Venture capital in Switzerland: how it works

Venture capital is the capital that finances high-growth-potential companies in exchange for equity, with the aim of a significant return within a few years. In Switzerland the ecosystem is mature and well connected to the technology and university hubs, with funds active above all in areas such as deep tech, life sciences, fintech and software. Understanding how a VC fund thinks is the first step for a startup considering a raise.

What a VC fund looks for

A venture capital fund is not a bank and does not seek stability: it seeks rapid growth and scaling potential. Its model rests on a few big successes that pay for many failures. This radically changes what it assesses:

A large market: it must be able to become big, not just profitable.
A scalable product: growing without increasing costs in the same proportion.
A team able to execute: in the early stages this is the factor that weighs most.
Traction: concrete evidence that the market is responding, from first revenue to usage metrics.
A plausible exit path: an acquisition or listing that lets the fund monetise.

If the company aims for solid but not explosive growth, VC is probably not the right instrument: other forms of capital are better.

The funding stages

Fundraising happens in successive rounds, each with its own logic and amounts:

Pre-seed: initial capital to validate the idea, often from founders, angels and accelerator programmes.
Seed: the first structured round to build the product and find product-market fit.
Series A: growth is financed once the model has given clear signs of working.
Series B and beyond: capital to scale, enter new markets, accelerate.

At each round the valuation changes and the founders’ stake is diluted. The goal is not to avoid dilution, but to make sure a smaller stake is worth much more.

The investment instruments

In Switzerland the two most common instruments are:

A capital increase with the issue of new shares: the investor subscribes equity at an agreed valuation. This is the typical form of structured rounds (Series A onwards).
Convertible loans and similar instruments: the investor lends money that converts into equity at a later round, often at a discount. Useful in the early stages, when setting a valuation is difficult.

The choice of instrument has concrete effects on valuation, dilution and governance. In the SA (AG), an investor’s entry entails amendments to the articles of association, shareholders’ agreements and sometimes different classes of shares with specific rights.

Valuation and terms

The pre-money valuation determines how much equity the founder gives up in exchange for the capital raised. In the early stages it is more negotiation than science: team, market, traction and competition for the deal all weigh in. Beware of two extremes:

A valuation that is too high today creates problems at the next round if the results do not justify it (risk of a down round).
A valuation that is too low dilutes the founders excessively and demotivates them.

Beyond the price, the terms matter: liquidation preference rights, voting rights, anti-dilution clauses, board governance. An unbalanced term sheet can weigh more than the valuation itself.

What it takes to raise

A clear equity story: why this company, why now, why this team.
A credible pitch deck and financial model, with defensible assumptions.
A clean cap table: clear stakes, with no ambiguous situations that scare investors off.
Orderly metrics: revenue, growth, acquisition cost, retention, cash.
A precise ask: how much is needed, for what, and up to which milestone.

The process takes time: months can pass from first contact to closing. Whoever raises with an empty till negotiates from a weak position.

In short

VC seeks rapid growth and scale, not stability: it is not suited to every company.
Fundraising happens in rounds, with progressive dilution and rising valuations.
Capital increases and convertibles are the typical instruments, with different effects.
Valuation is a negotiation: avoid both excess and shortfall.
The terms matter as much as the price: read the term sheet in detail.

How we help

We help founders prepare for venture capital: equity story, financial model, a clean cap table, the corporate structure of the deal and negotiation of the term sheet. Solid numbers and terms designed with future rounds in mind too. Let’s talk about your round.