Financing and funding for Swiss startups

Swiss startups have various financing options: equity, bank loans, Venture Capital, Business Angels, crowdfunding and government funding. Innosuisse offers up to 50% project financing. Cantonal programs complement national funding.

Financing is a critical success factor for startups. Here is an overview of all important financing options:

Equity and bootstrapping:

Advantages:

• Complete control: No external investors
• No interest: No repayment obligations
• Quick decisions: No consultations required
• Flexibility: Free business decisions

Disadvantages:

• Limited means: Personal savings limited
• High risk: Total loss possible
• Slower growth: Less capital for expansion
• Stress: Financial burden on founders

Bank loans and credits:

Traditional bank loans:

• Current account credit: Flexible liquidity solution
• Investment credit: For facilities and equipment
• Working capital credit: For operating costs
• Interest rates: 2-8% depending on creditworthiness
• Securities: Usually guarantees required

Founder credits:

• Special offers: For young companies
• Preferential rates: 1-5% interest rate
• Flexible repayment: Adapted amortization
• Consulting: Included support

Venture Capital:

Seed financing:

• Volume: CHF 100,000-1,000,000
• Purpose: Product development and market testing
• Investors: Seed funds and Business Angels
• Equity: 10-30% company share
• Timeframe: 12-24 months

Series A and later:

• Volume: CHF 1-50 million
• Purpose: Scaling and expansion
• Investors: VC funds and Private Equity
• Equity: 20-50% company share
• Due Diligence: Intensive examination

Business Angels:

Characteristics:

• Investment amount: CHF 25,000-500,000
• Expertise: Industry experience and network
• Mentoring: Active support
• Flexibility: Quick decisions
• Networking: Access to contacts

Swiss Business Angel networks:

• Business Angels Switzerland: Largest network
• Zürich Business Angels: Regionally focused
• Venture Kick: Startup support
• Wingman: Matching platform

Crowdfunding:

Reward-based crowdfunding:

• Platforms: Kickstarter, Indiegogo
• Rewards: Products or services
• Volume: CHF 5,000-500,000
• Advantages: Market validation
• Disadvantages: Elaborate campaign

Equity crowdfunding:

• Platforms: Swisspeers, Lendico
• Company shares: Investors receive equity
• Volume: CHF 100,000-2,000,000
• Regulation: FINMA supervision

Government funding:

Innosuisse (formerly CTI):

• Innovation projects: Up to 50% financing
• Startup coaching: 12-18 months support
• Startup training: Structured program
• Funding volume: CHF 50,000-500,000
• Prerequisites: Innovation and market potential

Cantonal funding:

• Guarantees: Up to CHF 500,000
• Risk capital: Direct participations
• Tax advantages: Reduced profit tax
• Location promotion: Settlement incentives

Alternative financing forms:

Factoring:

• Receivables sale: Immediate liquidity
• Costs: 1-3% of receivable
• Providers: Banks and factoring companies
• Suitable for: B2B businesses

Leasing:

• Assets: Machines, IT, vehicles
• Advantages: Preserve liquidity
• Costs: 3-10% leasing factor
• Tax advantages: Deductible as operating expense

Timing and strategies:

Financing phases:

• Pre-Seed: Equity and family
• Seed: Business Angels and Venture Capital
• Series A: Professional VC funds
• Growth: Private Equity and banks

Success factors:

• Solid business plan: Realistic forecasts
• Convincing team: Experience and competence
• Market potential: Large target group
• Scalability: Growth opportunities

Costs and conditions:

Equity costs:

• Seed round: 20-40% company share
• Series A: 25-50% company share
• Valuation: 5-50x annual revenue
• Liquidation Preference: Preferential repayment

Debt costs:

• Interest rates: 2-15% depending on risk
• Processing fees: 1-3% of loan amount
• Securities: Guarantees or liens

Valuation and Due Diligence:

Company valuation:

• Discounted Cash Flow: Future-oriented valuation
• Multiple method: Industry comparison
• Venture Capital Method: Exit-oriented valuation
• Valuation range: 5-100x annual revenue

Due Diligence process:

• Financial examination: Accounting and forecasts
• Legal examination: Contracts and IP
• Market analysis: Competition and potential
• Team assessment: Qualification and motivation

Conclusion: A thoughtful financing strategy combines different sources and considers company development. Professional advice helps with the optimal financing mix.