Short answer
Four cap-table views answer four different questions
The Swiss share register records who legally holds the shares issued today. That view is incomplete for a financing decision where options, promised equity, convertible loans or a pool increase may change the denominator.
Fully diluted ownership is a scenario rather than one universal legal definition. The model must identify which instruments are included, the terms used to turn them into equity and whether the employee-pool adjustment and new money enter before or after the negotiated valuation.
SECA’s Swiss venture financing models describe valuation and pre-/post-closing ownership on a fully diluted basis and expressly contemplate options, warrants, convertibles and existing or planned employee participation. Those definitions should therefore sit in the same model as the commercial deal before signing.
Use the cap-table view that matches the decision
| View | Answers | May miss |
|---|---|---|
| Share register / legal position today | Who holds the shares currently issued | Options, promises, convertibles and the next round |
| Issued ownership | How current shares divide on a percentage basis | Future or conditional equity rights |
| Fully diluted pre-round | How ownership may look after defined exercise and conversion assumptions | New investors and an unmodelled pool top-up |
| Post-closing cap table | Ownership after conversions, pool changes and the new investment | Liquidation preferences, vetoes and other economic or control rights |
Worked example
Why sequence matters more than the headline valuation
AssumptionsSimplified hypothetical: 800,000 founder shares, 200,000 existing investor shares, a pool of 100,000 options, a CHF 500,000 convertible modelled as 125,000 conversion shares, and CHF 2m of new money at a CHF 8m pre-money valuation. The investor also requires 15% of the fully diluted post-closing cap table to remain available for employee participation.
ResultA simple CHF 8m pre-money / CHF 2m investment calculation gives the incoming investor 20% after the investment. The founders fall further when the convertible converts before the round and the pool is topped up before closing, because both steps enlarge the pre-money denominator for the existing holders. The exact share count depends on the conversion price, capitalization definition, pool language and transaction documents.
Decision ruleCompare offers through a transaction waterfall: current position → conversions → pool adjustment → new money → post-closing result. That sequence shows who economically bears each dilution step.
The twelve levers that move the ownership result
Pre- or post-money
Confirm whether convertibles, the pool increase and other equity rights sit inside or outside the negotiated valuation. The label alone is incomplete; the operative definition controls.
Round size
At the same valuation, more new capital creates a larger incoming-investor stake. Model valuation and amount raised together.
Convertible instruments
Cap, discount, interest and conversion event determine how many shares arise before or at closing. Principal alone is not the conversion model.
Conversion sequence
With several instruments, order and denominator influence each conversion. Small drafting differences can compound across the round.
Pool size
Tie the pool to the hiring and grant plan. An unnecessarily large reserve creates immediate modelled dilution without itself hiring anyone.
Pool-top-up timing
A pre-closing top-up is commonly borne more heavily by existing holders; a later increase is spread across the cap table then in place. The documents must fix the timing.
Granted versus ungranted
Separate awards already granted from the unallocated reserve. Both may enter a fully diluted denominator but have different people and negotiation implications.
Promised equity
Founder, adviser and employee promises that are not yet properly documented belong in the pre-round cleanup—not in the investor’s diligence surprise list.
Share classes & preferences
Equal percentages do not guarantee equal proceeds. Read liquidation preference, participation and conversion rights alongside the cap table.
Pro-rata & anti-dilution
Pro-rata enables follow-on investment; anti-dilution may protect investors in a defined down round. Neither is a general founder shield against ordinary financing dilution.
Control thresholds
Board composition, vetoes, reserved matters and voting thresholds may shift practical control even while founders retain an economic majority.
Swiss implementation
New shares, conversion, subscription-right treatment and employee options require the right approvals, articles and capital mechanics. The legal documents must implement the spreadsheet.
When the standard model needs to change
- Several convertible loans or side letters use different caps, discounts, interest or capitalization definitions.
- The company has founder, adviser or employee equity promises that have not been properly documented.
- An existing ESOP or PSOP has grants, leaver cases or vesting rights missing from the spreadsheet.
- A down round activates contractual anti-dilution or changes conversion prices.
- Secondaries, founder transfers or leaver rules change ownership without bringing new cash into the company.
- The company is a Swiss GmbH or uses foreign-currency capital, a capital band or conditional capital.
- Cross-border investors or employees require additional tax and regulatory analysis.
- The financing closes in tranches, creating different cap-table dates or pricing outcomes.
Cap-table check before the term sheet
A reconciled cap table is negotiation evidence, a closing annex and a future diligence record.
- 01
Reconcile the legal position
Match the share register, articles, capital records and historic issuances to the spreadsheet.
- 02
Collect every instrument
Bring together convertibles, options, warrants, pool, side letters, transfers and equity promises.
- 03
Define the denominator
State exactly what issued, outstanding and fully diluted mean for this transaction.
- 04
Document assumptions
Make valuation, round size, conversion prices, interest, pool target, sequence and closing dates visible.
- 05
Run three scenarios
Compare the expected round, a lower valuation or smaller round, and a delayed financing.
- 06
Isolate the pool step
Show the existing pool, grants, remaining reserve and required top-up as separate lines in the waterfall.
- 07
Separate economics and control
Review ownership, exit proceeds, board rights and consent matters on distinct layers.
- 08
Lock signing and closing views
Base the term sheet on an understandable pro-forma cap table and reconcile the actual position after closing.
Common cap-table and dilution mistakes
Reading only the share register
The model counts today’s issued shares while options, convertibles and promises remain outside it.
Mistaking valuation for outcome
A higher pre-money looks attractive while a pool top-up, conversions or a larger raise reduce the founder percentage further.
Ignoring the unallocated pool
Only granted options are counted even though the investor includes the full existing or enlarged pool in pre-money capitalization.
Skipping the sequence
Several conversions and capitalization steps are calculated together although the documents use different dates and denominators.
Misreading anti-dilution
Investor protection in a down round is confused with general protection for founders from normal financing dilution.
Hiding control in the percentage
Board and veto rights are not shown separately even though they may change decision-making more than a few ownership points.
Letting model and documents diverge
The spreadsheet shows an outcome that the term sheet, CLA, employee plan or capital-increase documents do not legally implement.
Cap tables and dilution: FAQ
What is a cap table?
A cap table is the structured record of a company’s equity rights and holders. For a financing, it should show issued ownership plus clearly defined fully diluted and post-closing scenarios.
What does fully diluted mean?
It is a scenario that includes issued shares plus defined options, warrants, convertibles and other equity rights. The transaction must specify which items are included and how they are calculated.
How is dilution calculated?
At its simplest, an existing holding is divided by the enlarged fully diluted denominator. A real round must also reflect conversion prices, interest, pool changes, sequence and the definitions in the documents.
Does a higher valuation always reduce founder dilution?
Not necessarily. More new money, converting instruments or a larger pre-closing pool increase can offset part or all of the benefit. Compare the complete post-closing outcome.
Who pays for an option-pool increase?
It depends on timing and the valuation definition. If the pool is enlarged before the investment and included in pre-money capitalization, the existing holders commonly bear more of that step.
When do convertible loans dilute founders?
The legal ownership change occurs when conversion shares are issued. The expected economic effect should be modelled when the loan is signed and again before the equity round.
Does anti-dilution protect founders?
Anti-dilution usually means a contractual investor protection where a later financing occurs at a lower price. It is not general protection for founders from ordinary dilution caused by new capital.
When should the cap table be updated?
Update it for every issuance, transfer, option, equity promise, financing agreement and material term change—at the latest before term sheet, signing and closing.
Primary sources and legal review
- SECA: Equity Financings for Swiss Startups
- SECA Term Sheet, 5th edition, annotated
- SECA Investment Agreement, 5th edition, annotated
- SECA Shareholders Agreement, 5th edition, annotated
- Federal Council: revised company law effective 1 January 2023
- EHRA Practice Note 2/23 on capital increases and set-off
Last legally reviewed: 17 July 2026
This page provides general information, not legal, tax or investment advice. The worked example is hypothetical, simplified and does not describe a client matter. Ownership, tax treatment and implementation depend on the company, articles, instruments, employees, investors and transaction.