Startups are complex ventures.
They require technical solutions, research, innovation, and teamwork. Yet pitching a compelling vision only becomes a business when there is money behind it.
While self-financing options such as personal loans or bootstrapping the business are available, they place the entire financial risk on the founder. For this reason, most entrepreneurs seek external investment.
In this lesson, we’ll examine the funding landscape for early-stage startups, explore practical funding strategies, unpack the psychology behind investor decision-making, and highlight the power of match funding.
Venture Capital vs Grant Funding
To understand your potential investors, start by viewing them as customers.
They’re ‘buying’ a stake in your idea, and each investor comes with specific goals, timeframes, and return expectations.
Whether you’re dealing with hedge funds, venture capitalists, angel investors, or government grant bodies, each operates within a defined mandate.
Reviewing their investment reports and strategic priorities helps you assess alignment.
Venture Capital
For-profit startups typically pursue venture capital (VC) funding. These firms invest capital on behalf of other investors, and target scalable, high-growth ventures.
VC firms prioritise ROI well above vision. VC investors are hunting for 10x, 100x, and unicorn outcomes.
Unlike angel investors, VC firms rarely offer hands-on support unless their capital is at risk. Therefore, your pitch must focus on scalability and a clear exit strategy.
Grant Funding
But what if your project isn’t designed to generate profit?
Consider The Garden at Imperial.
Our purpose is to create value for the university community and the environment, not returns for shareholders. For mission-driven ventures like ours, grant funding, philanthropy, and internal university programs are more appropriate sources of funding.
These funders assess proposals based on Social Return on Investment (SROI), the long-term value your work provides to people and the planet.
Navigating Difficult Financial Conversations
Personally, and somewhat paradoxically, I dislike talking about money. I know it’s the medium through which change is made, but I’ve always found it easier to use money than to request it.
As a self-employed consultant, this hasn’t always served me well. Even in meetings specifically about funding, I’ve hesitated. I would get caught up in the vision, the story, the passion, and then stumble when it came to “the ask”.
That changed after a conversation with my mentor, Devon Smiley. Her advice reframed the issue.
She suggested structuring funding conversations into three simple stages that organically lead into each other:
- First 15 minutes – Speak. In my case, this meant walking them through the garden, showing them the plants, and sharing my vision.
- Next 15 minutes – Listen. Ask about their ideas. In my case, this meant asking them what they could imagine for the garden? And, what concerns might they have?
- At the 30-minute mark – Offer a cup of tea. Sit down, slow the pace, and – with a light-hearted comment like “And now for the million-dollar question…” – introduce the topic of funding.
This structure allows for emotional connection, intellectual engagement, and a smooth transition into financial discussion – without it feeling too awkward or abrupt.
Match Funding and Distributing Risk
Now, flip the perspective. Imagine you’re the investor. You’re managing capital on behalf of a client, government, or pension fund. Your main concern? Risk.
You’d be likely to seek answers to questions such as:
- How likely is this idea to succeed?
- How many assumptions need validating in order to be confident about the business model?
- Can this team actually deliver?
Some losses are to be expected, but risk can be reduced. Just as investors diversify their portfolios, smart founders should embrace match funding during their funding rounds.
What is Match Funding?
Instead of raising the full amount from a single backer, you secure smaller commitments from multiple sources.
This approach reduces each investor’s financial exposure, increases accessibility to funding, and builds social proof.
That last point about social proof is particularly potent. When people see other respected individuals backing your project, it signals credibility. FOMO builds, more investors jump in, and the bandwagon effect takes hold, leading to increasing momentum and investor interest in the project.
Match Funding in Practice
Of course, this presents a classic chicken-and-egg paradox: You need credibility to raise investment, but you need investment to build credibility.
This is where angel investors play a vital role. They write the first cheque, and thereby initiate the positive feedback loop.
In our case, the chaplaincy committed early to supporting and maintaining the garden. When we applied to the President’s Community Fund (PCF), we were able to highlight this existing support, and secured a £39,000 grant.
That success enabled us to approach the Imperial College Union. Recognising the project’s momentum and wanting to be involved, they fast-tracked our campaign application, granted a marketing budget, and provided insurance cover.
Next, we needed funding to cover student salaries. We applied to Imperial’s Student Shaper program, leveraging the project’s strong institutional backing. They awarded £10,500 to support part-time roles.
Each funder saw the opportunity through their own lens:
- PCF saw the chaplaincy’s commitment as signal that our project was a low-risk way to fund a green space
- As the momentum grew, the Union wanted to support a prominent student-led project.
- Finally, Student Shapers saw a clearly defined role for themselves within a larger well-supported mission.
With that layered support in place, other micro-projects began approaching us, leading to resource sharing and new partnerships.
The Bottom Line
Whether you’re in the pre-seed, seed, or Series A stage, funding is essential. It sustains your operation, supports your team, and empowers your vision.
Securing funding can feel daunting, but it’s one of the most crucial roles of any founder.
In this lesson, we explored:
- Different funding types and how to align with them
- A strategic approach to asking for funding
- How match funding can build momentum and reduce risk
Challenges do not end after securing funding, if anything the expectations of success increase and with them the pressure on the founding team. But what happens when we face a wicked problem that we cannot overcome alone?
In the next article, we’ll talk about how strategically creating and managing my stakeholder network helped me overcome an unmovable challenge that risked defunding the whole project.
Emilio Garcia Padron is an MSc Applied Mathematics student at Imperial College London, specializing in Computational Dynamical Systems. He is a full-stack software developer and founder of NEA Studios. He is also a founder of RE:GEN @ Imperial, a project aiming to protect and expand Green Spaces on Imperial grounds that raised over £39,000 in funding.
Image: DALL-E
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