9 funding options to fuel growth of your startup

What is absolutely critical to fuel growth for any startup? Money! But, as we haven't discovered a tree from which money grows, we still need to work to get it. Luckily, there are various funding options available, from self-funding to securing venture capital, each with pros and cons. To help, here's a summary of nine key options to consider for Estonian e-resident founders.

1. Self-funded startups (bootstrapping)

Bootstrapping is when you use your own personal savings to fund your startup. This method allows full control over your company and avoids equity dilution. It also signals confidence in your business, attracting future investors. However, bootstrapping is risky as you’re investing personal funds, and if the business struggles, you could lose significant personal savings.

2. Funding from family and friends

Many startups turn to family and friends for early-stage capital. This funding is relatively easy to access if your loved ones are supportive. However, this approach carries risks: failure of the business could strain personal relationships, and it’s important to manage expectations and be transparent about potential losses.

3. Crowdfunding

Crowdfunding platforms like Kickstarter or Fundwise allow you to pitch your idea to a wide audience. While it’s a great way to validate your business and build a customer base, a successful campaign requires considerable effort, marketing skills, and often delivering rewards in return, which can be costly and time-consuming. Additionally, crowdfunding platforms take a fee from the raised funds.

The e-Residency Funding Portal has numerous investing and funding opportunities: Fund your business - e-Residency ( e-resident.gov.ee )  

4. Startup business loans

Business loans provide an option to raise capital without giving up equity. While loans can help you scale your startup, they come with interest and repayment obligations, even if your business doesn’t turn a profit. A solid business plan and good credit score are often necessary to secure these loans.

5. Angel Investors

Angel investors are wealthy individuals or groups who provide funding in exchange for equity. They also offer valuable mentorship and networking opportunities, making them an attractive option. However, founders must be prepared to relinquish some control and ownership of the company.

6. Venture Capital

Venture capitalists (VCs) invest in high-potential startups and typically offer larger amounts of funding than angel investors. In return, they demand significant equity. VC firms also bring expertise, mentorship, and extensive networks, helping startups grow rapidly. Estonia's robust VC ecosystem makes it an attractive option for startups registered there.

7. Startup incubators and accelerator programs

Incubators and accelerators provide mentorship, networking, and often small amounts of seed funding in exchange for equity. These programs help startups refine their business models, scale, and connect with investors. Estonia offers numerous opportunities for e-residents to join such programs, including Tehnopol Startup Incubator and Prototron.

8. Grants

Grants offer non-repayable funding, often provided by governments or foundations. While they don't require giving up equity, they come with strict conditions and require detailed reporting. Estonian e-residents can apply for a range of grants, including EU-backed programs like Horizon Europe , which support startups in sectors such as health care, climate solutions, and digital technology.

9. Revenue-Based Funding

Revenue-based funding (RBF) is a newer option where startups sell a percentage of their future revenue to investors. This option avoids giving up equity or taking on debt but typically provides less funding than traditional equity investors like VCs or angels. It’s a flexible choice for startups that want to retain more ownership.

Final Thoughts

When choosing a funding method, consider the implications for your startup’s control, equity, and future growth. Many startups combine several funding options to achieve their goals, but whatever approach you take, be prepared to navigate the challenges and opportunities that come with raising capital.

If you want to read more about funding options for e-resident startups in Estonia, read the full article on the e-Residency blog .