Equity/bootstrapping
One of the most common and direct ways to finance a startup is to use your own funds, known as “bootstrapping.”
In doing so, you invest your own money in the company and become a partner or shareholder. This has the advantage that you have the Maintain full control of your company and all profits and increases in value benefit you. However, the risk is also entirely on you.
Mailchimp is a successful example of bootstrapping.
3F — Family, Friends, Fools
The so-called 3F's — Family, Friends and Fools — are also a popular source of financing.
This method involves raising capital from close relatives, friends, or other benevolent people who believe in your idea. These investors often act as private investors and may offer interest-free or low-interest loans. The terms of these agreements must be negotiated individually.
Bank loans and loans
Bank loans are another form of external financing, but they are more difficult to obtain today than in the past.
A comprehensive and well-thought-out business plan is essential to convince the bank of your business idea. Banks are risk-averse and rarely finance creative or risky projects. However, a solid plan and strong evidence of your past successes can help.
Start-up competitions
There are numerous start-up competitions in Switzerland where you can win start-up capital. These competitions not only offer financial support, but also the opportunity to expand your network and make valuable contacts.
An overview of the most important competitions can be found at Young Entrepreneur Awards.
crowdfunding
Crowdfunding has gained a lot of popularity in recent years. Platforms such as Kickstarter, Indiegogo or Startnext make it possible for many small investors to invest in your business idea. You will not only receive the necessary capital, but also valuable feedback and a first customer base. Crowdfunding is particularly suitable for innovative products and services that can count on broad support.
Business Angels
Business angels are usually experienced entrepreneurs or managers who invest their own capital in startups. In addition to financial support, they often also offer valuable mentoring and access to their network.
This support can be decisive for the success of your startup. Business angels are usually looking for projects with high growth potential.
Venture Capital
Venture capital companies invest specifically in promising startups. These investments often come with extensive know-how and network support. The goal of these investors is a profitable exit in which they sell their shares at a higher price.
Startups benefit from the expertise and resources of venture capital companies, but must also relinquish shares and therefore some control. This comes with a corresponding risk.
A difficult environment with a slight recovery in 2024
Swiss VC investments recorded a drop of 54% in the first half of 2023 compared to the previous year. A total of just under CHF 1.2 billion was invested, with a slight decrease in the number of financing rounds.
2024 is showing signs of recovery. In May 2024, investments reached CHF 234 million, an increase of 58% compared to the previous month. Die The most important sectors were biotech, fintech and ICT.
A majority of investments remain focused on early-stage financing, which accounts for almost 96% of financing rounds.
Accelerators and incubators
Accelerators and incubators offer startups support in the form of advice, affordable office space, financing and continuing education programs.
Some well-known incubators and funding programs in Switzerland:
- Tenity: Fintech and insurtech in Zurich
- Switzerland Innovation Park: Different areas & locations
- Kickstart Innovation: fintech, health tech, edtech, smart cities
- MassChallenge Switzerland: Early-Stage Accelerator
- Innosuisse start-up coaching: Various areas of technology, national
- BaselArea.swiss: Life Sciences & Healthtech in Basel
- Venture Kick: Support for startups from Swiss universities
- Impact Hub Zurich: Social entrepreneurs and sustainable business models
These programs are often offered by large companies or institutions and aim to scale promising startups quickly and effectively. Participating in such programs can give your startup a significant boost.
Internal financing (operating cash flow)
Internal financing through operating cash flow is the lowest-risk method. In doing so, you use the income from ongoing business operations to finance new projects or to expand. This method requires that your company is already profitable and generates enough funds to be reinvested.
