IS VAUD AS INVESTOR-FRIENDLY AS IT IS BUSINESS-FRIENDLY?

When Jesús Reglero and his colleagues were looking for somewhere to set up the European headquarters for their operations, the obvious choices were London, Paris, Madrid – where Jesús is from – and Zurich.

So how did they end up in Lausanne? “Three things,” says Jesús. “Solid business reasons, quality of life – this city is very family-friendly – and Innovaud’s investor team.”

Short-listing Switzerland

The group quickly narrowed its list to Switzerland owing to the country’s economic stability and regulatory-friendly environment. But then they had to choose a city in Switzerland to set up shop. Jesús was familiar with Lausanne, having completed his executive MBA at IMD Business School, and got in touch with Innovaud and its investor team. His contact at Innovaud, Yuliya Blaser, proposed an exploratory trip to the canton, which Jesús and his colleagues did in October 2023.

Switzerland is known as an attractive location for large multinationals, family offices and wealth-management firms, but the team wanted to confirm all this on the ground. They liked what they saw.

The first thing Jesús mentions is the sheer number of potential opportunities in this region. Yuliya and her team pulled out all the stops, introducing the six-person team to countless entrepreneurs in the region, from startups on up. The Innovaud team also highlighted the solid startup ecosystem: local universities, including EPFL and IMD, are a veritable breeding ground for startups, and they enjoy various forms of support – funding, exposure and networking, to name a few – from local and national innovation agencies and from long-established businesses.

Lausanne’s physical location – with easy access to both Geneva and Zurich, not to mention the rest of Europe – is another reason an ambitious investment team would want to be based here.

“We looked at other, larger financial centers in Europe, but we liked the fact that Switzerland, and Lausanne in particular, are really close to everything,” says Jesús.

Origins of Contrail Capital

Jesús started his career in 2001, working for ten years in investment banking for a handful of top companies, including Goldman Sachs, Lazard and UBS. Whether based in Madrid or London, he advised Spanish companies on mergers, acquisitions, funding, disposals, restructuring and IPOs.

Following the financial crisis of the late noughts, Jesús saw an opportunity to switch gears. Deciding to do an executive MBA at IMD, he spent a year and a half shuttling between Madrid and Lausanne. During that time he picked up some consulting work and, after finishing his degree in 2013, he decided to turn that nascent business into a full-blown advisory firm, RS Corporate Finance.

In 2017, Jesús’s firm helped broker a deal between a Spanish renewables company and a US investor group. Jesús was then offered a seat on the board of the company that came out of that deal – Sofos Harbert Renewable Energy. The other board members were Billy Harbert and Steve Dauphin, from Bonaventure Capital in Birmingham, Alabama, and Tomas Wängberg, a Swedish investment advisor who has a long-standing relationship with Bonaventure. Jesús remained on the board until 2023, when the company was sold to Grenergy, a Spanish listed company.

The team got on so well that when they were celebrating the transaction in Paris, they decided to consider setting up a venture – ultimately called Contrail Capital – in Europe. Whereas Bonaventure Capital is a US-based vehicle backed by Harbert, Contrail Capital would be the European equivalent.

Jesús was joined on the October 2023 exploratory visit by Harbert, Dauphin and Wängberg; Carter Burleson, also from Bonaventure Capital; and Rodrigo Yagüe, from RS Corporate Finance. Harbert came up with the name Contrail at that time, while walking near Lake Geneva: he looked up and saw all the plane contrails crisscrossing in the sky, seeing a metaphor for the business deals the new firm aimed to arrange between European and American companies.

In addition to Jesús, Contrail Capital’s founding partners consist of Harbert, Wängberg and Dauphin.

Connecting Switzerland and the US

Contrail Capital invests and works with low middle-market companies that meet three criteria: they must be scale-ups with an established revenue stream; they must already have a professional investor onboard; and they must have plans to expand to the US. The first two of those criteria help the firm ensure it’s investing in viable companies. The third criterion is crucial because that’s where Contrail Capital’s real value lies: its links to the US market, drawing on the experience – and Rolodex – that Bonaventure Capital’s people have built up over the past 30 years.

“Contrail provides smart capital,” notes Jesús. “Our contribution is not just a financial investment but also our team’s experience, commitment and track record. The US is one of the most attractive markets, but it’s also one of the most difficult to break into.”

Contrail Capital’s deals include an agreement under which the investment firm will help its European investee companies tap into the US market and its US investee companies tap into the European market.

The firm aims to allocate between half a million and a million francs or dollars per investment, and it’s already struck deals with three companies – Scantrust, Conserv and Matis. It has also backed an investment in ACE Swiss Technology Fund, which is managed by ACE & Company, a Geneva-based private equity and venture capital group. Scantrust and Matis are based in Vaud Canton, ACE is registered in Geneva, and Conserv operates out of Birmingham, Alabama.

The firm has a medium- to long-term horizon. “We have patient money,” says Jesús. He expects the firm to remain focused on helping European – especially Swiss – companies break into the US market, although he sees considerable potential in the other direction as well.

The team will be in investing mode until the end of 2025, and some other projects are currently in the works. Jesús reiterates that Contrail Capital does not limit the scope of its targets to Vaud-based companies, and adds that the firm is open to working with other investors who share the same values.

Innovaud’s investor team

Jesús found Yuliya and her colleagues to be very helpful from the start. He got answers to all his questions – if the Innovaud experts didn’t know, they found the person or office that did.

“Innovaud is a public organization, yet they’re very business-oriented,” says Jesús. “They’re more like private investors, or consultants, than civil servants.”

Jesús is also quick to point out that Innovaud is an excellent ambassador: “Saying you’re referred by Innovaud really opens doors.” That’s how the Contrail team met so many local business leaders during their exploratory visit in 2023.

And going forward? “There’s no doubt in my mind that Innovaud will remain very important for my firm’s ongoing development,” says Jesús, who is still in close contact with Yuliya and her team.