You need money to build your product, hire people, reach customers and grow. But most founders think about financing wrong. They think it’s about getting as much money as possible, as fast as possible. That’s not it.
Getting the right money at the right time in the right way - that’s what matters. Take the wrong funding at the wrong stage and you can kill your startup just as effectively as having no money at all. A software startup reaching global markets might be perfect for venture capital. A local service business might be better with revenue and small loans. A hardware product might need grants and crowdfunding first before attracting investors.
This section helps you understand the funding landscape, what you need to prepare, and how to navigate getting capital. Whether you’re bootstrapping your first prototype or raising your first major round, these fundamentals apply.
Revenue
Before we talk about external funding, let’s talk about the best financing source that exists - your customers. Revenue, money from people paying for what you sell, is the ultimate validation and the most sustainable funding source.
Why revenue beats everything else: Customers paying you proves your product works and people want it. You keep full ownership and control. You don’t owe anyone anything. You build a sustainable business, not one dependent on continuous fundraising. And having revenue makes it much easier to raise external funding if you need it later.
Many founders rush to raise money before they have any customers. This is backwards. Unless you’re building something requiring massive upfront investment before you can sell anything, focus on getting your first paying customers before seeking external funding. Even a few customers paying small amounts changes everything. It proves demand. It gives you leverage in funding conversations. And it might mean you don’t need external funding at all.
Some of the world’s most successful companies bootstrapped through revenue for years before taking any outside investment. Mailchimp grew to billions in value without ever taking VC money. Basecamp has been profitable and independent for over 20 years. GitHub was profitable before being acquired for $7.5 billion. This isn’t rare - it’s a proven path that works.
So before you spend months chasing investors, ask yourself: Can I get my first 10 customers and start generating revenue? If yes, do that first. Use that revenue to fund your next stage of growth. Only seek external funding when you’ve proven the model works and need capital to scale faster than revenue alone allows.
Bootstrapping
Bootstrapping means funding your startup with your own resources. Your savings, income from a job or freelancing, credit cards, or selling personal assets. It’s how most startups begin and often the best way if it’s possible for your situation.
The advantages are clear. Total control and ownership - nobody tells you what to build or how to run your company. You can be profitable from day one if you want. You move at your own pace. You learn to be resourceful and lean, which makes you a better founder. And if you eventually raise external funding, you have more leverage and better terms because you’re not desperate.
The disadvantages are obvious too. Limited capital. Growth might be slower. You carry personal financial risk. And some businesses genuinely can’t be bootstrapped because they require too much upfront investment before generating revenue. Developing a new drug, building a factory, or creating complex hardware often needs external funding from the start.
Bootstrapping works best for service businesses, software products with low development costs, and businesses that can generate revenue quickly. It’s harder for hardware, biotech, or businesses requiring significant infrastructure before launch. But even these businesses can often bootstrap further than founders think by being creative about what to build first and how to validate before spending big money.
Grants and Subsidies
Grants are non-repayable funding from governments, foundations, or organizations supporting specific types of businesses or innovations. Free money where you don’t give up equity or take on debt. The catch is grants usually come with requirements about what you can use the money for and reporting on outcomes.
Grants typically support businesses working on regional development, innovation, sustainability, specific industries like agriculture or clean energy, research and development, or social impact. You need to align your startup with the grant’s purpose and demonstrate how your work serves their goals.
Most grants work as reimbursements. You spend money first on approved expenses like consultants or equipment, then get reimbursed later. This means you need some capital to start with. Grants rarely cover general business expenses. They fund specific projects or developments that match the program’s goals.
Understanding what grants actually fund is important. As one funding guide puts it, grants aren’t for financing regular business operations. They’re for specific projects that align with the funder’s mission, whether that’s driving regional growth, supporting innovation in certain sectors, or addressing societal challenges. Many programs use what’s called “program logic” - you need to clearly describe how your activities lead to desired changes and create positive effects, both short and long term.
Finding grants in Sweden and on Gotland:
Several organizations offer grants for startups:
Science Park Gotland Invest is a wholly-owned subsidiary of Science Park Gotland that invests in Gotland-based companies through two funds. We’re dedicated to helping more Gotland companies get created and grow successfully.
Region Gotland supports projects driving regional development and growth on the island. They focus on initiatives that benefit Gotland’s economy and society.
Länsstyrelsen (County Administrative Board) runs programs across various sectors with both regional and national funding.
Leader Gute focuses specifically on rural development projects on Gotland’s countryside. They support local initiatives driven by and for people living and working in rural areas.
Tillväxtverket (Swedish Agency for Economic and Regional Growth) offers national programs for business development, internationalization, and regional growth. They support companies at different stages.
Vinnova (Sweden’s innovation agency) funds innovation and R&D projects. They’re particularly interested in companies developing new technology or innovative solutions to societal challenges.
Jordbruksverket (Swedish Board of Agriculture) provides support for agriculture-related businesses and rural development projects.
Globally, look for government innovation agencies in your country, regional development organizations, universities and research institutions, industry associations, large corporations running innovation programs, and foundations focused on causes related to your startup.
Competition prize money works similarly to grants. Startup competitions exist globally, from local pitch contests with €5,000 prizes to major international competitions with €100,000+ awards. Winning also gives you credibility, publicity, and connections. The downside is competitions are highly selective - you might spend significant time applying to many with no guarantee of winning any.
Applying for grants:
Be clear about your purpose from the start. What do you want to achieve with the funding? Don’t just ask for money - explain what the funding will result in for your company, your customers, your employees, and maybe society. Have a plan for how you’ll use the money and how you’ll measure results. Think about who you’ll collaborate with and how you’ll secure the resources you need.
Grant applications take time. From submission to decision can be 1-6 months depending on the program. Some evaluate applications only once or twice per year with fixed deadlines. Start early. Don’t wait until you’re desperate for money.
We at Science Park Gotland can help you understand which grants might fit your startup and guide you through the application process.
Loans and Credit
Loans mean borrowing money from a bank or financial institution that you repay with interest over a set period. This gives you immediate capital without giving up ownership. But it creates debt that must be repaid regardless of whether your business succeeds.
Loans work like home mortgages. You borrow the money you need with the agreement to pay it back plus interest over a set time. Repayment periods for business loans are relatively short, typically two to five years. Lenders require security - either an asset the company owns like property, or personal assets as guarantee.
What banks look for:
Traditional banks typically require your business to have been profitable for at least two years, have assets to use as collateral, and demonstrate ability to repay. Banks are risk-averse by regulation - they legally can’t lend to businesses likely to fail. This means most early-stage startups can’t get traditional bank loans.
When you meet with banks, come prepared. They want to see you as an entrepreneur - your experience, references, education, and personal finances. They want your business plan including a realistic and detailed financial plan with identified risks. Your budget and cash flow forecast matter a lot. They also want to know if you have access to support and advice like an accountant, board members, or connections to programs like incubators. For established companies, bring your balance sheet, financial statements, and tax returns.
Banks want to see profitability. The finance industry and Swedish banks are regulated and can’t lend to companies with too high risk levels. They want businesses that have been profitable for at least two years. This is why newly started companies generally can’t borrow from traditional banks.
Almi - an alternative:
Almi is a government-backed alternative for companies that can’t get traditional bank loans yet. Almi is owned by the state and regions, operates non-profit, and offers various loans specifically for small and medium businesses. These loans can complement grants, bank loans, or investments from other sources.
Almi Gotland operates on the island and can help startups access financing even when traditional banks say no. Many countries have similar government-backed small business lenders with more flexible requirements than commercial banks.
Pros and cons:
Advantages: You keep full ownership. If you can afford repayments, it’s often cheaper than giving up equity. The process is usually faster than raising equity from investors.
Disadvantages: Debt shows on your balance sheet. You have regular repayment obligations regardless of revenue. Usually requires personal guarantees putting your personal assets at risk. Not available for very early stage startups without revenue or assets.
Loans work best for established businesses with steady revenue needing capital for expansion, equipment, inventory, or specific projects. They’re rarely suitable for pre-revenue startups still validating their idea.
Equity Funding
Equity funding means investors give you money in exchange for ownership shares in your company. They become co-owners. Their goal is helping you grow the company’s value significantly, then selling their shares for profit - usually after 5-10 years.
This is fundamentally different from other funding types. You’re not borrowing money you have to pay back. You’re not getting a grant with specific project requirements. You’re selling part of your company to someone who becomes your partner in building it. This changes everything about how your company operates and what goals you’re working toward.
Angel Investors:
Angels are wealthy individuals who invest their own money, typically €25,000 to €250,000 per investment. They often invest very early based partly on believing in you as a founder. Many angels are former entrepreneurs who also provide advice and connections beyond just money. They make investment decisions relatively quickly compared to other investors - weeks to a few months rather than half a year.
On Gotland, Investerarnätverk Gotland (Investor Network Gotland) connects entrepreneurs with private business angels and investment companies from or connected to the island. The network makes it easier for startups and investors to find each other. They organize pitch events several times per year where companies can present to potential investors. If you’re looking for angel investment on Gotland, contact the network. For other regions, look for local angel networks or attend startup events where angels typically show up.
Venture Capital:
VC firms manage large funds - often €50 million to over €1 billion - pooled from institutions and wealthy individuals. They invest larger amounts, typically €500,000 to €50 million or more per investment. VCs focus on businesses with potential for very large returns because they need your company to eventually be worth hundreds of millions or billions to make their fund economics work. One big winner needs to pay for the nine investments that fail or return modest amounts.
The VC process is slower and more formal than angel investing. Expect 3-6 months from first meeting to money in your bank account. They do extensive due diligence, involve multiple partners in decisions, and have structured processes they must follow.
What investors think about:
When you meet an investor, understand their perspective. Whether they represent a fund or are investing their own money as an angel, they’re primarily interested in high returns on their investment after 3-5 years. For VCs especially, they need 10x returns or more to make their fund math work.
Investors want to understand risks with your company and how those risks can be minimized. This often comes down to team and competence - do you have the skills and experience to pull this off? They look at competitive advantages - what stops someone bigger from copying you? They want to see protection of your company’s assets through things like patents, exclusive partnerships, or network effects.
Something crucial that many founders forget: all investments build on relationships and trust between investor and founder. You’re going on a risky and intense journey together for 5-10 years. They’re evaluating whether they want to work with you for that long. You should be evaluating whether you want to work with them too. A bad investor can be worse than no investor.
Pros and cons:
Advantages: Large amounts of capital to fuel fast growth. Investors often bring expertise, connections, and help with recruiting. Prestigious investors give you credibility with customers, partners, and future investors. No debt or repayment obligations - if the business fails, you don’t owe them anything. They’re aligned with wanting the company to succeed.
Disadvantages: You give up ownership and some control over your company. Investors will want board seats and a say in major decisions. They push for aggressive growth and eventual “exit” - selling the company or going public - even if you’d prefer building differently. If you raise multiple rounds of funding, you can end up owning a small percentage of the company you founded. And the process of raising money is time-consuming and distracting from actually building your business.
When equity makes sense:
Businesses needing significant capital before generating revenue. Companies that can scale to very large markets with hundreds of millions of potential customers. Startups with potential for 10x or higher returns in 5-10 years. Founders who want to grow as fast as possible. Teams comfortable with co-owners and planning for an eventual exit.
When it doesn’t make sense:
Profitable businesses growing sustainably from revenue. “Lifestyle businesses” where founders want long-term control and steady income rather than explosive growth. Businesses serving smaller markets where 10x returns aren’t realistic. Companies where founders want to stay independent long-term. Founders who aren’t comfortable giving up control.
Critical timing point:
Start your financing round for equity capital early when you’re not desperate for money. Most processes take at least six months from first conversations to money in the bank. You dramatically weaken your negotiating position if you need capital urgently. Investors can sense desperation and either walk away or offer worse terms. Plan ahead.