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Created on 09.08.2024

Investors wanted: financing startups and SME

If you want to be independent or to set up a startup, the first thing you need is money to rent office space, open production sites, hire employees, or to pay your own salary. But how exactly do you find out how much everything costs, and what options do you have to finance your own startup? Find out what matters when it comes to financing a startup, how to look for and find investors, and when exactly you need a capital payment account.

At a glance

  • In addition to a good business concept, startups need investor capital.
  • Making your financial plan the cornerstone of your business plan will provide investors with a vital basis for making their investment decisions.
  • But how do you go about finding investors? Startup events and awards are good platforms for doing just that.
  • PostFinance not only has a startup package plus suitable solutions at hand for company founders, it also offers the right capital payment account for starting capital.

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Do you have an exciting business idea, but your funds are limited? This is a challenge most startups and company founders are faced with. In the initial phase especially, when outgoings typically exceed income, sufficient financing is essential. This makes it all the more important to get a firm grip on startup financing. What costs do company founders incur, when are they due, and what sort of buffer should you budget for to deal with the unexpected?

Craft your financial plan: the cornerstone of a business plan

Coming up with a decent financial plan is vital when setting up a company. The financial plan captures, in figures, what you have set out in your business plan as the business idea, competition analysis and market potential, and gives some indication as to whether your startup will actually be financially viable. At the same time, it shows how much capital you’ll need to finance your independence or SME. If you need money for your startup in particular, then having a business and financial plan is key: it provides investors with a basis to decide whether to invest in your company or not. With this in mind, be sure to invest enough time in drawing up your financial plan. If you want to win investors over to your business idea, your financial plan should, as a rule, cover the first three to five years. The first year is broken down into individual months.

Jump start your company

PostFinance supports startups in their first steps towards independence through its partnership with the “Institut für Jungunternehmen” (institute for startups, or IFJ). The professional support it has provided on the startup scene means that the IFJ has established itself as the leading authority for company founders. 

THE IFJ offer

  • Easy, quick and secure company founding online
  • Founding of a sole proprietorship, general partnership, limited liability company (GmbH) or private limited company (AG) free of charge if opening a PostFinance business account at the same time
  • Free courses on setting up a company, business plans, acquiring new customers, online advertising and bookkeeping
  • Support with finding financing thanks to the Venturelab (The link will open in a new window venturelab.swiss) accelerator programme, or access to startup capital of up to CHF 130,000 through the Venture Kick (The link will open in a new window venturekick.ch) initiative
  • Free Innosuisse training programme for projects and startups in the ICT, advanced engineering, medtech and biotech sectors

What should be in your financial plan?

You need to map out the following points in detail when crafting your financial plan:

  • The idea of the revenue plan is to estimate revenue for the next three to five years as realistically as possible. It forecasts how many products or services you will sell at what price.

  • The cost plan estimates and records all costs incurred in the first three to five months. These include fixed costs (incurred regardless of revenue) such as wages, rent, insurance or interest; variable costs (depending on revenue/the order intake situation ) such as material/supply costs, as well as startup costs.

  • From procuring computers and machines to setting up your office interior: investments often make up a large portion of the capital required to set up a company. This plan records all the planned, necessary investments, which allows you to determine capital requirements. This allows you, and, above all, your investors and creditors to gauge what the capital requirements of your startup or SME are. In addition to your initial investments, be sure your investment plan also includes growth or replacement investments that you expect in the following years. Company founders use an investment plan to list all necessary and planned investments that are required to break even or to expand the business. This includes costs for property such as construction and conversions, machinery, appliances, furniture and vehicles, patents, warehousing/material storage, marketing campaigns and so on. The expected costs and prices are assigned to each investment, then tallied up. 

    More tips  on realistic investment planning on the Confederation’s The link will open in a new window SME portal (sme.admin.ch).

  • Liquidity planning is about using the revenue, costs and investments you have identified to compare expected income with expected outgoings for a given period. The liquidity plan indicates when potential liquidity shortfalls will emerge, and how much in capital requirements you need to cover externally.

  • In the financing plan, you lay out what funds you need and how you plan on covering these capital requirements. In simple terms, capital requirements are essentially the amount of money a startup or SME needs to reach its objectives in a given period. A financing plan often contains an analysis of the various financing options.

  • Profitability is one of the most important indicators of a company’s economic viability. In a nutshell, if there’s still money left once you’ve deducted all the costs from your revenue, the company can be said to be profitable. This profitability calculation tells you whether your project is economically viable, and planned revenue is contrasted with planned costs. 

What types of financing are there?

Essentially, there are two types of capital: equity capital and debt capital.

What counts as equity?

Equity capital covers all funding that owners, partners and shareholders contribute towards the share capital of the company in the form of shares or capital contributions. Partners and shareholders who inject capital become joint owners and have voting rights. This means equity capital offers substantial entrepreneurial freedom of choice (there is no reliance on third-party investors and creditors), is accessible in the long term, and is available to the business on a flexible basis. Stakeholder assets are tied up in the company. 

What is debt capital?

Debit capital is the proportion of capital that is not contributed by the owners or partners themselves, but rather by third-party investors, for instance in the form of a bank loan. Investors of this kind set conditions for the loan and charge a risk-based rate of interest. Debt capital provides additional financial leeway to build up, develop or expand a business. Debt capital is usually invested for a limited period of time.

Some ways of procuring debt capital include:

  • bank loans are especially suitable for companies offering collateral such as real estate, receivables, stock, machinery, patents and sureties, and which are able to produce solid financial figures that assure the creditor the loan will be repaid. The benefits of bank financing is that liquidity is made available to a company immediately.

    Seeing as a company’s future performance is very uncertain, and founders are generally unable to offer much in the way of collateral, using debt capital from banks to finance startups and fledgling companies often proves tricky. 

    Tip: Surety bond cooperatives
    The Confederation supports various surety bond cooperatives that can make it easier for SME to access bank loans if needed when setting up or growing a company. This is because surety bond cooperatives are able to offer guarantees to banks that are lending money to companies. 

    The link will open in a new window Go to “Sureties for SME” at seco.admin.ch

  • With this type of financing, loved ones such as family and friends supply the capital. Capital from family and friends can take the form of loans, equity investments, or a combination of the two. These arrangements are usually informal in nature. More often than not, the money is invested in the startup without a formally agreed repayment obligation, and is occasionally even non-repayable. However, this does mean your loved ones are exposed to a financial risk, which is something the investors should be made aware of. 

  • Venture capitalists are professional investors or investment companies that invest in companies with substantial growth potential early on. Not only do they provide financial support, they also often bring their own strategic expertise and networks to the table. Venture capitalists tend to invest large sums of money and expect shares in the company in return so they can benefit from its increase in value. This type of financing is usually only suitable for business models that promise a high scaling effect.

  • Business angels are individual investors who invest their own money in startups, often very early on in the company’s development. Unlike venture capitalists, business angels are often former entrepreneurs themselves or successful professionals. Not only do they supply capital, they also bring their own industry expertise, experience and networks to the table to help fledgling companies achieve growth. In return for their investments and commitment, they receive shares in the company, which they sell off at a later date. 

  • Crowd lending is a form of financing where several private individuals or institutional investors issue loans to startups and SMEs via online platforms. Unlike traditional loans, which are provided by banks or other financial institutions, crowd lending takes place between the investors and the borrowers directly. Crowd lending involves startups getting money in return for interest. 

    The link will open in a new window Go to lend.ch

  • Crowd lending is when a number of investors invest in companies or projects, usually via online platforms. It involves startups getting money in return for company shares, or in return for a share of future profit.

  • Suppliers issue supplier credit that helps startups in their founding/expansion phase in that it guarantees more generous payment conditions than usual (e. g. 90 days rather than  30). Supplier credit is a form of financial agreement where a supplier delivers goods or services to a customer on a credit basis.

Pros and cons of various financing types

Financing typeProsCons
Financing type
Bank financing
 Pros
  • Access to larger amounts
  • Long-standing partnership with an established institution
 Cons
  • High security requirements
  • Difficult for startups without collateral
Financing type
Friends & family
 Pros
  • Quick access to capital
  • Negotiable or interest-free repayment conditions
 Cons
  • Possible strain on personal relationships
  • Limited capacity for higher financing amounts
Financing type
Venture capitalists
 Pros
  • Large financing amounts possible
  • Access to networks and expertise
 Cons
  • Loss of control and freedom of choice
  • High growth expectations and exit strategy
Financing type
Business angels
 Pros
  • Flexibility in negotiations and conditions
  • Access to experience and networks
 Cons
  • Limited funding compared with venture capitalists
  • Involvement in business decisions
Financing type
Crowdinvesting
 Pros
  • Access to a larger pool of investors
  • Several small-scale investors means the risk is more diversified
 Cons
  • Campaign requires a lot of work
  • Need to win over the crowd
Financing type
Crowd lending
 Pros
  • Capital procured quickly
  • No loss of company shares
 Cons
  • Risk of the platform failing or of payment defaults
  • Credit rating checks and collateral required
Financing type
Supplier credit
 Pros
  • Short-term liquidity savings (good received before payment)
  • Informal and quick
 Cons
  • Actual interest is often high, so potentially expensive
  • Depends on suppliers

Mezzanine financing (which comes from the Italian “mezzanino” meaning “intermediate floor”) is a type of company financing which comes somewhere between debt capital and equity capital due to its economic and legal configuration, which makes it a mixed form of financing. It’s an option for startups when they require greater levels of financing than what they receive from banks and other investors. Mezzanine financing is issued by mezzanine funds, private investors or on crowdinvesting platforms, to give a few examples.

An example of mezzanine financing is what’s known as the “profit-participating loan”: here, the lender is not co-owner of the company, but they do have a stake in a potential sale of the company and any profits, just like a co-owner. In light of this, profit-participating loans are essentially long-term shareholder loans. They have a fixed basic interest rate, as well as a performance-based component. In the event of insolvency, profit-participating loans are serviced after the debt capital, if there is any money left. In return for taking on this risk, the lenders are compensated with higher interest and profit-based payments.

What do you need to bear in mind when it comes to financing?

Realistic planning is essential to company financing. If revenue growth is slower and the costs are higher than expected, you may have a liquidity problem. You should therefore build a generous buffer, which will be honoured by investors.

How and where can you find investors in Switzerland?

A good way of drawing the attention of investors to you is to organize startup events and awards. Some well-established startup events include the Startup Nights in Winterthur (the biggest startup event in Switzerland), or the Startup Days in Bern, where startups can network with investors, companies and other major players in the startup ecosystem.

Some of the best known awards include the TOP 100 Swiss Startup Award and >>venture>>.

You can find other exciting opportunities to win investors over to your business idea at startupticker.ch.

Another way is to approach investors personally. You can find a list of possible investors at startup.ch.

What should you look out for when selecting an investor?

Investors should not be evaluated solely on their financial strength. Instead, it’s a much better idea to check what type of investor is best suited to your business idea, and who can support your startup with their experience, expertise, and a broad, established network. And, last but not least, there must be chemistry there. Investments in startups are often longer-term commitments where the most important factor to success is bound to be the personal relationship between the investor and founder. 

Which types of financing are suitable for which cases?

This comes down especially to the amount of capital. If you want to be independent on just a little bit of a capital, i.e. a few tens of thousands of francs, then opting for capital from your family and friends may seem like an obvious solution. For sums in the hundreds of thousands of francs, bank financing may be an option if you can offer the appropriate collateral. If it’s an innovative business model with high risks, investors are usually the only option. 

How can you win investors over to your business model in the very first meeting?

One thing you must be able to do is summarize your business idea clearly and succinctly. You should have short, succinct, coherent answers to the three key questions:

  • What problem will your company solve?
  • How will your company solve the problem?
  • How do you plan on making money from it?

Useful to know: when do you need a capital payment account?

If you opt for the legal form of Ltd or LLC for your new company or startup, you will need a capital payment account. You can deposit your starting capital safely in this account until it’s converted to a business account once you’ve founded your company.

Also explore PostFinance’s attractive startup package. If company founders open a business account with us as the basis for all additional financial transactions, we’ll waive the account management fees for two years.

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