Question 1

When should a startup use grants?

Accepted Answer

Non-repayable money from governments, agencies and foundations for specific activities such as R&D, pilots or hiring. No equity, no repayment — the cheapest money there is. Slow applications, strict eligibility and reporting; usually tied to specific costs.

Question 2

When should a startup use angel investors?

Accepted Answer

Individuals (or angel networks) investing their own money, typically $25K–$500K, before institutional investors arrive. Fast decisions, flexible terms, and often useful advice and introductions. You give up equity (often 10–20% at pre-seed/seed); quality of angels varies.

Question 3

When should a startup use accelerators & incubators?

Accepted Answer

Time-boxed programmes that provide a small investment or grant, mentorship and a demo day in exchange for a slice of equity (or free, for incubators). Structure, mentors, credibility and a network of investors at demo day. Typically 5–10% equity for a small cheque; competitive to get in.

Question 4

When should a startup use venture capital?

Accepted Answer

Professional funds investing larger rounds (seed to growth) in companies that can grow very large, very fast. Big cheques, follow-on capital and a network for hiring and scaling. Significant dilution, board seats and pressure to pursue a very large outcome.

Question 5

When should a startup use venture debt?

Accepted Answer

Loans for venture-backed or revenue-generating startups, usually alongside an equity round, with interest, fees and small warrants. Extends runway with far less dilution than equity. Must be repaid on schedule; covenants and warrants add cost. Only wise if the next round is highly likely.

Question 6

When should a startup use revenue-based financing?

Accepted Answer

An advance repaid as a fixed share of monthly revenue until a capped multiple (e.g. 1.2–1.5×) is paid back. No equity, no personal guarantees, repayments flex with revenue. Effective annual cost can be high if you repay quickly; needs steady revenue.

Question 7

When should a startup use bootstrapping?

Accepted Answer

Funding growth from revenue, savings or customer prepayments — no outside investors. You keep 100% ownership and control, and focus on profitability from day one. Growth is limited by cash flow; competitors with funding may move faster.

Question 8

When should a startup use crowdfunding?

Accepted Answer

Raising from many people online — rewards/pre-orders (Kickstarter-style) or equity crowdfunding where permitted. Validates demand, builds a community and can fund a first production run. Campaigns take real marketing effort; public failure is visible; equity crowdfunding is regulated.

Which funding should I take?

Where is your startup today?

The eight ways to fund a startup