Options for Non-Traditional Financing

In the last 2 months, I've spoken with 100+ founders, and the most recurring question is: "Is venture capital the only way to grow my business?" For many first-time founders, especially those raising their first seed round ($1M+), VC funding seems like the clear choice. But it comes with serious trade-offs: - equity dilution - loss of control - pressure for rapid growth From my experience working with bootstrapped, PE-backed, and VC-backed founders There are other paths depending on your vision and goals. Here are 5 alternatives to VC funding that founders should consider: 1. Debt Financing → Borrowing money from a lender that you repay over time with interest. ✅ Upside: You keep 100% control of your business. ❌ Downside: Missed payments put your assets at risk. 2. Investor Loans → Flexible options like convertible debt or angel investments. ✅ Upside: Delayed valuation and more flexibility than traditional VC. ❌ Downside: Potential future equity dilution or control issues. 3. Crowdfunding → Raise small amounts from many people (e.g., Kickstarter, Republic). ✅ Upside: Gain funds and validate market interest simultaneously. ❌ Downside: Crowded cap table may deter future investors. 4. Grants → Non-dilutive funding from government or organizations. ✅ Upside: Free money—no equity loss, no repayments. ❌ Downside: Time-consuming applications with strict eligibility criteria. 5. Bootstrapping → Using your own business revenue to grow. ✅ Upside: Full control, no investor pressure, grow at your own pace. ❌ Downside: Potentially slower growth if cash flow is limited. Tip: Hybrid approaches often work best. Align your funding strategy with your long-term vision and current traction. Remember: Each path has trade-offs. Choose wisely. __ How would you fuel your next big idea? __ 🔁Share with a founder who might benefit from exploring alternatives to VC funding. 📌Follow me, Mariya, for more insights from the startup trenches.

One question I hear often from SaaS founders is: “What are our non-dilutive financing options, and which do you recommend?”. Here’s my list of 10 options (with pros, cons, and recommendations) to drive your next financing conversation: 1. Government grants (e.g., R&D incentives) - Pros: Non-repayable cash; boosts R&D credibility. - Cons: Time-consuming applications; strict eligibility criteria. - Best for: Early-stage SaaS with proprietary tech (e.g., AI/ML platforms). 2. SBIR/STTR grants (U.S.-focused) - Pros: Funds innovation without equity loss. - Cons: Aligns with federal priorities; bureaucratic process. - Best for: SaaS addressing civic/gov challenges (e.g., cybersecurity, healthcare IT). 3. Venture debt - Pros: Fast capital post-equity round; minimal dilution (often via warrants). - Cons: Covenants require strong metrics (e.g., >50% YoY ARR growth). - Best for: Post-Series A SaaS with predictable scaling. 4. Revenue-Based Financing (RBF) - Pros: Repay as % of MRR (e.g., 5-10%); aligns with cash flow. - Cons: Costly if ARR surges (fixed % of higher revenue). - Best for: SaaS with $200k+ ARR and low churn (<5%). 5. SaaS-Specific Financing (e.g., AWS Activate, Pipe) - Pros: Tailored terms (AWS credits for infra; Pipe for ARR monetization). - Cons: Platform-dependent (AWS for cloud users; Pipe requires $100k+ MRR). - Best for: Startups leveraging AWS/Azure or recurring revenue monetization. 6. Customer prepayments/annual contracts - Pros: Upfront cash (e.g., 20% discount for annual billing). - Cons: Short-term revenue trade-off; requires customer trust. - Best for: Bootstrapped SaaS with strong negotiation leverage. 7. R&D Tax credits - Pros: Cash refunds for dev/engineering costs (e.g., 20-30% of eligible spend). - Cons: Complex filings (jurisdiction-specific); delayed payouts. - Best for: SaaS with large dev teams. 8. Strategic partnerships - Pros: Co-selling, integrations, and shared resources (e.g., Salesforce AppExchange). - Cons: Risk of vendor lock-in or exclusivity clauses. - Best for: SaaS aligning with ecosystem players (e.g., HubSpot, Microsoft). 9. MRR-Backed lines of credit - Pros: Lower interest (8-12%); flexible draw against recurring revenue. - Cons: Requires 12+ months of stable MRR (80%+ retention). - Best for: Scaling SaaS with predictable cash flow ($1M+ ARR). 10. Pre-Sales/subscription crowdfunding - Pros: Validates demand; builds community - Cons: Execution risk (marketing costs); potential overcommitment. - Best for: PLG models with viral appeal (e.g., productivity tools). Stage-specific recommendations: - Pre-Product: Grants, pre-sales (validate MVP interest). - Early Growth (50k−500k ARR): RBF, annual contracts (stabilize cash flow). - Scale Phase ($1M+ ARR): Venture debt, MRR credit lines (fuel expansion). ⚠️ Key Metrics lenders care about: - CAC:LTV < 1:3 - Net Dollar Retention > 100% - Burn Rate < 12 months Have I missed a SaaS-specific option? What’s worked for your startup? Let’s discuss below! 👇

One of the top themes of this #NHC workshop has been alternatives to federal financing for mitigation projects. It seems clear that it is time for us to broaden our perspective on how we can find sustainable financing for resilience solutions. The good news is that many of these are already practiced worldwide and in the US. Will keep it high level for this post. Tax Increment Financing (TIF) - This has been talked about a lot and is used often - though often with poorly performing stadium projects. The thing about mitigation projects is that they can directly increase property values by reducing risk. The benefit of this reduced risk can immediately flow to those who are protected and a portion of that value captured via incremental increases in property values. Land Value Capture - In areas with large amounts of vacant, underutilized, and publicly owned land, the government can use that land as leverage to pay for bonds to construct resilience improvements (e.g., floodwalls or other protective measures). As resilience improvements boost land values, they can sell the land and capture the appreciated values to pay the bond, while also encouraging redevelopment. Special Assessment Districts - Property owners who directly benefit from resilience projects (like levees or stormwater systems) contribute through special assessments based on the protection they receive. General Obligation & Revenue Bonds - Leverage municipal credit ratings for long-term, low-cost financing. Revenue bonds can be backed by utility fees, development impact fees, or other dedicated revenue streams. Green Bonds - Tap into the growing sustainable finance market with bonds specifically earmarked for environmental and resilience projects, often attracting lower interest rates from ESG-focused investors. Concessional Financing - Access below-market-rate loans from development finance institutions, green banks, or impact investors who prioritize resilience outcomes over maximum returns. Hybrid Public-Private Financing - Combine remaining FEMA funds with private investment to stretch federal dollars further while bringing in private sector expertise and efficiency. Design-Build-Finance-Operate (DBFO) - Transfer project risks to private partners who handle design, construction, financing, and long-term operation in exchange for revenue sharing or availability payments. Resilience Service Agreements - Private partners finance and maintain resilience infrastructure in exchange for long-term service payments, similar to solar power purchase agreements. State Resilience Programs - Many states have developed their own hazard mitigation funding programs independent of federal resources. Utility Rate Mechanisms - Build resilience costs into water, electric, or gas utility rates, especially for infrastructure protection projects. #DisasterResilience #MunicipalFinance #ClimateAdaptation #PublicPrivatePartnership #HazardMitigation

6 alternative fundraising options for startups besides VC, PE, bank lending, and factoring: 1. Revenue-based financing (RBF) RBF is a way to get funding by sharing a part of your future revenue. It's good for startups with steady income (like SaaS or subscription-based businesses). Some companies that offer this include Clearco, Booste, Capchase, Flow Capital, Lighter Capital, and Wayflyer. 2. Equity crowdfunding You can raise money from lots of individual investors through online platforms like Kickstarter, Wefunder, Fundable, and Indiegogo. It's great if your startup has a special appeal. 3. Accelerators and incubators These programs provide mentorship, resources, and networking opportunities. Some even offer funding. Check out programs like 500 Startups, Y Combinator, Techstars, AngelList, and the Founder Institute. 4. Working capital loans These loans help cover your day-to-day expenses. They're handy for fast-growing startups or those with short inventory cycles. Look into lenders like OnDeck, Kabbage from American Express, Lendio, Fundbox, and Bluevine. 5. Equipment financing If you need equipment but can't pay for it all upfront, equipment financing is a good choice. Companies like Balboa Capital, Crest Capital, First American Equipment Finance, Fundbox, and Lendio can help. 6. Government funding programs Consider these options: SBA Express Loan: Quick loans up to $500,000 for various business needs. SBA Microloan: Loans up to $50,000 for startup and expansion costs. SBA 7(a) Loan: Popular loans up to $5 million for different purposes. Grants: Look for government and private grants for innovative or socially impactful projects. LMK If you need more advice, I hope this helps you on your financing journey!

As the world's economies evolve, there is an increasing need for alternative financing mechanisms for #PPP projects. #BlendedFinance offers an alternative path to secure and leverage financing for PPP projects in emerging economies that struggle to raise conventional financing. Blended Finance #strategies and deployment have the following characteristics: * Blended finance leverages catalytic flexible capital from public or philanthropic sources that are willing to accept disproportionate risk or lower returns to encourage other investments. * Catalytic blended finance structures help mitigate risk associated with investments in emerging markets. * The use of blended finance makes PPP projects more attractive to private investors who typically prioritize financial returns. * Blended Finance projects also offer opportunties for domestic investors to invest in local projects who have lower investment capacity. Blended Finance uses various tools and approaches to achieve PPP project goals. Tools and approaches include: * Concessional finance where public or philanthropic funds are provided as loans with more generous terms than market loans or as grants. * They address risk mitigation through the use of guarantees or insurance that can be used to improve the creditworthiness of PPP projects, reducing the risk for SPV company private investors. * Grant-funded technical assistance from independent technical advisory institutions can be used can be used for objective project concept preparation actions, feasibility studies, and assessments of commercial and economic viability, vfm, and developmental impact of projects. * Outcome-based Blended Finance offers public or philanthropic institutions the opportunity to invest in instruments where financial and/or structural characteristics are tied to predefined sustainable development goals (#SDGs) and governance (#ESG) objectives.  Blended Finance leverages the power of public and philanthropic capital to encourage private sector investment in PPP projects that have the potential for both financial returns and positive social and environmental impacts. Because of this, Blended Finance should be considered for innovative and 'out-of-the-box" projects that offer unique opportunties to improve society, especially for impact investors who are looking beyond the traditional investment constraints of PPP projects. In 2025, the WAPPP | World Association of PPP Units & Professionals (#WAPPP) is exploring the potential of Blended Finance in PPP projects. To read more about its initiative, follow this link: https://lnkd.in/eSwB-qaG To read more about the benefits and challenges of Blended Finance PPPs, click on the link below.

Traditional capital markets prioritize rapid returns and often sideline startups with long-term potential. This issue is particularly acute in education, where truly novel innovations might take anywhere from 10 to 20 years (at least) to realize their impact. That’s not to say that no education companies should pursue traditional forms of funding, like venture capital, but many would benefit from alternative forms of funding like: Revenue Capital: In this model, instead of aiming for an exit, investors in essence receive a year-over-year fee based on a percentage of the startup's revenue. This model allows startups to grow at a natural pace without the pressure of rapid scaling. Dividend Capital Model: This model involves investors taking a share of the startup's profits only after it becomes profitable. It encourages startups to be patient for growth but impatient for profitability to show that they can really build a sustainable model. Read more in the full Forbes article here: https://lnkd.in/eFKzBvQP

Breaking the mold in SaaS finance is a necessity, even if it’s not easy. The traditional path of venture capital has long been revered. And the well-trodden path is clear: shake down your friends and family for some $$, go engage some angels to get things going, then turn to venture capital to dial up the dollars in support of rapid scaling. Maybe even consider partnering with a PE firm to drive operational rigor and efficient growth. Ultimately, you have your eye on the "exit prize". I've navigated this path, securing funding for multiple startups. But here is the kicker. More Venture funding can often be the wrong answer. Witnessing businesses flourish without relying on venture dollars is eye-opening. These companies, fueled by grit and a diversified capital structure, achieve enviable outcomes in the tech world. A conversation with Brian Parks, CEO and Co-Founder of Bigfoot Capital, shed light on overlooked alternatives in software financing. Brian champions ARR-based lending over traditional venture debt and equity routes, sharing stories of founders who, with non-dilutive growth capital, retained control and achieved significant success even without unicorn status. You don’t always need to chase the billion-dollar dream through endless funding rounds. A strategic approach to capital, balancing equity and non-dilutive financing, can lead to remarkable outcomes while maintaining control. For those interested in delving deeper into my conversation with Brian, the link to his interview on the SaaS Builder Podcast is available in the comments. #SaaS #GrowthStrategy #CapitalStructure #FounderJourney #NonDilutiveCapital Maxio

Last night the fabulous Nathalie Molina Niño, author of Leapfrog and founder of Known zoomed in to the University of Washington's women in entrepreneurship leadership course. We read her book leapfrog and love the hacks. A few takeaways: 1. Know the Power Dynamics in Venture Capital In venture capital, General Partners (GPs) may appear to make all investment decisions, but Limited Partners (LPs), who provide the majority of the funds, often wield influence. GPs can be pressured by LPs to change their investment strategies, even when it contradicts their original mission, as seen when large investors reshaped a fund’s focus away from underserved areas to more profitable, larger companies. 2. The Underrepresentation of Women and BIPOC in Wealth Management Despite promises from major players to invest more in women and BIPOC-led ventures, the actual share of wealth managed by these groups has decreased. This disparity makes it even more daunting for these entrepreneurs to raise capital, but alternative strategies, such as seeking patient capital from family foundations, offer a promising path. 3. Family Foundations can offer a More Flexible Financing Option Unlike VCs, family foundations have more flexibility because they don’t face external pressure from LPs. They can afford to take risks and make long-term investments in causes aligned with their mission. However, identifying family offices can be difficult 4. Innovative Financing Models Beyond Equity Nathalie encourages entrepreneurs to explore alternative financing models beyond traditional equity. Options like revenue-based financing or unique forms of debt can allow founders to retain control of their company. These models offer creative solutions to raise capital without giving away significant ownership too early. 5. The Importance of Plain Language in Finance Nathalie criticizes the use of jargon in finance, which can alienate those outside the industry. She advocates for “making it plain,” emphasizing that real understanding comes from being able to explain concepts in simple terms. Financial literacy should empower people rather than exclude them, and often the true expertise lies in communities traditionally labeled as "illiterate." Thanks Rosalinda M. Maggie Qian Molly Klein Jamie Foehl Mayte Manzo Karen Weigelt Catalina Fox Deepali Paul Kate Julia and others for joining https://lnkd.in/gV58dmaa.