Pre-money valuation of ETH and EPFL spin-offs founded between 2017-2020

Valuing pre-revenue start-ups, especially those spun off from top universities, involves analysing a specific data set with comparable transactions. Differences in qualitative factors such as team strength, technology innovation, and market potential justify deviations from the mean valuation. In this post, we discuss the average and median pre-money valuation of early-stage spin-offs from two of Switzerland’s leading universities: ETH Zurich (ETH) and École Polytechnique Fédérale de Lausanne (EPFL).

Seed Phase Valuations

ETH Spin-Offs

• Average Pre-Money Valuation: CHF 6.4 million
• Median Pre-Money Valuation: CHF 5 million

EPFL Spin-Offs

• Average Pre-Money Valuation: CHF 2.6 million
• Median Pre-Money Valuation: CHF 2.8 million

Analysis

The pre-money valuation of ETH spin-offs in the seed stage is significantly higher than that of EPFL spin-offs. Specifically, ETH spin-offs have a valuation that is likely to be 78% to 146% higher than EPFL spin-offs. This higher valuation can be attributed to factors such as the stronger perceived brand and market potential of ETH-based startups. Additionally, the distribution is skewed to the right, indicating that most spin-offs are valued below the average, but a few high-valued startups pull the average up.

Series A Valuations

ETH Spin-Offs

• Average Pre-Money Valuation: CHF 23 million
• Median Pre-Money Valuation: CHF 21 million

EPFL Spin-Offs

• Average Pre-Money Valuation: CHF 10.6 million
• Median Pre-Money Valuation: CHF 20.3 million

Analysis

The Series A pre-money valuations also show significant differences. On average, ETH spin-offs have a pre-money valuation that is 116% higher than EPFL spin-offs. However, the median valuations of the two groups are comparable, with only a slight deviation of 3.39%. This suggests that while the top ETH spin-offs achieve higher valuations, the overall distribution of valuations between the two universities is more aligned at this stage.

Factors Influencing Valuations

Team Strength

• ETH: Often perceived to have access to a broader and more experienced talent pool, leading to higher valuations.
• EPFL: Also has strong teams, but may not have the same level of market recognition as ETH.

Market Potential

• ETH: Spin-offs frequently target larger, more lucrative markets, attracting higher investor interest.
• EPFL: Spin-offs might focus on niche markets, which can lead to lower initial valuations but strong potential for niche dominance.

Technological Innovation

• ETH: Known for groundbreaking research in fields like robotics, AI, and biotechnology, which are highly attractive to investors.
• EPFL: Also strong in technology and innovation, particularly in energy, materials science, and microengineering.

Conclusion

The valuation of spin-offs from ETH and EPFL during the seed and Series A phases reveals a significant difference in average valuations, with ETH spin-offs generally receiving higher pre-money valuations. However, the median valuations at the Series A stage are quite similar, indicating that both institutions produce high-quality startups capable of achieving substantial valuations as they progress.

Understanding these valuation trends can help prospective investors make informed decisions and assist founders in setting realistic expectations during their fundraising efforts.