How Alternative Financing Options Help Startups Avoid the Death Valley
- Brainz Magazine
- 2 days ago
- 6 min read
Written by Nicolas Grebenkine, CEO of Aetsoft
Nicolas Grebenkine is CEO of Aetsoft, an emerging tech software services company. As an investor and an entrepreneur, he’s launched 10+ products across AI, blockchain, fintech, and sustainable energy. Recognized in international accelerators, he now helps startups attract venture capital and scale globally.
Alternative financing makes it easier to raise traditional investments. As an investment manager, I’ve seen hundreds of pitches. Some were great, some were not. But I’ve learned what makes me invest, and that later helped me raise financing for my 10 products. So here’s what I know about financing startups.
Today, we’ll focus on the early stages of the startup financing cycle, seed capital or even what comes before that. We’ll see how alternative financing options help avoid the valley of death in the beginning.
Preseed stage, do your homework
Before we dive into alternative financing options, let’s get the fundamentals right.
Any startup, by definition, has ambitious goals, but they have to survive while finding a working model. The number one thing that kills a startup is the end of the runway. But without outside investment now, you can experiment as much as possible early on.
Before hiring employees, you need to answer these questions:
Who needs this? Define your core user segment as specifically as possible.
How do they currently handle the problem?
How large is the potential market?
Is the idea feasible? Assess whether you can build the product with available skills, technology, and time.
What should the unit economy be? Do the math, how much it costs to acquire a customer and what each is worth over time.
Are people ready to pay for the value? Build an MVP to find out.
You can test a single hypothesis with only $500 for most SaaS. In most cases, you only need a landing page and some digital marketing skills to run the ads.
Stripe started with a “seven lines of code” payment API that let developers accept cards instantly.
Your solution can’t be so simple? Robinhood started with just a waiting list for commission-free trading. They gained 10,000 signups on day one and a million waiting users by the end of the first year.
Seed stage – Start small, grow bigger
At the seed stage, you begin attracting outside capital. Unless you’ve already built a unicorn, raising money on reputation alone will be an uphill battle. For most founders, meaningful investment comes once they have a functioning MVP.
Fortunately, by now you should have solid evidence from the pre‑seed phase:
A clear picture of your target audience and their needs
A view of your competitors and market gap
A defined total addressable market
A realistic project plan and funding requirements
Basic unit economics showing potential profitability
Early traction and results from your MVP
If you have convincing answers to these, start approaching angels. Don’t try to skip the seed stage by continuing to bootstrap. Investors like to co‑invest, and each new backer strengthens the signal of market demand. If you’re the only person funding your company, it’s harder to convince future VCs that others see value in it.
Your customers are often the best early investors. They’ve already validated your product with their wallets and enthusiasm. So if they’re willing to invest personal money, that’s a powerful signal for future rounds.
Most startups begin with several small checks before finding a lead investor. You might attract multiple angels investing $5,000-$25,000 each, totaling under $500,000. Angels typically invest through convertible notes or SAFE agreements. Since your company doesn’t yet have a formal valuation, these instruments act as short‑term loans that convert into equity once a lead investor prices the round.
So why choose alternative financing options
Did you notice a gap in traditional financing? Here’s a hint, you’re missing retail investors.
Startup financing starts from low to high. First, you attract friends & family, then angel investors, and only then do you unlock VC funds.
Then why did we not mention really small checks? A hundred dollars, not five thousand. Sure, angels are wealthy individuals, they may have little interest in investing pocket change. But what about the general public?
Retail investors might be very interested in fractional investment. But they face more limitations. In the U.S., there are Blue Sky laws to protect retail investors from fraud. They also require disclosures, limits, and/or intermediaries.
I’m simplifying, but there are 3 main ways to raise from the general public in the US:
IPO. Obviously not applicable at the seed stage.
Regulation A (Reg A). A “mini‑IPO” framework that allows public fundraising with audited disclosures and ongoing reporting. It’s powerful but also very expensive for an early stage.
Regulation Crowdfunding (Reg CF). An exemption designed for early‑stage raises with lower limits and simpler filings.
Note, that Reg CF is for equity crowdfunding. Investors receive a security (e.g., a SAFE, note, or share), not just perks.
There are limitations as well, but equity crowdfunding and crowdsourcing are viable ways to raise capital from the general public.
Some limitations founders should know:
Intermediary required. You must run the raise through a registered funding portal or broker-dealer. One option would be a white-label STO platform.
Raise cap. You can raise up to $5 million within a 12‑month period.
Investor limits. Retail investors have annual caps based on income/net worth.
Marketing rules. Communications are constrained, most solicitations must route to the portal and remain consistent with filed disclosures. Plan your campaign around these rules.
Resale restrictions. Securities sold under Reg CF are generally restricted from resale for a year (with some exemptions) before secondary trading is possible.
Get leverage before a priced round
When you approach Series A, your company should look at its best. VC investors operate on FOMO. They have no reason to finance your company except that they fear missing the next breakout success.
Once your bank balance gets low, you lose all negotiating power. If you’ve reached the end of your runway, it means that no one else was willing to support you while you still had momentum. So why should new investors step in now?
It’s a paradox, but the healthier your company looks without VC money, the more VC wants in.
Alternative financing can give you leverage. Or, if you’re already at the end of your runway, you can get some breathing room.
Rather than waiting endlessly for a lead VC, you can bring in hundreds of smaller checks to reach your next milestone.
Key advantages:
Extra runway. Raise 3-9 months of capital to keep growing without losing momentum.
Higher valuation later. Hitting one or two key milestones can double your valuation before you negotiate with institutional investors.
Operational simplicity. Using standard instruments (like Crowd SAFEs) or tokenized contracts keeps your cap table manageable while cutting legal overhead.
By the time you’re ready for a priced round, you’ll have stronger metrics, more leverage, and a larger audience of believers who already backed you.
Build a community of owners
Again, your customers are the best first investors. They already buy your product and believe in your mission.
When people own a part of your company, they behave differently. They have an incentive to recruit others on board. Every token holder becomes part of your growth loop. So a crowdfunding campaign is also a marketing campaign.
Key advantages:
Higher retention. Owners don’t churn, they care about what they helped build.
Built-in marketing. Every investor has an incentive to spread the story.
Sharper insights. They think like customers but advise like partners.
The future of alternative financing
Equity crowdfunding is just one piece of a much bigger picture. Over the last few years, a new wave of financing models has been reshaping how startups and investors interact.
And even if you don’t always see it in the headlines, the same technology quietly powers most of them, tokenization.
We’re talking about more than just equity rounds. Today, companies can unlock cash through all sorts of creative, digital-first tools:
Tokenized debt – loans or bonds issued as on-chain assets, repayment flows stay transparent and can be traded.
Invoice funding – a company sells invoices as fractional tokens to investors, gaining instant liquidity without taking on new debt.
Revenue-based financing – founders raise capital in return for a fixed share of future revenue, with payments tracked through smart contracts.
Asset-backed lending – real estate, renewable energy projects, or intellectual property become tokenized assets that serve as collateral or investment products.
Tokenization ties it all together. It standardizes how ownership, debt, and cash flow move between people and platforms. It makes once-opaque private markets faster, cheaper, and more trustworthy.
Even when a platform doesn’t call itself “blockchain-based,” there’s often tokenization under the hood handling compliance, ownership records, and settlement with quiet precision.
This shift isn’t theoretical anymore. The tokenized finance market is growing fast, connecting private markets to digital rails and lowering the cost of trust for everyone involved. For startups, that means more ways to raise capital without losing control.
Want to learn more about how digital assets transform modern finance? Visit Aetsoft.
Read more from Nicolas Grebenkine
Nicolas Grebenkine, CEO of Aetsoft
Nicolas Grebenkine is an entrepreneur, blockchain pioneer, and CEO of Aetsoft. Starting as an Investment Manager, he built expertise in spotting opportunities for emerging technologies: AI, blockchain, IoT. He has overseen the creation of 10+ in-house products, several featured in international accelerators. He now leads Aetsoft, a software company that delivers complex emerging tech solutions for enterprises and startups.
