Fund your early startup: Guide to pick the right option

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Starting a business can feel overwhelming, especially in the early days. You’re trying to build something from nothing – sorting out how things work, getting your first product ready, and figuring out what to do next.

One big question stands out: How do I fund it?

Here’s something to keep in mind: 38% of startups fail because they run out of money. That means getting the right funding is crucial.

But it’s not just about grabbing the biggest offer. You need funding that matches your needs and gives you the best chance to grow without unnecessary stress.

There are ten practical ways to fund a business, and each has its own benefits. The trick is finding the one that works best for you and your long-term goals. Let’s look at those options and make it simple.

How to fund your startup

1. Bootstrapping

Bootstrapping means funding your startup using your personal savings, or income from a side hustle. It’s a straightforward way to get started, and the biggest advantage is control. Since it’s your money, you don’t have to answer to investors or give up ownership of your company.

This approach works best if your Minimum Viable Product (MVP) doesn’t need a lot of upfront cash. For example, if you’re building a software product that only requires your time and skills, bootstrapping can be a low-risk way to launch. Canva, one of Australia’s most successful startups, was bootstrapped for its first year as they validated their MVP.

Bootstrapping lets you keep full control, but it can be risky because you're using your own money. If things don’t work out, you could lose your savings or put yourself under financial stress. To avoid this, set a clear budget and only use money you can afford to lose. Don’t dip into emergency funds or take on debt unless you’re confident you can repay it.

Bootstrapping is ideal for founders who want to keep things simple, avoid external pressure, and believe strongly in their ability to execute. But it’s important to set boundaries, decide how much you’re willing to invest personally, and be mindful not to stretch yourself too thin financially.

2. Friends and family

Your next option might be friends or family.

Getting money from friends or family can be a good way to fund your startup because they already trust and believe in you. But this can also cause problems if things go wrong.

Money issues can strain relationships, especially if expectations aren’t clear. To avoid this, make sure you’re honest about the risks and put everything in writing. Only ask for amounts they can afford to lose without causing hardship.”

3. Grants and competitions

Grants and competitions can be an excellent way to fund your startup, especially if you’re in tech, research, or a niche industry.

Governments and organisations often provide funding to support innovation or R&D, and the best part is that you don’t have to give up any equity. You keep full ownership of your company.

Competitions are also a great way to build credibility. Winning shows that experts believe in your idea, which can attract more funding and more opportunities. For example, the Stone & Chalk startup Dragonfly Thinking gained significant business and funding opportunities after their success in Australia’s National AI Sprint.

However, these opportunities are often competitive and take a lot of time to apply for. Make sure the potential reward is worth the effort before spending your hard-earned resources on them.

4. Incubators and accelerators

If you’re looking for funding plus mentorship, an incubator or accelerator might be the right fit. These programs provide resources, networking opportunities, and often seed funding in exchange for equity or fees.

Joining an accelerator signals to future investors that your startup has been vetted. It also connects you to a network of mentors, industry experts, and potential partners.

Not all programs are created equal. Some might take a lot of equity or charge high fees without delivering much value in return. Before joining, research the program, talk to alumni, and make sure it’s a good fit for your industry and stage of growth

These also serve as entry points into startup communities, like us at Stone & Chalk, who are better equipped to support startups with existing traction.

5. Angel investors

Angel investors are people who back startups in exchange for equity. They’re typically experienced entrepreneurs or professionals with money to invest.

The biggest benefit of working with angels isn’t just the cash, it’s the mentorship and connections they bring. Angels often have industry knowledge or networks that can help you refine your MVP and reach early customers.

To attract an angel, you need to clearly articulate your vision and demonstrate potential. They’re taking a risk on you, so make them believe it’s worth it. They can be very hard to secure, but very beneficial if you do.

While angels bring money, advice, and connections, working with them means giving up some control of your business. Some angels might want a say in decisions or push for faster results than you’re comfortable with.

To avoid this, choose angels who align with your vision and set clear boundaries in your agreements.

6. Pre-seed Venture Capital

Some venture capital (VC) funds focus on pre-seed investments, which are perfect for early startups. These funds take big risks in exchange for a share of your company.

Unlike angel investors, VCs are more structured and professional. They’ll want to see that your business has big growth potential and a clear plan to scale.

The catch is that you’ll be giving up equity, and they’ll expect your startup to grow quickly and deliver strong returns. These big expectations can create a lot of pressure on you and your team.

However, if your idea is ambitious, a pre-seed VC can provide the funding to get you off the ground. Just make sure you’re ready to scale and choose investors who share your long-term vision.

For example, Bluesheets, a Stone & Chalk AI automation alumni, secured $6.5 million in Series A funding – showing what’s possible to bring in with VC support!

7. Revenue-based financing

Revenue-based financing is a flexible way to fund your startup if you’re already making revenue. Instead of giving up equity, you repay the lender with a percentage of your future revenue. This means your payments go up or down depending on how well your business is doing.

For example, if you’re running a subscription business and need $50,000 for marketing, a lender might agree to fund you. In return, you pay them back 10% of your monthly revenue until you repay the loan, plus an extra agreed amount (e.g., $65,000 in total). This way, if your revenue slows down one month, your repayment also decreases.

This option is great for businesses like SaaS or e-commerce that already have steady income. It’s quick to set up, doesn’t take any ownership of your company, and lets you focus on growth. However, it’s not ideal if you’re still building your product and don’t have revenue yet.

8. Crowdfunding

Crowdfunding platforms like Kickstarter or Indiegogo let you pre-sell your product or secure small investments from backers.

It’s a win-win: you get funding, and your supporters feel like part of your journey. Equity crowdfunding platforms, like Swarmer, let you raise money in exchange for small equity stakes.

Crowdfunding works best when you have a compelling story and a product people are excited about. It’s also for building a community of early adopters, that will serve you as you move forward.

It does though takes a lot of effort to run a successful campaign. You’ll need to spend time on marketing and communication, and if you don’t deliver on promises, it could hurt your reputation. Plan carefully and make sure you can meet your backers’ expectations.

As an example, Stone & Chalk startup, money management fintech Parpera, ran a $1m million equity crowdfunding campaign to fund the start of their business. They then went on to raise $1.3 million as they ramped up their offering.

9. Convertible Notes or SAFE Agreements

Convertible notes and SAFEs (Simple Agreements for Future Equity) are ways to raise money without setting your company’s value right away. They give you cash now, and in return, the investors get equity later, usually during your next big funding round. This can be a great option if you’re not ready to decide how much your startup is worth yet.

Here’s how it works: let’s say an investor gives you $500,000 through a SAFE with a valuation cap of $5 million. If the company later raises money at a $10 million valuation, the early investor's shares will be priced as if the company is worth only $5 million, giving them more equity for their investment (a better deal for taking an early risk).

These agreements are simple, fast to set up, and don’t burden you with repayment schedules. But they come with trade-offs. If you offer very generous terms, like a low valuation cap, you could end up giving away more of your company than you’d expect when it converts.

These funding options work best for founders who need quick cash to keep building and want to delay big valuation discussions until they’ve made more progress.

10. Partnerships

Sometimes, the best funding doesn’t come as cash, it comes as help from a company. Strategic partnerships let you team up with companies that can support your business in exchange for a share of your revenue or ownership.

They might offer funding, help you reach their customers, or provide expert advice. If your product works well with their existing business, they can also help you grow much faster.

Imagine you’ve created an eco-friendly cleaning product. A large supermarket chain agrees to stock it in their stores as part of their push toward sustainable products. In return, you give them a small share of your revenue.

They benefit by offering their customers an innovative green product, boosting their sustainability credentials. Meanwhile, you gain access to their massive customer base and distribution network, something that would have taken years to achieve on your own.

However, partnerships can be tricky. If your goals aren’t aligned, the relationship can become messy. You also need to think carefully about giving up part of your business to someone else.

These partnerships work best if you already have a working product and want to grow quickly by using someone else’s resources or connections. Just make sure both sides are clear on what they want and how the partnership will work.


How to pick the right funding for your startup

When you're starting a company, it feels like funding is the key that unlocks the next door. And it is—but only if it’s the right kind of funding.

Pick the wrong type, and you might find yourself tied up in obligations that don't fit your stage or goals. Worse, you might waste precious time chasing funding that's not a match.

The trick is knowing where you are and what you need right now, not in some hypothetical future. Once you know that, the path forward is surprisingly clear.

This step-by-step process will help you figure out what kind of funding to pursue.


Question 1: What is your primary need?

Choose which applies to your startup.


  • a) I need funding to build and validate my MVP. → Go to Question 2
  • b) I need funding to scale and grow my startup. → Go to Question 3

Question 2: How much funding do you need to build your MVP?

Choose which applies to your startup.


a) I need minimal funding (e.g., <$10,000) → Are you willing to use personal funds?

  • Yes: Bootstrapping
  • No: Friends and Family or Grants and Competitions

b) I need moderate funding (e.g., $10,000–$50,000) → Do you want to avoid equity dilution?

  • Yes: Grants and Competitions or Revenue-Based Financing
  • No: Angel Investors or Convertible Notes/SAFE Agreements

c) I need significant funding (e.g., $50,000+). → Do you have a clear plan and early traction?

  • Yes: Angel Investors or Pre-Seed VC
  • No: Incubators and Accelerators

Question 3: What is your primary growth objective?

Choose which applies to your startup.


a) I want to scale revenue or acquire customers. → Do you already have revenue?

  • Yes: Revenue-Based Financing
  • No: Pre-Seed VC or Angel Investors

b) I want to expand my team and operations. → Do you want mentorship and resources alongside funding?

  • Yes: Incubators and Accelerators
  • No: Angel Investors or Convertible Notes or SAFE Agreements

c) I want to build industry connections or partnerships. → Can you align your product with a larger company’s goals?

  • Yes: Partnerships
  • No: Angel Investors or Incubators and Accelerators

Bonus questions to pick the right funding option

As you've seen, there are many options to choose from when deciding on a funding stream for your startup. And each option have distinct advantages when it comes to speed, control and support.

Here are a few bonus question you might want to think about before making a decision.


a) Bonus Question 1: Do you need quick funding?

  • Yes: Bootstrapping, Friends and Family, or Revenue-Based Financing
  • No: Grants and Competitions, Angel Investors, or Pre-Seed VC

b) Bonus Question 2: Do you want to preserve equity?

  • Yes: Grants and Competitions or Revenue-Based Financing
  • No: Angel Investors, Incubators and Accelerators, or Pre-Seed VC

c) Bonus Question 3: Do you need funding with mentorship or expertise?

  • Yes: Angel Investors or Incubators and Accelerators
  • No: Bootstrapping or Revenue-Based Financing

How to use these questions

We can combine these bonus questions with our answers to the previous questions to dig deeper into the best option.

For example:

  • I need $20,000 to build an MVP but want to avoid giving up equity. → Grants and Competitions or Revenue-Based Financing (if revenue exists)
  • I have traction and need $100,000 to grow quickly. → Angel Investors or Pre-Seed VC
  • I want funding plus mentorship and industry connections. → Incubators and Accelerators
  • I’m pre-revenue but want to build strong industry partnerships. → Partnerships and Strategic Alliances

Whichever option you pick, raising money should be focused on what you need to move forward, whether that’s a prototype, traction, or the ability to scale. The best founders understand this. They’re pragmatic about choosing funding that fits their current needs without giving up too much optionality for the future.


Final thoughts

Getting early funding is a big step when you're growing your startup. The right funding gives you breathing room – time to fine-tune your product and really understand what your customers want.

You don’t need to stick to just one type of funding, either. Many successful startups use a combination.

For example, bootstrapping can help you stay in full control, but it might mean working longer hours. Grants are great because they don’t need to be paid back, but they often come with specific conditions. Angel investors can bring money and guidance, but they may want a say in how you run things. It’s all about finding the mix that best supports your goals.

The journey of starting a business can feel a bit uncertain at times, but funding doesn’t have to. Every decision you make – whether it’s applying for a grant, pitching to an investor, or even entering a competition – is a step closer to making your vision a reality.

Each dollar you raise and every bit of support you gain is like a little milestone, showing that your idea has real value. These small wins might not feel like much in the moment, but together they build the foundation for a business that can truly last.