7 Alternative Funding Options for Startups Beyond VC & Angel Investors

Getting funding is one of the biggest challenges for startups, especially in Africa. Many founders assume that venture capital (VC) and angel investors are the only way to get money, but that’s not true. In fact, VC funding is extremely competitive, and not every business fits the high-growth model that investors look for.

The good news? There are plenty of other ways to fund your startup. Whether you’re just starting or looking to scale, this guide explores different startup funding options that don’t involve giving away big chunks of your company.

1. Bootstrapping: Build with What You Have

Bootstrapping means using your own money or revenue to fund your business instead of relying on external investors. It’s a great way to stay in full control of your company.

Pros:

• You don’t give up equity (ownership)

• You learn to be resourceful and efficient

• You have full control over decisions

Cons:

• Growth can be slow

• You take on all the financial risk

• Limited resources for expansion

Example: ReelFruit, a Nigerian dried fruit company, bootstrapped its way to success before attracting investors.

Read: The Journey Of ReelFruit – Nigeria’s largest end-to-end fruit processing company

Best for: Startups with low initial costs or those that can generate revenue quickly.

2. Crowdfunding: Let the Public Fund Your Idea

Crowdfunding allows people to contribute money to your business in exchange for rewards, early access, or even equity. Platforms like Kickstarter, GoFundMe, and Thundafund are great places to start.

Pros:

• No need to repay the money

• Can help validate your idea

• Builds a community around your brand

Cons:

• Requires strong marketing efforts

• Not all campaigns succeed

• Some platforms take a percentage of the funds raised

Best for: Startups with a strong story, a unique product, or a social impact mission.

3. Revenue-Based Financing (RBF): Pay as You Earn

Revenue-based financing (RBF) allows startups to get funding in exchange for a percentage of future revenue. Instead of paying back a fixed loan, you repay based on how much you earn.

Pros:

• No need to give up equity

• Payments adjust based on your income

• Quick approval process

Cons:

• Can be expensive over time

• Only works for businesses with predictable revenue

Where to get RBF:

• Lendable (operates in Africa)

• Clearco

• Choco Up

Best for: Startups with steady sales looking for flexible funding.

4. Grants & Competitions: Free Money for Your Startup

Many organizations offer grants (free money) to startups, especially those in tech, agriculture, and social impact. Some competitions also offer funding, mentorship, and exposure.

Pros:

• No repayment or equity loss

• Can boost your brand’s credibility

• Some provide mentorship and training

Cons:

• Highly competitive

• Application processes can be time-consuming

Popular grants in Africa:

• Tony Elumelu Foundation Grant ($5,000 for African entrepreneurs)

• GSMA Innovation Fund (for mobile and fintech startups)

• Orange Social Venture Prize (for social impact startups)

Best for: Early-stage startups and social enterprises.

5. Corporate Partnerships & Sponsorships

Big companies often fund or support startups that align with their business goals. This could be in the form of sponsorships, partnerships, or direct investments.

Pros:

• Can provide long-term business support

• Offers credibility and networking opportunities

• May include free resources like office space or technology

Cons:

• Requires alignment with corporate goals

• Can take time to secure partnerships

Example: Google’s “Google for Startups” program supports African tech entrepreneurs with funding and mentorship.

Best for: Startups in industries where corporate collaboration is beneficial (e.g., fintech, AI, edtech).

6. Microfinance & SME Loans: Small Loans for Big Growth

Microfinance institutions and small business loans are great alternatives if you don’t want to give up ownership. Many African banks and fintech startups offer these services.

Pros:

• No equity loss

• Structured repayment plans

• Can help build your credit score

Cons:

• Requires a repayment plan

• Interest rates can be high

Where to get small business loans in Africa:

• Baobab Microfinance (Nigeria, Senegal, Côte d’Ivoire)

• Kiva (Crowdfunded loans for entrepreneurs)

• SME loans from banks like Equity Bank (Kenya) and Access Bank (Nigeria)

Best for: Startups that can generate revenue to pay back the loan.

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7. Decentralized Finance (DeFi) & Crypto-Based Funding

With blockchain and crypto, startups can now raise funds through token sales, Initial Coin Offerings (ICOs), or DeFi lending platforms.

Pros:

• Fast access to global funding

• No traditional banking barriers

• Can attract a global investor base

Cons:

• Regulatory uncertainty

• High risks due to market volatility

Example: African blockchain startups like Yellow Card and Paxful have raised millions using crypto-based funding models.

Best for: Tech startups with blockchain integration or global scalability.

Which Startup Funding Option Is Best for You?

There is no “one-size-fits-all” approach to funding a startup. The right option depends on your business model, industry, and risk tolerance.

• If you want full control: Bootstrapping

• If you have a strong community: Crowdfunding

• If you have steady revenue: Revenue-Based Financing

• If you need free money: Grants & Competitions

• If you can align with a big company: Corporate Partnerships

• If you want a small loan: Microfinance & SME Loans

• If you believe in crypto: DeFi & Blockchain Funding

By exploring these alternative startup funding sources, African startups can build and scale without relying solely on venture capital or angel investors.