Funding research, matched.
Also called: Capital sourcing · Funding the build · Finance options review · Money-to-need matching
Working out how to pay for the build and the first production run, matching each type of money to the need without over-giving.
Money is not money. Grants, pre-orders, loans and equity each carry a different price, and the price is rarely just interest. Match the cheapest money that fits the actual need. Taking the first cash offered, especially equity, is how founders end up working for their own investors.
What funding research is
Funding research is the work of finding out who will pay for the next phase, on what terms, and what each of them wants back. It is not “where can I get the most money?”. It is “what is the cheapest money that fits this particular need, and what does it cost me beyond the headline number?”.
The trap is treating all capital as interchangeable. A £20,000 grant, a £20,000 loan and £20,000 of equity all put the same figure in the account, and they are wildly different deals. The grant has strings and reporting. The loan has interest and a personal guarantee. The equity has a permanent passenger in every decision you make from here on. The number tells you nothing; the terms tell you everything.
The two questions to answer first
- What is the money actually for? A one-off lumpy cost (tooling) wants different money from ongoing working capital. Pre-orders suit a fixed first run; they are useless for a slow drip of overheads.
- What is the smallest amount that clears the obstacle? Raising more than you need is not a buffer, it is dilution or debt you are paying for nothing. Size the ask to the obstacle, not to ambition.
How the proofing box could be funded
We worked through this with the proofing box. The build itself was bootstrapped, topped up by a small innovation grant. The lumpy cost is the ceramic tooling in Stoke-on-Trent, and the open question is how to fund the first run of 500 to 1,000 units without taking early equity. Here is how the options compared, so you can see the shape of a real decision rather than a generic template.
Notice the chosen mix matches each source to a specific need: grant to the prototype, pre-orders to the fixed run, loan to a known overrun risk. Nobody handed over a share of the company to pay for one batch of ceramic.
- Accepting equity because it arrived first and felt like validation.
- Raising more than the obstacle needs, “to be safe”.
- Reading the headline figure and skipping the terms.
- Funding a one-off cost with a permanent claim on the business.
- Match each source to a specific, sized need.
- Exhaust non-dilutive money (grants, pre-orders) before equity.
- Price the full cost: strings, guarantees, control, not just interest.
- Keep equity for the moment scale capital is genuinely the constraint.
How it fits the bigger picture
Funding research is activity 06.20.05 in the framework, inside Stage 06 Design. It builds on the costed bill of materials and the production plan, and it feeds directly into competing product review (06.20.06), where you check the funded plan against what rivals already offer before committing the money.
What it can do
It puts a price on every type of money before you take any, so the decision is made on terms rather than on which offer turned up first. It keeps a one-off cost like tooling from being paid for with a permanent claim on the business, and it stops you raising more than the obstacle actually needs.
What it can’t do
It can’t conjure demand. Pre-orders only work if the product review and earlier validation hold up; funding research assumes that homework is done. It also can’t remove risk, only price it. A loan still has to be repaid if the run sells slowly, and that is a decision the household, not a spreadsheet, has to be comfortable making.
See the full 10-stage process →
Try it yourself
List the next phase’s real costs, then split them into one-off (tooling, certification) and ongoing (overheads, stock). For each, write down the cheapest source that fits and what it truly costs you, beyond the headline number. Only then look at who is offering money. If the cheapest non-dilutive option clears the obstacle, you have no reason to give away equity to do it.
Or run the guided version. The Free Sprint frames the cost-to-fund question as part of its viability pass. Start the Free Sprint →
Your funding checklist
Project notes: money with the fewest strings
▸ From the notebook · optional reading
Why Dan and Anna Hartley in Stockport turned down the easy equity, and funded the first ceramic run from pre-orders instead.
3 min read · click to open
The build was bootstrapped, with a small innovation grant covering part of the prototyping. By the time the design was locked, the one cost that frightened everyone was the ceramic tooling in Stoke-on-Trent. Lumpy, up front, and non-refundable once the moulds were cut.
The offer that nearly landed
A contact offered to put money in for a slice of equity. It was enough to cover the tooling and the first run, and it arrived early, when the bank balance was thin and the offer felt like a vote of confidence. Dan was tempted. I asked one question: “What is this money actually paying for?” The answer was one ceramic run. We pushed back hard. Giving away a permanent share of the company, forever, to pay for a single batch of moulds is the most expensive money on the table dressed up as the friendliest.
What we did instead
We sized the real obstacle: tooling plus a first run of 500 to 1,000 units. Then we matched money to it. The grant had already done its job on the prototype. Pre-orders could fund the ceramic run and prove the £149 demand at the same time, which is two problems solved with one decision and no dilution. A modest loan sat in reserve in case the tooling overran, with the household comfortable carrying that specific, bounded risk.
The equity stayed off the table. Not forever, but until scale, not a single production run, is the genuine constraint. I told Anna the test I use: take the cheapest money that fits the need and no more, and never sell a piece of the thing you are building to pay for a cost you could have covered another way. They held the line. The first run is being funded by the people who actually want the box.
— Design stage, project notes, 2026
— Next in Design → Competing product review