When Non-Dilutive Funding is Your Best Option

21 Jul

By Karen Deyo, Director of Investor Research, Israel BD, LSN

When starting a fundraising journey, it is important for startups to keep an open mind for any relevant source of funding or means of advancing their technology. Whether a standard equity investment, convertible note, joint partnership, licensing deal, or non-dilutive funding, it is necessary for startups to understand all options, weigh the pros and cons, and find the best way forward for the company.

Non-dilutive funding is a great option for early-stage startups for many reasons. First, it provides a great way to advance to value inflection points without reducing their equity stake in the company. Second, investors like to see non-dilutive funding because it proves that, in many instances, experts in the relevant field believe strongly in the technology and its promise. Additionally, investors benefit from the lack of equity dilution and can indicate a better ROI for them. Lastly, non-dilutive funding can serve as a bridge when a company is having difficulty with fundraising, helping them reach that milestone that investors want to see before investing.

There are many sources for non-dilutive funding – this includes regional organizations, non-profits and government entities. These grants often require an extensive application process, with several specific deadlines each year. Many of these organizations also have support staff that can help companies improve their odds of getting funded. Doing your research for these programs can play a large role in your success – but the benefits are worth the effort! Keep an eye out for these opportunities, and remember to check all potential avenues, including your regional economic initiatives, government organizations promoting startup advancement, and patient non-profit groups or foundations supporting the indication you are addressing. Good luck with your journey!

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