Early-stage financing in Switzerland usually takes one of two legal forms: a convertible loan, or a priced equity round. Founders often frame the choice as "fast and cheap" versus "slow and proper". That framing is not wrong, but it hides what each instrument actually commits the parties to — and the commitments, not the paperwork, are what you live with afterwards.
What a convertible loan actually is
A convertible loan is, first of all, a loan. The investor transfers money now; the company owes it back. What makes it convertible is a set of contractual promises about the future: under defined conditions — typically the next qualified financing round — the debt converts into shares instead of being repaid, on terms fixed in the loan agreement.
Legally, this means the investor holds a claim, not equity. Until conversion, they have no shareholder rights, no votes, no dividends — and the company carries a liability on its balance sheet. It also means the hard questions are deferred, not avoided: the loan agreement must define what counts as a qualified financing, how the conversion price is derived from that round (commonly via discount and valuation-cap mechanics agreed between the parties), what happens at maturity if no round comes, and what happens in a sale of the company before conversion. A convertible that leaves these open is not simple; it is unfinished.
What a priced round commits you to
A priced round is a direct sale of newly issued equity: the parties agree on a valuation now, and the investor subscribes to new shares at that price. Under Swiss law this runs through a formal capital increase — a shareholders' resolution, a public deed, amended articles of association and an entry in the commercial register. The company's constitution changes, not just its contracts.
The documentation is correspondingly heavier: an investment agreement with representations and warranties, a shareholders' agreement (new or amended) governing the enlarged shareholder base, often new share classes with preference terms anchored in the articles. This weight is not bureaucratic decoration. It is the price of certainty: after closing, everyone knows exactly who owns what, at what preference, with what rights.
Cap-table effects: deferred dilution is still dilution
The convertible's great convenience — no valuation today — has a mirror image on the cap table. Until conversion, the dilution it will cause is a formula, not a number. Founders who stack several convertibles on top of each other, each with its own cap and discount, sometimes discover only at the next priced round how much of the company they have already promised away. The instrument did not hide this; nobody ran the numbers.
A priced round is the opposite trade. Dilution is exact and immediate, visible in the commercial register. What you give up in optionality you gain in clarity — for yourselves, for employees with option grants, and for the next investor, who will model conversion of every outstanding instrument before pricing their own round.
Two further Swiss-specific points deserve attention at framework level. First, a convertible loan is debt: in a downside scenario it sits on the balance sheet and can contribute to overindebtedness in the sense of Art. 725 ff. CO, which is why convertibles are often paired with a subordination (Rangrücktritt). Second, whether and how the loan bears interest, and how interest is treated at conversion, has tax and accounting consequences that should be settled in the document, not discovered later.
The conversion is a capital increase too
A point founders regularly miss: the convertible's simplicity is front-loaded. Converting the loan into shares later requires the same corporate machinery as a priced round — a capital increase with the corresponding resolutions, deed and registration, usually executed together with the qualified round that triggered it. The convertible does not remove the formal step; it moves it into the future and makes its terms depend on documents signed years earlier. Sloppy drafting in the loan agreement surfaces precisely here, at the moment of least patience.
Choosing between them
There is no universally correct choice; it depends on the facts. Convertibles tend to fit bridge situations, small rounds with aligned investors, and moments when agreeing on a valuation would cost more time than it is worth. Priced rounds tend to fit larger raises, new lead investors who want governance and preference terms settled, and cap tables that need cleaning up rather than further layering.
What is universal: both instruments are only as good as their drafting, and the cheapest mistakes to fix are the ones found before signing. Reading a stack of existing convertibles against a proposed round — every trigger, cap and maturity — is systematic work our systems do quickly, with a lawyer answering for the conclusions.
If you are weighing the two routes for your own financing, we are glad to talk through what each would mean for your cap table and your documents.