Non Dilutive Funding: What You Need to Know to Fuel Your Startup

Grow your tech startup and retain equity through non dilutive funding.

Tech startup founders listen up. You’ve already raised capital and are probably projecting $2 – 3MM in annual revenue. Sure, you’ve had to relinquish some equity, but you’re off the ground and ready to make the jump. Trading shares for capital is just how it goes, right? Well, maybe not—if it’s alternative financing you’re after, non dilutive funding has something to say.

Read on to learn everything you need to know about raising funds without giving up more control, what non dilutive involves, and what it looks like.

Non dilutive explained

More capital. Same control. It’s as simple as that. Non dilutive doesn’t sacrifice your equity any further, but it does bring home the financial support you need. Having already raised funding through dilutive means—you guessed it; equity for shares—non dilutive capital protects your level of ownership and builds on top of your current revenue.

Time to think about the in’s and out’s.

non dilutive funding-a-balance-scale-diadem-capital-blog

Non dilutive: things to consider

All sources of capital have their pros and cons, and non dilutive funding is no different. Let’s start with the good stuff.

Control. We’ve mentioned it already, but non dilutive exists to look after what you’ve already got. Stop thinking about equity, focus on growth and success.

Flexible. Non dilutive capital can be made to fit. Put your startup first and agree repayment terms that align with your cash flow and revenue forecast.

Quick. Applications are often stress-free and speedy.

So far, so good—but the trick is knowing exactly what you’re signing up for, and that might include:

Constraints. Your funding agreements might be based on strict terms of use, or need regular reporting.

Total capital. Non dilutive funding is usually lower than VC rounds. Think about how much your startup needs to raise.

Time. While speed is great, you already know that finding the right capital takes time. Getting it right is more valuable.

Okay, we’ve talked non dilutive and what comes with it. Here’s what you’ve been waiting for—funding options 101.

Types of non dilutive funding

Mix, match, fund your fund. Non dilutive capital comes in many shapes and sizes.

Asset based lending. Secured against collateral, asset based lending is a non dilutive form of loan or credit line.

Accounts receivable financing. Also known as ‘AR financing’, this repayable funding method raises capital ahead of time, based on outstanding invoices.

Grants. Grants have the ultimate benefit of not having to be repaid—they’re non dilutive in the truest sense.

Inventory financing. Borrowing against all or part of your stock, inventory financing is lender-issued and fully repayable.

Purchase order financing. This loan-model is designed to pay your suppliers and boost cash flow.

Research and development (R&D) tax credits. Does your tech startup invest in innovation? If so, you’re in luck. R&D tax credits reimburse a percentage of qualifying costs based on a project’s expenditure.

Revenue based financing. Raise non dilutive in exchange for a percentage of future revenue.

Venture debt. Venture debt only applies to already VC backed startups. Although you’ll have given up some equity as part of the original deal, venture debt doesn’t decrease your control any further and is usually collected through warrants.

Supporting founders and facilitating your funding

Non dilutive funding is pretty straightforward, but we know the game. Fundraising remains a major hurdle to jump over. Question for you—why waste time and money sourcing investment when the right support can be brought to your door?

At Diadem Capital, we’re saying goodbye to the ‘old ways’ of fundraising. We’re efficient, effective, and digital. With a fully vetted and approved selection of non dilutive lender partners, your growth is just a click away.