Alternatives to VC Funding in 2026

VC funding is hard to get. It’s also not right for everyone.

Here are the alternatives worth considering in 2026.

Revenue-Based Financing

How it works: Borrow money, repay as a percentage of monthly revenue until you’ve repaid principal plus a fee (typically 1.3-1.5x).

Providers: Lighter Capital, Clearco, Capchase, and others

Good for:

  • SaaS companies with predictable revenue
  • Funding growth without dilution
  • Bridging between equity rounds

Watch out for:

  • Requires existing revenue ($10K+ MRR typically)
  • Payments reduce cash flow
  • Can be expensive compared to traditional loans

Example: Borrow $200K, repay 8% of monthly revenue until you’ve repaid $260K.

We used this to fund a marketing push without raising another equity round. Worked well.

Government Grants

Australia has substantial grant programs for startups.

R&D Tax Incentive

What it is: 43.5% refundable tax offset on eligible R&D expenditure for companies under $20M revenue.

How much: Depends on your R&D spend. Typically $50K-500K for startups.

Catch: Must be genuine R&D with technical uncertainty. Administrative burden. Cash comes after financial year ends.

Worth it: Almost always yes if you’re doing genuine product development.

Export Market Development Grant

What it is: Reimbursement of up to 50% of export marketing expenses, up to $150K over the life of the grant.

Good for: Australian startups expanding internationally.

Requirements: Must be Australian, less than $50M revenue, export products/services.

State Grants

NSW, Victoria, Queensland all have startup grant programs.

  • NSW: MVP Grant, Boosting Business Innovation
  • VIC: Various innovation grants
  • QLD: Ignite Ideas, various programs

Check business.gov.au for current programs. They change frequently.

Grants Worth Applying For

Apply to grants where:

  • You’re genuinely doing the activity anyway
  • The amount justifies the application effort
  • Requirements align with your business

Don’t contort your business to match grant criteria. Not worth it.

Angel Investment

How it works: Wealthy individuals invest in exchange for equity. Typically $25K-$500K total from multiple angels.

Where to find angels:

  • Sydney Angels, Melbourne Angels, Brisbane Angels
  • AngelList
  • Founder introductions
  • LinkedIn (yes, really)

Good for:

  • Very early stage (pre-revenue or early revenue)
  • Companies that need smart money and connections
  • Founders who want mentor-investors

Watch out for:

  • Herding many small investors is time-consuming
  • Some angels are more trouble than they’re worth
  • Terms vary widely—get good legal help

The reality: Angel money often comes through relationships, not applications. Network early.

Family Offices

How it works: Wealthy families with private investment arms. Operate like VCs but with different motivations.

Good for:

  • Later stage than angels, earlier stage than some VCs
  • Patient capital (no fund timeline pressure)
  • Industry-specific expertise sometimes

Watch out for:

  • Hard to find and approach
  • Very relationship-driven
  • Variable professionalism

How to find: Ask lawyers and accountants who work with high-net-worth individuals. Referrals only.

Bank Loans

Yes, banks still make loans.

What’s available:

  • Lines of credit (secured against assets)
  • Term loans (need profitability or collateral usually)
  • Invoice financing (borrow against unpaid invoices)

Good for:

  • Established businesses with assets or cash flow
  • Specific asset purchases
  • Bridging known receivables

Watch out for:

  • Personal guarantees often required
  • Banks don’t understand startup risk
  • Covenants and reporting requirements

The reality: Hard for early-stage startups. Worth exploring once you have consistent revenue.

Crowdfunding

Equity crowdfunding: Sell shares to many small investors through platforms like Birchal.

Reward crowdfunding: Pre-sell products through Kickstarter or Indiegogo.

Equity Crowdfunding

Good for:

  • Consumer brands with passionate customers
  • Building community of investor-advocates
  • Raising $500K-$5M when VC isn’t the right fit

Watch out for:

  • Expensive (platform fees, legal, marketing)
  • Managing many small shareholders is overhead
  • Failed campaigns are public failures

Reward Crowdfunding

Good for:

  • Physical products with broad appeal
  • Validating market demand
  • Building initial customer base

Watch out for:

  • Fulfillment is your problem
  • Timelines always slip
  • Only works for certain products

Corporate Partners

Some corporations invest in or fund startups relevant to their business.

How it works: Strategic investment, pilot programs, accelerators, or outright acquisition offers.

Good for:

  • Startups with clear strategic relevance
  • B2B companies where corporate is a customer
  • Access to distribution and credibility

Watch out for:

  • Corporates are slow
  • Strategic terms can limit your options
  • They may want to acquire, not invest

Examples: Telstra Ventures, NAB Ventures, various corporate innovation programs.

Bootstrapping (The Non-Funding Option)

How it works: Fund growth from revenue. Don’t raise external capital.

Good for:

  • Services businesses
  • SaaS with efficient acquisition
  • Founders who value control over speed

Requirements:

  • Can reach profitability quickly
  • Market allows gradual capture
  • Founders can survive low/no salary period

Many of the best businesses are bootstrapped. SmartCompany regularly profiles bootstrapped Australian success stories. Don’t assume you need external funding.

The Decision Framework

Ask yourself:

  1. Do you actually need capital? What specifically requires it?

  2. What type of capital fits?

    • Dilutive (equity) vs. non-dilutive (grants, debt)
    • Patient (family office) vs. pressured (VC)
    • Smart (angels with expertise) vs. dumb (just money)

  3. What are you willing to give up?

    • Equity and control (investors)
    • Cash flow (debt)
    • Time and focus (grants)

  4. What’s your realistic stage?

    • Pre-revenue: Angels, grants, bootstrapping
    • Early revenue: Revenue-based financing, angels, some VCs
    • Growth stage: VCs, growth debt, larger rounds

Match the funding to your actual situation, not your aspirations.

The Combination Approach

Most funded startups use multiple sources:

  • Grants for R&D
  • Angels for early capital
  • Revenue-based financing for growth initiatives
  • VC only when truly needed for scale

Don’t think single source. Think portfolio of funding options.