A Matter of Scale

There is a contradiction at the heart of Swiss biotech that Dominik Escher has spent the better part of two decades trying to resolve. The science is exceptional. The talent is deep. The pharma infrastructure – Roche, Novartis, decades of accumulated expertise – is a flywheel that other countries have spent billions trying to replicate. And yet, when a promising biotech company needs serious growth capital, it still, too often, has to board a plane.

In the final part of our series, Escher explains why Switzerland keeps underselling itself – and what it would actually take to fix it.

Built Different

Ask Escher what makes Swiss biotech distinctive and he doesn’t reach for the usual talking points. He talks instead about what happens when you dig. “In the last twelve months, we have seen more than 600 biotech companies wanting to pitch to us,” he says. “And I always have to say: Swiss quality is amazing compared to others.” The contrast he draws is with the United States, where he sees outstanding presenters with polished stories and, sometimes, not much underneath. “In Switzerland, you might not have the most shiny presentations. But if you start to scratch, you see: wow, there is fundamental research and fantastic data behind.” Less Theranos. More substance.

The explanation, he thinks, is structural. Switzerland has the research universities – ETH, EPFL, Basel, Zurich – sitting alongside the pharma industry in the same small geography, which means the distance between a discovery and someone who knows how to develop it is genuinely short. “Switzerland is one of the top countries in biochemistry, molecular biology, genetics,” Escher says. “And this combines with pharma experience that we have had for decades, and with role models – successful exits that showed that this was actually possible.” Each generation of exits produces the next generation of founders, who know the terrain because they have walked it before.

These role models- founders who have done it before- in Swiss biotech are in stark contrast to the usual landscape in the Swiss scale-up world. Swiss biotech has proven that billion dollar exits and IPOs can come out of the heart of Europe.

Approximately 40% of the Pureos portfolio is in Swiss companies. Not because of any patriotic obligation, but because the quality is there. “They’re doing very, very well,” Escher says. “They’re really top notch.” And when international money starts circling, he fights to make sure those companies stay where they were built.

The Bavarian Trap

When Escher was in the process of raising the first round of financing for ESBATech back in 1998, one of the term sheets that came in arrived with a condition: move to Bavaria. Germany was building its biotech ecosystem at the time, grant money was flowing, and Munich wanted companies. “They had some grants which they offered,” Escher recalls. “And at the end, we stepped out of that term sheet.” The conditions for building a biotech, he had already concluded, were right in Switzerland. Why would they move?

He still argues the same case with his portfolio companies today, but he is more forensic about it now. When a new investor comes into a Swiss round, one of the first questions Pureos asks is what that investor thinks about the company’s location. “If they say, you know, I think the US is much better for a biotech – of course you’re getting careful about inviting that investor to join the round.”

The cautionary tale he returns to is Boston. A wave of European biotechs relocated there – drawn by the cluster, the talent density, the proximity to pharma – and for a while it felt like the right move. Then the funding cycle turned. Companies that had moved stopped finding what they came for. “We have now seen a wave of dying companies around Boston,” Escher says. “All of a sudden lab space is getting very cheap in the Cambridge area again – and a couple of years ago it was almost not affordable.” The lesson isn’t that Boston is bad. It’s that a biotech is already global. Its clinical trials happen across borders, its preclinical testing is distributed, its pharma partnerships don’t care about the address on the legal entity. “As a biotech, you are anyway global,” he says.

The Missing Link

Here is where the paradox bites. If the quality is there and the location advantage is real, why does Switzerland still have a funding gap? Escher’s answer is specific, and he doesn’t soften it: pension funds.

“Switzerland is such a wealthy country,” he says. “And the percentage of pension money that goes into innovation is ridiculously low.” Swiss pension funds are theoretically allowed to allocate up to 5% to venture. So far, the actual allocation is below 0.1%. “Even just 1% would move the needle and make Switzerland the startup stronghold it deserves to be”, Escher states.

Part of the problem is history. When Swiss pension funds decide to allocate to venture capital, they tend to go to the United States, to funds already in their tenth or twelfth generation with audited track records and decades of return data. “In Switzerland, we first have to get to a point where we can say: we have the fifth or sixth fund generation and we have good numbers. Then pension funds will probably start to invest.” Pureos has some Swiss pension fund LPs. Not nearly enough. And the money that does flow to innovation from Swiss pension coffers still largely flows across the Atlantic, to funds that had a 30-year head start.

To Co or Not to Co (-Invest)

When international money does come in – and it does, increasingly – Escher has a clear framework for evaluating it. The question isn’t just whether an investor is credible. It’s whether they share the same destination.

“We always want to get to a clinical proof of concept with our companies,” he says. “There are funds which simply have a different strategy that does not match ours.” What he’s looking for is alignment on outcome and – crucially – alignment on timing. A co-investor at the end of their fund cycle will be feeling pressure to show returns that a Pureos investment at the beginning of its cycle hasn’t yet had time to produce. “Some investors might push too early for an exit that we consider to be premature,” he says. “That needs to be balanced.”

The human dimension matters too. “You see people you think are nice and good to work with,” he says, “and you see people with whom you would never sit on a board.” This is not a minor consideration. A board is where the hard conversations happen – about CEO performance, about pivots, about whether to take the acquisition offer or hold out for something bigger. Having the wrong person at that table, however well capitalized, is a problem no term sheet can fix.

Swiss Seal of Quality

What gives Escher confidence, despite the funding gap, is how Switzerland is perceived from the outside. “If you say you’re a Swiss biotech, that’s already a seal of quality,” he says.

This is earned, not assumed. It comes from the research institutions, from the exits, from the culture of precision that runs through the Swiss scientific community. And it survives the absence of the grant infrastructure that other European ecosystems rely on. France gives companies money back for preclinical testing done on French soil. Germany has historically doubled and tripled VC investments with public co-funding. Switzerland offers neither. “We don’t have many grants supporting Swiss biotech companies,” Escher says. His view is that this is probably fine – the German experiment with subsidized venture, in his experience, inflated round sizes and company valuations without improving underlying quality, and the majority of those companies didn’t survive. “I really think we need the market,” he says. “But we just need much more local venture capital.”

Cold Water Makes the Gut Grow Wise

When Escher started ESBATech in 1998, founding a company was not, at the University or elsewhere, a respectable career move. “Some professors refused to say hello to me afterwards,” he recalls. “You were sort of an enemy. You’re leaving academia, you’re going for profit – how dare you?” Today, starting a company is a genuine option for ETH students and postdocs, not a deviation from the correct path. Spin-off culture is celebrated rather than stigmatized. The professors who would have turned their backs in 1998 are more likely today to be co-founders.

This, in Escher’s view, is the most important shift that has happened in the Swiss ecosystem since he entered it. Not the legal frameworks, not the financing structures, not the international recognition. The fact that a young researcher looking at their options now sees entrepreneurship on the list. “I think it’s very nice,” he says, “for students and postdocs to consider an entrepreneurial position and jump into the cold water.”

The cold water, as he has spent thirty years demonstrating, is where the gut gets built. And that gut has the potential to build empires that save lives.