Raising Startup Capital Without Equity Dilution

Miguel Fernandez
Miguel Fernandez
Co-founder & CEO
Posted on
December 6, 2023
min read
Raising Startup Capital Without Equity Dilution

In the fast-paced world of SaaS, securing funding is a critical first step for talent acquisition, product development, and growth. Traditional venture capital and equity financing has been the default choice for tens of thousands of startups over the last couple of decades, but it comes at a steep cost. Relinquishing ownership and control of a company can often make sense at a certain stage, but most startup founders hope to maintain majority ownership in a company’s early years to ensure that the product aligns with their vision and mission. 

The landscape of SaaS funding techniques is rapidly evolving, and SaaS companies now have more options than ever for raising startup capital without giving up equity. In this blog post, we’ll explore some of the startup funding alternatives and techniques that empower SaaS companies to navigate today’s complex financial landscape, secure funding support, and power growth – all without sacrificing ownership. 

In this blog post, we’ll break down some startup funding techniques that go beyond traditional venture capital or equity financing, from popular methods like crowdfunding and micro loans to lesser-known financing options like convertible notes and scalable financing based on your predicted ARR. We’ll dive into the details of each funding method, and by the end, we hope you’ll have an idea of what you’re going to go after to power the next phase of your SaaS company’s growth. 

Let’s jump in!


Funding can take several forms, depending on your growth goals. Self-funding, or bootstrapping, remains a fundamental strategy for SaaS companies looking to further their growth without relying on external investors. This approach leverages the personal savings of the company founders, revenue generated by the company, and cautious financial management to sustain and expand operations. 

Self-funding gives founders more autonomy, letting them retain complete control over the business strategy, vision, and decision-making. It’s a great way to keep the vision strong and centralized, and ensure that the mission is the core of all operations and growth decisions. It requires strong financial discipline, frugality, and a focus on sustainable growth. Without these, a self-funded startup can easily burn through cash, leaving the founders depleted or in debt, and leaving the company with no option but to sell or shutter. On the other hand, self-funding eliminates the risk of equity dilution. As no external investors are involved, founders maintain 100% ownership. 

While bootstrapping as a method of raising startup capital requires a careful, judicious approach to resource allocation, it can also be a really effective option especially for early-stage SaaS companies with modest initial capital requirements and a clear, well-researched revenue model.

Funding through Partnerships

Collaborating with established companies by creating strategic partnerships offers a clear pathway for SaaS startups to secure funding without diluting equity. These partnerships can take a number of forms, including agreements with licensing, sharing of annual or project revenue, and joint product development, marketing, and customer support. 

In an ideal arrangement, strategic partnerships deliver broader access to resources to both partners. The more established partner contributes valuable resources, expertise, and market reach, while the newer partner can provide unique talent, product development skills, or product features that enhance the established partner’s products, helping them better meet changing customer needs. A strong partnership will be mutually beneficial, fostering a positive win-win dynamic for both companies involved, their key stakeholders, and their customers. Another benefit of strategic partnerships is that companies can collaborate with multiple companies, diversifying their funding channels and connections, and delivering their product to a broader range of consumers. 

Strategic partnerships provide financial support, but also open doors to new markets and customer bases, making them a strong choice for SaaS companies seeking non-equity assistance. 

Aligning Capital with Growth

Financing based on revenue is a popular funding model that ties capital injections to a company’s revenue performance. In this arrangement, a growing SaaS company seeking financing receives funding, and in return, commits to repaying a percentage of its future revenue. This financing model often includes an element of flexible repayment, since payments are directly linked to the company’s financial performance. This helps align the interests of the investor with the success of the startup company, ensuring that investors truly believe in the company’s and founder’s future. It’s a great vote of confidence. 

This model also comes with predictable costs, since monthly repayments are based on a fixed revenue percentage. This is helpful during fluctuating markets and business cycles. And finally, revenue-based financing completely avoids equity dilution, so that SaaS companies and their founders can secure funding without having to give up ownership stakes. This model is particularly suitable for SaaS companies with predictable and steady revenue streams, and for companies and founders seeking a financing avenue that adapts to the performance of the business across market environments and scenarios. 

Leveraging your Community Network

Startup funding techniques are becoming increasingly democratized through crowdfunding platforms that allow SaaS company founders to raise capital directly from a global pool of backers, offering equity or reward-based funding. Of course, for companies seeking non equity assistance, reward-based campaigns are the way to go.

Successful strategies for crowdfunding start with compelling storytelling. Craft a meaningful narrative that resonates with potential backers, emphasizing your value propositions, the problem in the industry that you’re responding to with your product, and the uniqueness of your solution. Provide clear incentives such as early access, discounts, exclusive features, limited-edition products, or tangible merch, like stickers and shirts. Successful crowdfunding campaigns also actively engage your community, leveraging social media and other channels to build momentum and support. 

Crowdfunding is a great option because it allows companies to reach a global audience. It can double as fundraising and marketing to a broad group, validating the product or service and building a community of early adopters. Crowdfunding also gives members of your community outside of the SaaS industry an opportunity to show their support for you and your product even if they’re not potential buyers. Let your friends, family, and non-SaaS network show you what your hard work, vision, and drive mean to them. 

Accessible Financing 

Other techniques for raising startup finance include micro loans. Often facilitated through online lending platforms, micro loans are designed to meet the specific needs of SaaS startups by providing them with small scale financing options that can power single projects, such as the development of a new product feature or a period of operating costs. Micro loans often are free of the more stringent application and eligibility requirements that make traditional loan applications so arduous and often out-of-reach for early-stage SaaS businesses. 

In spite of the more relaxed eligibility requirements, micro loans for startup businesses still require a strong pitch. It starts with a well-considered business case that articulates your intended purpose for the loan, and how it will contribute to the healthy, long-term growth of your startup company. Then, a demonstration of viability is key. You’ll want to provide evidence of your startup company’s viability, including a business plan that includes extensive market and competitor research, revenue projections, and a clear strategy for future repayment of the micro loan. 

Micro loans are a great startup funding alternative that doesn’t dilute equity. They’re a strong option for SaaS companies that need a small cash injection for initial product development, marketing efforts, and operational expenses without relinquishing control. 

Looking to the Government

Some startups find success in applying for government grants, subsidies, and other incentives for funding. Governments often have funding available at city, state, and federal levels designed to boost development and growth in different sectors. Look for government grants or programs that promote innovation, advancements in technology, economic development, or job creation. If your startup aligns with government priorities, you might qualify for non-dilutive funding directly from state budgets or beyond. 

Securing government support can often come with stricter eligibility requirements, so be sure to research government programs available at the local, regional, and national level to ensure that your company meets the guidelines. Search for grants that are relevant to your field that support startups in technology, SaaS, or job development sectors. Confirm that your objectives align with the grant’s intended goals. Tailor each grant application to showcase how your startup company’s goals align with government and grant objectives. 

Many SaaS companies seeking non-equity assistance will choose to apply to government grants with the help of a professional grant writer. Hiring a professional has an upfront cost associated with it, but it’s an investment – you won’t have to go through rounds of edits with a less-experienced in-house team that’s never written grants before, and you’ll have a higher chance of winning a grant with a writer that’s done it before. A professional grant writer can enhance the quality of your application and improve its competitiveness. 

Applying for government grants and initiatives can be competitive, but successfully securing government support can boost the financial position of a SaaS startup without sacrificing equity. In addition, it can be a great way to show proof of product value and up your company’s brand awareness at a very high level. 

Balancing Debt and Equity

Convertible notes offer a hybrid financing solution, allowing SaaS startups to raise capital as debt initially, with the option to convert the debt into equity at a later stage, typically during a subsequent funding round. A lesser-known option, convertible notes can be a good fit for SaaS companies that have a solid long-term business plan that gives both founders and investors confidence in the company’s longevity and ability to commit to sustainable growth. 

Convertible notes come with flexible terms, including interest rates, maturity dates, and pre-planned conversion triggers, so the expectations of all parties can be in complete alignment. Conversion features such as deferred equity dilution allows equity dilution to be delayed until a future funding event, providing short-term financing without immediate ownership implications. This is a great way for SaaS startup founders to build a solid foundation for their company based on their vision and goals while in complete control of the company’s trajectory, and then open it up to other equity shareholders once the company has had the opportunity to become more established. Convertible notes are also attractive to early-stage investors who want to support a startup without immediately committing to a fixed equity stake.

This financing technique allows SaaS startups to secure capital in the short term while deferring the equity discussion until a later, potentially more advantageous, time. It provides flexibility both to the company and to the investors, who are not on the hook to do the labor of being shareholders while the company goes through early growing pains and early market launches.

Growth that Scales

It can be scary taking on debt as a SaaS startup founder, especially in the early stages of product development before your product is proven revenue begins to roll in. It can be even scarier to trade debt for equity and relinquish total control before you’ve even really begun. Luckily, today’s market has dozens of startup funding alternatives as we discussed above. There are options for companies of every size and industry specialty, allowing SaaS startup founders to find the mode of financing that fits them. 

We’re SaaS people, too, and we’ve grappled with many of these same challenges. How can we raise money without crushing debt that may be difficult to repay? How can we get investors without giving up equity?

It’s why we built Capchase Grow, a non-dilutive financing option for B2B SaaS companies that gives you the funding you need to grow to the next level without having to give up any equity. Capchase Grow is designed to meet you where you’re at, with financing that scales alongside your predicted ARR, so you’ll avoid taking on more debt than you can handle. We’re on your side – we want to see you win and succeed as you grow. Capchase Grow provides you with the capital you need to build your next great product feature, and it grows as you grow, giving you manageable but powerful funding as your ARR increases. 

We’ve helped hundreds of B2B SaaS startup companies build massively with Capchase Grow. We love to empower companies with vision to refine and market their products without having to give up equity and control. Because we believe that a great SaaS company starts with a great founder and a brilliant idea. Why mess with a good thing by adding more cooks to the kitchen? 

We like to keep things simple – so you can secure financing quickly and get back to focusing on what really matters to you: developing and selling your one-of-a-kind SaaS solution. 

Ready to check out how much growth capital you qualify for? Let’s talk!