The SECO Startup Fund is under new management with a new strategy and a commitment to invest more than €5m to better serve firms in emerging markets.
The Swiss government has relaunched its SECO Startup Fund with a commitment of CHF 5m (€5.4m) for high-growth and impact-driven startups with Swiss ties in emerging markets.
The fund, which is backed by the Swiss State Secretariat for Economic Affairs (SECO), will be targeting early-stage as well as growing innovative companies with proven business models that struggle to land traditional growth financing.
Eligible companies must be able to show they have “meaningful” Swiss ties, either through its shareholders, suppliers or partnerships, or ensure alignment with SECO’s cooperation strategy, which revolves around the themes of decent work, access to critical goods and services and climate-smart capacities, SECO said.
“This isn’t just about capital. It’s about creating economic opportunity by helping businesses grow their operations and generate local employment through tailored financing mechanisms aligned with Switzerland’s global cooperation priorities,” said Patrick Elmer, CEO of advisory and impact investment firm iGravity, which took over the management of the SECO Startup Fund alongside Seedstars from FinanceContact last year.
Evolving criteria
Since its foundation in 1997, the SECO Startup Fund has invested CHF 44m in more than 120 companies. These include eWaka, a provider of 562 locally assembled electric bikes and a battery-swap network for 123 corporate clients. The Nairobi-based startup was backed by a CHF 500,000 loan from the fund and has a Swiss-backed leadership team.
“It has been an instrument that has been around for a long time, but we thought that some of the eligibility criteria that we used before were a bit outdated. For instance, it used to be a requirement that one of the investors needs to have residency in Switzerland, so we have tried to open that up a bit,” Irene Frei, deputy head private sector development at SECO, told Impact Investor.
The relaunched fund will predominantly focus on what SECO has identified as an acute funding gap in emerging markets: firms that are less than six years old, who have gone beyond the early-stage phase and are making money, according to Frei.
“These companies start to make revenue, but they are still not in a position to get a commercial loan. This specific gap is what we are most interested in,” said Frei.
The startup fund will offer post-revenue startups in Switzerland’s development partner countries in Africa, Asia, Latin America and Eastern Europe single digit interest rate loans and low ticket sizes, starting from CHF 300,000, according to Lucas Tschan of iGravity.
“We are trying to really help these companies secure the first loan, which then hopefully builds their financial history so they can secure more loans from commercial banks or more traditional investors in the future,” Tschan, head of advisory at iGravity, told Impact Investor.
“The risk perception that commercial investors have for these countries is, of course, quite high,” said Frei. “With an instrument like the second startup fund, we have the resources to really look into this. We have quite a thorough due diligence process that allows us to look at this risk in more detail, and then take a better informed decision.”
Alisée de Tonnac, CEO of Seedstars, said she was “excited” to see the next generation of innovative businesses in emerging markets thrive.
“Through the SECO Startup Fund, we’re able to channel funding toward entrepreneurs who are not only building strong companies, but solving real problems in their communities,” de Tonnac said.
