It’s a challenging time for startups to raise capital. That’s why many founders are getting creative when it comes to capitalizing their businesses and exploring non-dilutive options like government tax incentives and grants. 

But let’s be clear. Going after non-dilutive capital is not for every startup or scaleup. Chasing this type of funding can be expensive, time consuming and stressful. And it’s important to remember, grants and other forms of non-dilutive funding are designed to support specific projects, not the company itself. Founders should consider reading our Getting Ready blog before exploring this kind of funding, to avoid wasting countless hours going after a grant or credit they’re unlikely to get. 

That said, securing non-dilutive capital can make all the difference for a venture. And many investors like to see that a company has received non-dilutive funding. That’s what we’ll explore here. 

Managing Partner of Thin Air Labs, James Lochrie, says all founders should have a non-dilutive capital strategy. He says this kind of funding is valuable for many reasons. First off, grant funding can allow founders to delay their next raise and increase their valuation. 

“I believe every startup should have a non-dilutive funding strategy but it’s really difficult for most of these startups to put their attention and resources toward making that happen. That’s why we listened to founders and designed a service to make the process easier.” ---James Lochrie, Managing Partner

“Any time you can use non-dilutive funding to extend your runway and achieve more milestones, more growth, more maturity before going into the market and raising capital, that's a better presentation for you to go into an investment round, and investors will be more appreciative of the company that you've built,” says James. 

Non-dilutive funding can also help founders stay in control of their company for longer. 

“When you’re building your company in the early stages there are a lot of dilutive events that can happen when you’re raising capital to go to market,” explains James. “Using grant funding keeps more of your company in your own pocket. And so as you scale, you have more equity, you have more ownership and more control.” 

And as both an angel investor and the Managing Partner of a fund, James says, a startup that has received non-dilutive funding, can give a potential investor some more confidence in the company and the founder they’re evaluating. 

“Anytime you’re entering a new investment process and meeting new investors, they really don’t know anything about you, your company, or what you’ve accomplished,” says James. “Having a grant body already approve a grant for you, means they’ve done a level of due diligence, they understand your business and they’ve validated you.”

Fundamentally, James thinks all startups should be going after grants and other government tax incentives. And he says there are organizations out there, like Thin Air Labs, that can help with the process, saving entrepreneurs time and money and eliminating unnecessary stress. 

“I believe every startup should have a non-dilutive funding strategy but it’s really difficult for most of these startups to put their attention and resources toward making that happen,” explains James. “That’s why we listened to founders and designed a service to make the process easier.”

And with more founders accessing this type of non-dilutive capital, there will be more companies growing faster, even in a tricky fundraising environment.

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Watch more from James on this topic in these videos.

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