Like many founders, I once fixated on funding numbers. Then COVID hit, and the conventional funding playbook went out the window as the world came grinding to a halt almost overnight.
When startup capital froze, I realized what separates the companies that not only survive, but scale up during market downturns. It isn’t that they have a better pitch deck. It was that their business was resilient and prepared to weather the storms you can’t see coming.
The single capital stack model can be a trap for today’s founders, especially in capital-intensive industries like climate and hard tech. Leaders who can navigate an unexpected pandemic, a banking crisis, or whatever else the world throws their way are those building well-rounded capital ecosystems. Here’s what I’ve learned about how to build alternative financing pathways and how you can do it too.
Use venture capital as a growth engine, not a lifeline
An Inc.com Featured Presentation
All founders want to see hockey stick growth. Venture capital is top of mind for this and will remain essential to the financing formula. This model was already strained before recent market volatility.
Venture capital is a necessary growth tool for founders, but it’s important to understand that it isn’t the only one. It is best used as a growth accelerator deployed at inflection points to help unlock other forms of capital. It shouldn’t be the singular answer to financing a startup.
Founders should size rounds intentionally, know what venture partners can (and can’t) provide, and not over-index on venture capital at the expense of other pathways. Understanding what alternative financial levers to use is essential for those building hard tech companies today.
Build strategic corporate partnerships that are commercially anchored
Being a savvy fundraiser is necessary, but not nearly sufficient for startups today. Early on, I realized scaling requires partners who believe in our vision and are willing to put both capital and commitment behind it.
For example, we brought on a major banking and insurance firm for our Series B funding round. They could see how our technology would transform insurance underwriting and claims to provide more accurate data and a better experience for their policyholders.
Corporate venture arms and large strategic partners can escalate growth, but the deal structure is everything. For us, that has meant going beyond term sheet numbers to align on shared outcomes and then signing contracts that reflect a real commercial relationship, not just a financial one. The investment followed the alignment, and not the other way around.
Not all strategic capital is created equal, so it’s essential to pressure-test commercial partnerships when making corporate relationships a part of your strategy.
Deploy non-dilutive and quasi-dilutive capital as infrastructure
Venture debt has been a much-needed lifeline for hard tech and climate tech companies during
market downturns. Yet I don’t see enough discussion of how non-dilutive and quasi-dilutive strategies can be used proactively as a growth lever instead of just a last resort.
These financial instruments can provide critical runway, convert pre-signed contracts into dollars, and hit revenue milestones to strengthen your position in the next equity raise.
Beyond venture debt, the landscape has expanded in important ways that founders need to know about. Hardware financing, project financing, and non-bank lenders are tools for founders who know where to look. These have matured into a real toolkit for those building capital-intensive companies, especially in the hard tech and climate space. The key is knowing these instruments exist and deploying them strategically, versus only when you desperately need them.
Earn resilience through customer and partner integration
I’ve noticed a trend over the past few But, amid market adjustments and black swan events. The companies that are able to thrive in less welcoming economic environments aren’t just the ones with the biggest rounds or valuations. It’s those with the deepest commercial integration with customers and partners.
When founders build partnerships grounded in mutual value creation, where their success and your own are intertwined, customers and partners who are scaling with you have every reason to write a check into your company. For founders in capital-intensive industries, where the fundraising environment can be unforgiving, this can be a game-changing advantage.
This might look like a battery or chip supplier with a corporate venture arm, or a customer partner whose business outcomes depend on what it is you’re building. Relationships can build durability, especially when the doors to the venture capital market are closed off.
What to prioritize, and what’s increasingly unrealistic
The days of pure venture capital-dependent strategies are increasingly hard to sustain. But the truth is, this was always an overly simplistic approach that treated startup financing like a
problem with one solution.
Scaling today requires multiple financial pathways to achieve growth. Founders who turn a blind eye to strategic commercial partnerships and other financial instruments are potentially leaving additional runway and opportunity on the table.
The founders who will scale the next generation of companies aren’t just thinking about how to raise their next round, but more holistically about what their entire capital formation looks like. Build multiple pathways and deep commercial relationships, and the capital will follow.
The extended deadline to apply for the 2026 Inc. 5000 is Friday, May 1, at 11:59 p.m. PT. Apply here.
