which has employed AI to help it develop the magnets needed as part of the fusion process and harnessed the latest advances in material sciences.
Picking out the likely winners in these emerging fields is difficult, with redalpine screening as many as 5,000 early-stage businesses each year to hone its shortlist of potential investments. Around half the firm’s employees are scientists rather than traditional investment professional, an approach that Sidler believes gives the firm an edge when weighing up the merits of new technologies and individual businesses.
“As our team has grown over the years, we’ve kept adding scientists to it,” he says. “Ultimately, with early-stage businesses, you’re investing in people because there is very little in the way of financial performance to go on; but you’ve also got to understand the technicalities of the technology and the potential market for it.”
It’s an approach that has delivered good results to date. Analysis of redalpine’s previous funds suggest they have delivered an average annual return of 24% after costs over the past 10 years. Sidler is making no promises about the future, but he believes the current market environment provides a golden opportunity, given anxiety about the tech sectors that has seen many investors become more cautious.
“In many ways, now is the best of all times to be launching this sort of fund,” he argues. “There is a scarcity of capital but an abundance of opportunities.”
To identify more of those opportunities at an earlier stage, redalpine is expanding its geographical footprint with a new office in London. Headquartered in Zurich, the firm already has an office in Berlin, but now believes it needs boots on the ground in the UK too.
“Establishing a presence in London is the next logical step in our growth journey,” argues Sebastian Becker, general partner at redalpine and head of the new London office. “London and the UK have shown very impressive advances in the past few years, particularly in deeptech and AI – areas that align perfectly with our investment strategy at the continuum of software and science.”
Lino Teuteberg, co-founder of Taxfix, a fintech in which redalpine invested in with a previous fund, says the firm is a supportive but challenging shareholder. “The founding partners and team served as valuable sparring partners around the topics of product development, growth, and hiring,” he says. “They continue to double-down on their support by investing from Seed to Series D.”
Sidler expects to announce new additions to RAC VII’s portfolios in the coming months, with the fund-raising now closed. The oversubscribed fund, backed by investors including pension funds, family offices and funds of funds, is the largest ever raised by the firm.
