Many venture capital funds, especially those in more recent years, have been unable to return capital to investors. Swiss venture capital firm Redalpine is one exception, which the firm says is the main reason its newly announced $200 million seventh early-stage fund was oversubscribed.
Redalpine Capital VII (RAC VII) is already on track to back 15-20 early-stage European companies and has made nine investments to date, including German nuclear start-up Proxima Fusion.
“We closed our first round of funding and then we started putting money into it,” founding partner Michael Shidler told TechCrunch. The funding will also help the company open an office in London.
That consistent top-quartile return profile undoubtedly helped Ridalpine secure new funding. The firm manages more than $1 billion in assets across its Evergreen Summit funds and early-stage investment products, and has built a large limited partner network, enough of whom were willing to double down on their investments based on past performance. “I did some math recently and across all seven of our funds, from the very old to the very new, our average net return over the past 10 years has been 24% per year,” Shidler said.
Some of those returns likely come from being early backers of European fintech unicorns like N26 and Taxfin, but Redalpine's investment thesis is more in line with current trends. Shidler co-founded Redalpine in 2006 with partner Peter Niederhauser, a software entrepreneur, to focus on Europe and what they call “the software and science continuum.”
In today’s terms, we might call it European deep tech, which has been the theme of recent funds such as Elaia, First Momentum and IQ Capital. In particular, spin-outs from European universities generate attractive deal flow to attract LPs.
Shidler acknowledged this trend, but pointed to Redalpine's first-mover advantage: “Having a very close network with all the universities and scientific communities, and having people with scientific backgrounds in physics, medicine, materials science and biotechnology, is a unique advantage right now, and it takes a long time to build that. People with experience as entrepreneurs, investors and scientists are very rare,” he said.
But like previous vintages, RAC VII remains sector agnostic, with Redalpine seeing innovation opportunities across a wide range of sectors, including energy, health and food. This breadth also serves as a buffer against market volatility. Shidler said that broad reach is one of the reasons Redalpine has been able to exit portfolio companies even in “more challenging markets like 2022-2023.” Looking to 2024, “we've already been able to secure some exits from our still-young Fund VI and Summit funds,” Shidler said.
Shidler himself has a PhD in molecular biology, and Redalpine is no exception. “50% of our investment professionals are [have] “We're looking for people with a science or engineering background,” he says. This allows the company to “interact on an equal footing with scientific founders” as well as receive operational support. He gives the example of medtech startup Actia, whose general partner Daniel Graf is helping it expand internationally after “playing a key role in recruiting the new CEO.”
While Graph is based in Silicon Valley, Redalpine also has offices in Berlin and Zurich, and the upcoming London office will help Redalpine “engage with the London ecosystem,” Shidler said. “We're seeing more and more really interesting deals coming out of universities in and around London,” he explained.
ExpressionEdits, a spinout from the University of Cambridge, is one example of the type of company Redalpine is looking for in the UK. Backed by RAC VII, it is developing a computational gene editing platform that leverages AI to improve the effectiveness of treatments. “Humanity is currently at an inflection point in technological development, with advances in AI and biotechnology driving this change,” Shidler told TechCrunch.