Startup Playbook | Part 2: How to Get Funded

So… how the hell do you fund your idea?

It’s one of the first questions every first-time founder has, and one of the hardest to act on. I know, because I’ve been there.

Back in 2020, when I wanted to build my company, BeoBia LTD , I thought I’d have clarity. But when it came time to start something new, I was paralysed. There were just so many funding options. Grants, angel investors, bootstrapping, crowdfunding, accelerators, and each one came with its trade-offs, implications, and unknowns.

I clearly remember sitting on directions for months, stuck. Paralysed by the fear of picking the wrong path. Overthinking every route. Worrying about the cost of getting it wrong. And that’s the thing they don’t tell you, sometimes the biggest blocker isn’t money, it’s decision fatigue.

And I know I’m not alone. I talk to early-stage first-time founders all the time who feel exactly the same: like they can’t move forward until they’ve figured it all out. But here’s the truth, you won’t figure it all out. Not straight away. And that’s okay.

You’re going to make mistakes. You’re going to learn. And most importantly, you’re going to realise that getting funded isn’t about following a rigid path, it’s about understanding your options and picking what works for you.

There’s no perfect approach. In my opinion, the smartest founders often blend funding paths, starting with sales, adding grants, and raising equity. It’s not about purity, it’s about practicality.

This guide is here to help you see the landscape, honestly, and without the fluff. So you can start moving instead of second-guessing

Let’s get into it! ✌️

1. Sales: The Most Underrated Funding Route

Let’s start with the obvious one, that almost no one actually starts with: revenue.

If you can sell your product or service early, even in its roughest form, and make money, do it. That is your best form of funding. It’s non-dilutive, immediate, and gives you real customer feedback. Founders get obsessed with raising money, but forget that making money is still a thing.

Actual customers paying actual money for your product or service. Daniel Priestley calls this being 'oversubscribed', the idea that before you even officially launch, you’ve already created demand and even secured funding from future customers. His book Oversubscribed is a must-read for this mindset. Instead of asking for permission or capital, you build so much interest upfront that you effectively self-fund from day one.

💸 Sales don’t just fund you, they validate you.

If you can get people to part with money early on, that’s better than any investor ‘yes’. And if you're building something physical or tangible, platforms like Kickstarter (a rewards-based crowdfunding tool) let you pre-sell your idea to the world. If you hit your funding target, you unlock the capital to build it, if not, nobody’s charged. It’s a beautiful signal of market fit and early demand. Use your own site, use waitlists, use email sign-ups, or use crowdfunding platforms. But start with sales. That’s your strongest early funding tool.

Your early revenue shows traction. It proves people want what you’re offering. It also gives you leverage, when you do go to investors or grant bodies, you’re not just talking about a ‘great idea’. You’ve got proof. Of course, this won’t apply to every founder. If you’re in biotech, deep tech, or anything with heavy R&D and regulation, you’ll need upfront capital.

But if you can generate your own oxygen? Do that first.

2. Grants: Free Money… or is it?

Grants sound great. And when they work, they are. Non-dilutive funding, meaning you don’t give away equity. No repayments. No interest. Just capital to help you move forward.

But let’s be clear: grants aren’t magic. And they’re definitely not easy.

A grant is money awarded to help you build something specific, usually linked to innovation, sustainability, or social impact. It’s given for a reason, not just because your startup has a nice logo.

In the UK, the biggest name in town is Innovate UK. They offer everything from £25K feasibility studies to multi-million-pound collaborative R&D grants. These are serious programmes that can transform your business, but they come with strings attached that you might not be aware of.

There are also smaller schemes:

• Local growth hubs and LEPs (Local Enterprise Partnerships)
• Startup accelerator micro-grants
• Bank-led initiatives (Santander X, NatWest, Lloyds Labs, Barclays Eagle Labs)
• University innovation centres
• Charitable foundations and trusts

👉 Use ChatGPT, Google, or sign up to newsletters like Innovate UK to stay in the loop.

The 'Strings' to be aware of...

🔥 Grants Are Highly Competitive

Everyone wants free money. Grant pots are limited. And the application process can feel like applying to Hogwarts. The bigger the grant, the tougher the odds. You’re often competing with seasoned organisations, research institutions, and funded teams with dedicated bid writers.

⏳ They’re Time-Consuming

Writing a proper application takes weeks, if not longer. You’ll need:

• A clear problem-solution statement
• Defined outcomes and metrics
• Risk assessments
• A credible budget with justification
• Partner organisations (for collaborative grants)
• Sometimes detailed financial accounts or forecasts

This is not a side task. It’s a full-time project for a few weeks — and that’s before you hear back.

💸 They Often Require Match Funding

Most grants, or at least the large ones, won’t cover 100% of your project. You might need to cover 30%–50% of the total cost. That can be from revenue, investment, or other funding. But if you don’t have that cash available, you’re not eligible.

📅 Most Grants Are Reimbursed, Not Paid Upfront

Linking to the match funding point above. Let’s say you win a £500K grant. You don’t get a £500K cheque on Day 1. You’ll likely need to spend the money first, then reclaim it. Usually quarterly. That means you’ll need short-term cash flow to fund your project while you wait for the reimbursement. If your runway is already tight, this can be problematic for you.

📋 You’ll Be Assigned a Monitoring Officer

Yep, someone whose job is to keep an eye on how you’re spending the money. Expect:

• Quarterly check-ins
• Budget reports
• Evidence of outputs (e.g. prototypes, research)
• Sometimes public dissemination of results

It’s not free money to splash on “growth hacking” or vague marketing efforts. Every pound needs a plan.

Grants are brilliant, especially in the early days, when done right. They can help validate an idea, fund a Minimum Viable Product (MVP), or give you breathing space before raising investment.

But they can also be a trap. Some founders become grant-chasers, warping their company to fit whatever’s being funded. Chasing buzzwords. Bending missions to suit funding rounds. Don’t do that. Build the company you believe in. Not the one that ticks the most boxes on a funding form.

Link to my 30 Grant providers. Enjoy 👉 ACCESS HERE

3. Equity Investment: The Art of Selling Ownership

Equity investment means someone gives you money in exchange for ownership of your company. You're not taking a loan, you're giving away a percentage of your business in return for capital, support, and (hopefully) alignment on your mission.

Done right, it's a powerful tool for growth. But you need to be clear about what you’re giving up, and what you’re getting in return.

There are three main types of equity investment at the early stage:

i) Friends, Family, and Fools

• 👥 Who: The people closest to you — the ones who believe in you, not necessarily your startup.
• 💷 Amount: £1K–£20K total
• 📌 Stage: Idea, pre-MVP (Minimum Viable Product), concept-only

As the name (jokingly) suggests, these are often the first people to give you money when you have nothing but a vision. It’s highly risky, and they know it, or at least, they should.

You don’t have traction yet. You probably don’t have a deck. What you do have is people who trust you personally. So they chip in. They back you, not the metrics.

At this stage, the capital might be used to build your MVP, take time off your job, cover initial legal costs, or fund early experiments. This money often makes the difference between an idea that stays on the back burner and one that gets moving.

Of course, this route depends hugely on who you know, and what kind of support you have around you. It’s not equally available to everyone, and that’s a real socio-economic issue in startup ecosystems.

ii) Angel Investors: The Believers

• 🕊️ Who: High-net-worth individuals who invest personal money into startups
• 💷 Amount: £5K–£100K per angel
• 📌 Stage: Pre-seed to seed

Angels are your bridge from "just an idea" to a real, funded startup. They’re often founders themselves, or experienced operators, who’ve made money and now want to support the next generation. Some angels are purely financial, others are strategic and hands-on.

Unlike VCs, angels invest their own money. That means they can move fast and often decide based on gut feel, founder fit, or alignment with a mission. But it also means they’re looking for something more than a return; they want to feel excited, included, and confident in you.

Angels typically come in at the pre-seed or seed stage (more about that later!), before there’s major revenue, and when your startup still has a lot of unknowns. They're betting on your vision, your team, and your ability to figure things out.

If you’re raising your first “proper” round, you’re likely raising it from angels, either directly or via syndicates - a group of angels pooling capital together.

iii) Institutional Investors: The Big Guns

• 🏛️ Who: Venture capital firms, early-stage funds, corporate investment arms
• 💷 Amount: £250K–£20M+ per fund
• 📌 Stage: Seed, Series A and beyond

Institutional investors are professional investors. They manage other people’s money, like Venture Capitalists and family offices, and are expected to return a profit.

They’re more metrics-driven, more cautious, and won’t invest unless you’ve already shown traction, revenue growth, and some kind of scalable path forward. That means they come in after angels, when you’ve proved that your product has legs, and you’re ready to grow fast.

VCs (venture capitalists) want big outcomes. They’re playing for 10x+ returns, so they’ll push you for scale. They also tend to invest in bigger cheques, which means giving up a larger stake, and taking on more expectations.

Most early-stage founders won’t deal with VCs right away. But it’s good to understand how they work, and how the game changes once they’re involved.

🪜 What the Funding Stages Actually Mean

You’ll hear terms like pre-seed, seed, and Series A thrown around a lot. But there are no fixed rules. These aren’t strict categories. They're more like loose reference points to describe where you are in your journey, and what kind of money and expectations come with it. Here’s how to think about it:

Pre-seed

• 🧪 Stage: Idea-to-early MVP (minimum viable product). Maybe a basic prototype.
• 💷 Raise size: £100K–£500k
• 🧠 Investor type: Angel investors, friends & family, small syndicates, pre-seed funds
• 📌 What matters: Founding team, vision, early validation (surveys, waiting lists, early sign-ups), maybe some revenue

At this stage, you're raising based on belief. Investors are backing you, not your traction. You likely don’t have a polished product yet, but you've done some homework. You will have user interviews, a prototype, a product waitlist, initial sales, and limited revenue. Don’t over-optimise here, people are investing in you.

Seed

• 🌱 Stage: MVP live, early traction, first users or customers
• 💷 Raise size: £500k–£2M+ 🧠
• Investor type: Angels, seed-stage funds, early VC firms, family offices
• 📌 What matters: Product-market fit signals, real usage data, team growth, early revenues

Now you're raising to accelerate, not just explore. You've proved the concept, and you're raising money to double down on what’s working: build the team, refine the product, grow revenue. Investors will want more than belief here; they'll want evidence.

You should know your core metrics: CAC, churn, runway, and burn rate. You should have a clean cap table. With a professional data room.

Series A, B, C (and beyond)

• 🚀 Stage: Growth mode. Real traction. Repeatable sales.
• 💷 Raise size: £2M–£20M+
• 🧠 Investor type: Institutional VCs, growth funds, strategic investors
• 📌 What matters: Serious traction, scalable ops, strong retention, path to profitability or massive scale

This is where you go from “startup” to “company”. Investors here want scale. They're looking at your margins, LTV, MoM growth, retention cohorts, hiring plans, international expansion, etc. You’ve raised before, and you have a proper board, financial model, clean data room, and team in place. The money you're raising is to step on the gas and grow fast.

🧠 Reminder: The general rule: raise enough for 18–24 months, bring it in upfront, and plan your run. Raising usually takes 6 months from start to finish.

What matters is that you raise what you need to hit your next milestone, and can explain clearly why you’re raising now, how much, and what it’s for.

Finding and Approaching Angel Investors

Start with your network. Warm introductions are gold. If you don’t have them, use LinkedIn, search 'angel investor', filter by geography, and send tailored messages. But here’s the catch: you need to be ready. You can't afford to show up underprepared. Know your numbers. Know your traction. Know your vision. Have a deck (we’ll go deeper into this in a later article). When you’re asking someone to part with their money and believe in your mission, you need to project clarity, confidence, and realism.

That said, not every conversation is a pitch. If you're not ready, ask for advice instead. Most angels love to share insights. So don’t hesitate to reach out for a virtual coffee and some guidance, just be clear about your intentions.

Equity investment is not Dragon’s Den. You won’t be standing in a room with a spotlight and five millionaires pulling faces at you. In reality, you’ll most likely be chatting to one or two people, often at an event, over coffee, in a lift or over a video call. It’s a conversation, not a courtroom. Still, they’re looking for credibility. That means clarity on what you’re doing, why it matters, and how it could grow. We’ll dig deeper into how to pitch and prepare for fundraising in a dedicated article on pitch decks and due diligence.

Equity, Valuation, and Ownership Basics

When someone gives you money for equity, you’re assigning a valuation to your company. For example, if someone gives you £100K for 10%, you’re saying your company is worth £1M post-money. Your cap table is a record of who owns what. Keep it clean.

Don’t give away 40% in your first round. Leave room for future investors, team members, and growth. You don’t need to be perfect. But you do need to be thoughtful. Raising money too early, from the wrong people, or giving away too much can hurt you later.

Know Your Tax Tools: SEIS & EIS

Here’s something a lot of first-time founders don’t realise — UK tax incentives make startup investing really attractive. If your company qualifies for SEIS (Seed Enterprise Investment Scheme) or EIS (Enterprise Investment Scheme), investors can claim back up to 50–70% of their investment in tax relief — and pay no Capital Gains Tax on profits if they hold the shares for 3+ years. That’s a game-changer.

It’s one of the key reasons UK angels back risky startups at early stages. But to get these benefits, you need to apply and be approved. It’s free and simple, do it here. But be aware that is can weeks for HMRC to reply with your advance approval letter. Check out the SEIS/EIS Guide by SeedLegals. Defo worth a read.

🧠 How to Get Funded – Summary

Funding a startup in the UK isn’t one-size-fits-all, and it doesn’t have to be stressful if you understand your options. Here’s what matters:

1. Start with Sales: Revenue is the most underrated (and most powerful) funding source. It’s fast, non-dilutive, and validating. Sell early, even if the product isn’t perfect.
2. Grants Are Real, But Tricky: Free money exists, from Innovate UK to regional funds. But it’s slow, competitive, and comes with admin strings. Great as a boost, not a crutch.
3. Equity is Giving Away Ownership: From friends and family to angels and VCs — you’re trading equity for capital. Understand who you’re talking to, what they want, and what you’re giving up.
4. UK Tax Incentives Are Game-Changers: Use SEIS/EIS to make your startup more attractive to investors. It’s a massive sweetener, but you have to get approved in advance.
5. Be Prepared Before You Pitch: Know your numbers, your vision, and your traction. Don’t go to investors with half-baked ideas. When you are ready, go confidently.
6. Blended Approaches Win: It doesn’t have to be one route. The smartest founders blend sales, grants, and small investments to build momentum before bigger raises.

Hope this helps. Tom 💚

♻️ Repost to help get those great ideas funded! 

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🧠 Core Reads

Angels by Jason Calacanis A sharp, no-fluff guide to how angel investors think, what they look for, and how to actually get a yes 👉 https://www.amazon.co.uk/ANGEL-Invest-Technology-Startups-Timeless/dp/0062560700/

The Money Train by David Pattison A UK-focused breakdown of raising capital — full of personal stories and grounded advice from a seasoned founder turned investor 👉 https://www.amazon.co.uk/Money-Train-David-Pattison/dp/1781336451/

The Lean Startup A practical book for anyone building a startup 👉 https://theleanstartup.com/

The SEIS/EIS Guide by SeedLegals Everything you need to know about one of the UK’s biggest early-stage investment advantages 👉 https://www.seedlegals.com/seis-eis/