Introduction
In the early stages of building a startup, every euro matters. And every percentage of equity matters even more.
When it comes to financing your startup, there are two major paths: non-dilutive funding (like grants) and equity-based investment (like angel or VC rounds).
Which one is better? The short answer: it depends. In this guide, we compare both options and help you understand when to choose grants, when to raise capital — and when to combine both.
What Is Non-Dilutive Funding?
Non-dilutive funding means money you receive without giving up ownership of your startup. For European startups, this usually means:
- EU grants (e.g., Horizon Europe, EIC Accelerator, Cascade Funding)
- National or regional innovation programs
- Public subsidies or R&D tax credits
✅ You keep 100% of your cap table
✅ Often supports R&D, pilots, and early validation
Example: ClimaWare secured €2.2M in non-dilutive grant funding from the EIC Accelerator without giving up equity.
What Is Equity-Based Funding?
Equity funding involves raising capital from investors in exchange for a percentage of ownership in your company. This includes:
- Angel investors
- Venture capital firms
- Strategic corporate investors
✅ Smart money: access to networks and expertise
✅ Fast injection of capital for growth
Example: A Seed VC round of €500K in exchange for 15–20% of the company.
Pros & Cons of Non-Dilutive Funding
Pros:
- No equity loss
- Adds credibility and traction
- Encourages long-term thinking
- Often comes with coaching or ecosystem access
Cons:
- Competitive and time-consuming application process
- Strict eligibility and reporting requirements
- May not cover aggressive go-to-market costs
Pros & Cons of Equity Funding
Pros:
- Speed: Faster access to large capital
- Flexibility in how funds are used
- Mentorship, intros, and ecosystem leverage
Cons:
- Equity dilution (less control, smaller exits)
- Pressure for fast growth
- Misalignment risk if investor goals differ from yours
When to Choose Non-Dilutive Funding
You should consider applying for grants if:
- You are working on cutting-edge technology, R&D, or scientific innovation
- Your product is not yet market-ready but needs validation or pilot testing
- You want to extend runway without giving up ownership
- You qualify for a specific program (e.g., EIC, Horizon, national grants)
Many founders use grants to reach a stronger position before negotiating with VCs.
When to Choose Equity Investment
Equity funding makes sense when:
- You need to scale fast (e.g. GTM, team hiring, sales expansion)
- You are post-product-market fit
- You’re building in a fast-moving market with high competition
- You want experienced investors on board
Why the Best Strategy May Be Both
Savvy founders today combine non-dilutive grants with equity rounds:
- Use grants to fund R&D, compliance, or product development
- Raise equity for GTM, hiring, and scaling
- Improve valuation by derisking via public money
💡 EU grants like EIC Accelerator even offer blended finance (grant + equity combo)
What Investors Think About Grants
Contrary to popular belief, most VCs love when their portfolio companies bring in non-dilutive funding:
- It extends runway
- It reduces their capital risk
- It demonstrates traction and credibility
Just make sure you:
- Are transparent about grant timelines
- Don’t let it slow down your speed
- Align reporting with your internal KPIs
Case Study: AI4Vision
AI4Vision, an early-stage startup in computer vision, secured:
- €120K from Cascade Funding to build MVP
- €1M Seed round after proving traction
Result: higher valuation, better investor terms, and zero dilution during R&D.
How We Help Founders
At PitchBob + DeepSync_EU, we support founders by:
- Identifying non-dilutive funding opportunities (EU, national, private)
- Preparing grant applications and pitch materials
- Coaching for investor decks and negotiation
We help you build a balanced funding strategy that aligns with your vision.
🗓 Book a free call with Sofia.
📬 Submit your project for evaluation.
Final Thoughts
There’s no universal answer to “which is better — grants or equity?” The best choice depends on your goals, stage, and strategy.
But one thing is clear: smart founders don’t choose one or the other — they use both wisely.
Start with the money that doesn’t cost you equity. Then, scale with the right partners.
Let’s build that roadmap together with our AI-powered tools for entrepreneurs.
