Raising money is one of the biggest challenges founders face, and one of the most misunderstood. The right funding strategy depends on where you are in your startup journey, your growth goals, and how much control you want to keep.
Non-Dilutive vs. Dilutive Funding
Broadly, funding falls into two categories: non-dilutive and dilutive. The key difference between non-dilutive and dilutive funding is ownership.
- Dilutive funding means you give up equity (the shares in your business) in exchange for capital. Investors own a share of your company and participate in future returns.
- Non-dilutive funding gives you access to capital without giving away ownership. You retain full control, but typically have to meet repayment terms or specific project criteria.
Understanding the trade-off between these two is critical for founders—non-dilutive funding can preserve control early on, while dilutive funding can accelerate growth when you’re ready to scale.
Non-Dilutive Funding Options
Grants
Grants are one of the most founder-friendly forms of capital—free money you don’t have to pay back. They’re usually awarded by governments or research bodies to encourage innovation and job creation.
In Victoria, for example, Business Victoria offers a range of grants to support startups, from early-stage product development to export expansion. These programs often have specific eligibility requirements, so it’s worth spending time aligning your application with the fund’s objectives. While grants can take time to secure, they’re an excellent way to fund R&D or validate early proof of concept without giving up equity.
Types of startup grants
| Australian Government Department of Industry, Science and Resources | Funding and incentives |
| Australian Government | Grants & Programs |
| Australian Government | R&D Tax Incentive |
| Business Victoria | Grants & Programs |
| City of Melbourne | Grants and Scholarships |
| CSIRO | CSIRO Kick-Start |
| Victorian State Government | Grants schemes |
Revenue based financing (venture debt)
Revenue-based financing is a flexible, non-dilutive funding model where startups repay investors via a share of monthly revenue rather than giving up equity or committing to fixed repayments.
One homegrown example is Victorian alternative lender Tractor Ventures, which backs mid-stage startups on a path to profitability.
This flexible model is ideal for startups with predictable income streams who want to scale sustainably without handing over ownership.
Crowdfunding
Crowdfunding allows startups to raise capital from a large number of small investors or supporters. It’s particularly powerful for community-driven or consumer-facing businesses.
Platforms like Birchal have helped hundreds of Australian startups raise millions through equity crowdfunding, giving customers a chance to become shareholders. Similarly, Lift Women focuses on empowering female founders through reward-based crowdfunding, helping them validate ideas and build early traction.
The upside: you can build an engaged customer base while raising funds. The challenge: running a campaign takes time and marketing effort, and you’ll need to manage a large group of small investors.
Dilutive Funding Options
Venture Capital
Venture capital (VC) is what most people think of when they picture startup funding. Venture capitalists (VCs) invest large sums in exchange for equity, betting on your growth potential.
The upside is obvious: significant capital, access to networks, and strategic guidance. The downside is dilution and the pressure to grow fast. VC funding suits startups with high scalability, defensible technology, and ambitions for global expansion.
LaunchVic has funded 15 new venture capital funds to set up in Victoria and back local founders, view a full list via our investor directory and visit the pages to connect with relevant groups.
Angel Investors
An Angel Investor is an investor with a high-risk appetite who provides seed investments into early-stage startup ventures, prior to institutional investors including venture capitalists.
Typically, Angel Investors provide more than investment alone – they bring business experience, mentorship and networks that can help the invested startup accelerate its growth.
LaunchVic’s startup database is a great resource to research active angel investors aligned with your startup.
Angel Networks
An Angel Network is a formalised group of Angel Investors that collectively evaluate and invest in entrepreneurial ventures.
Key benefits for members include:
- An increased pool of capital to make larger investments (and hopefully larger returns)
- Greater diversification through smaller investments in several ventures
- Shared costs of due diligence
- Access to dealflow and connections to the best up and coming startups
- Access to expertise of other sophisticated, active angels and angel networks
LaunchVic has funded a number of angel networks to establish in Victoria and back local founders.
Bonus: Blended Capital
Some funds combine dilutive and non-dilutive elements, an approach called “Blended Capital”.
One example is LaunchVic’s two in-house funds, the Alice Anderson Fund and the Hugh Victor McKay Fund. Both take 85% of their investment as equity, with the remainder going to the founder as a direct grant.
This prevents unnecessary dilution on your cap table at the early stages of your business.
Final Thoughts
There’s no one-size-fits-all funding strategy. The best founders treat fundraising like product-market fit—they experiment, iterate, and find what works for their stage. Whether you bootstrap, borrow, or bring on investors, the key is to stay focused on building something people want…and use funding as fuel, not the finish line.