The funding impact-led founders overlook when equity tightens
Updated: 7 days ago
Seed deals are down and SEIS (the Seed Enterprise Investment Scheme) funds keep selling out. For founders running social enterprises, community interest companies (CICs) and purpose-led businesses, there's a large pool of non-dilutive money that rarely comes up in startup circles.
Recent reporting found that UK seed deal volumes fell 27 per cent while SEIS funds keep selling out, so more founders are chasing fewer cheques. Most of the conversation is about what that means for equity: valuations, liquidity, and whether tokenisation opens up new routes to investors.
I want to talk about a different pot of money. I've spent around twenty years raising funds in the social impact sector, most recently as Fundraising Director at Impact Hub, and it still surprises me how many founders never look at it.
What I mean by non-dilutive funding
Broadly, four kinds:
Grants. From trusts and foundations, lottery distributors, local authorities and corporate foundations. You don't give up equity, and in most cases you don't pay it back.
Programmes. Accelerators and support schemes, often with a grant, mentoring or workspace attached. Some take equity, but many funded by foundations or corporates don't.
Social investment. Loans, blended finance and revenue-based deals from lenders who expect to be repaid but price in the social return. You pay it back, but you keep your shares.
In-kind support. Free software, pro bono professional services, donated space.
Why does this matter for a founder?
If you're building a standard venture-backed startup, most of this won't apply to you. Grant funders mostly want a social or environmental purpose, and many want a particular legal structure.
But plenty of founders are building businesses with the purpose built in, and a lot of them set up as community interest companies or social enterprises. A CIC has an asset lock and limits on what it can pay out to shareholders, which puts off many equity investors. The same structure opens the door to funders who won't touch a standard limited company.
This kind of funding can also sit alongside an equity raise. A grant that pays for a pilot gives you the evidence to raise on, and a programme gives you the network. Funders backing early-stage social enterprises tend to look for the same things an investor does: a clear problem, a team that can deliver, and a plan for when the money runs out.
Where founders go wrong
In my experience founders usually come unstuck in one of three places.
They can't find it. UK funding is spread across hundreds of funders' own websites, each with its own rules, deadlines and application process. There's no single public list of what's open right now.
They apply for the wrong things. Eligibility is where most time gets wasted. A fund that looks perfect turns out to be for registered charities only, or for one region, or for organisations under a certain income. You find that out on page four of the guidance notes, after an afternoon's reading.
They lose track. Rolling deadlines, multi-round funds, reports due to funders you've already won. It usually ends up in a spreadsheet, and then in several.
What I built
That's why I built Shoots Funding. It matches UK social enterprises, CICs, charities and community groups with funding they're eligible for, and gives them one place to manage every application.
You add your website, answer a few questions about who you serve and where you work, and your matches are ready as soon as you finish. There are over 700 live funding opportunities, across grants, programmes, social investment and in-kind support. Each one shows the deadline, the amount and whether your legal structure qualifies before you've read any guidance. When something's worth going for, you track it from first look through to submitted.
Shoots also works as a connector for Claude, so you can ask an AI assistant to search the catalogue directly rather than the open web.
Frequently asked questions
What are the main types of non-dilutive funding for social enterprises and CICs?
Non-dilutive funding broadly comes in four forms: grants, programmes, social investment and in-kind support. None of them require giving up equity, and of the four only social investment is repaid.
Why can a community interest company reach funders that a standard limited company cannot?
A CIC has an asset lock and limits on what it can pay out to shareholders, which puts off many equity investors. The same structure opens the door to grant funders who will not back a standard limited company, as many of them want a social or environmental purpose and a particular legal structure.
Can grant funding sit alongside an equity raise?
Yes. A grant that pays for a pilot can provide the evidence to raise equity on, and a programme can provide the network. Funders backing early-stage social enterprises tend to look for the same things an investor does: a clear problem, a team that can deliver and a plan for when the money runs out.
Where do founders go wrong when looking for UK grant funding?
Founders usually come unstuck in three places. They cannot find funding spread across hundreds of funders' websites, they apply for funds they turn out not to be eligible for, and they lose track of rolling deadlines, multi-round funds and reports due to funders.
What is Shoots Funding?
Shoots Funding is a platform that matches UK social enterprises, CICs, charities and community groups with funding they are eligible for and gives them one place to manage every application. It lists over 700 live funding opportunities across grants, programmes, social investment and in-kind support.
This is general information, not legal, tax or investment advice.
Key takeaways
With seed volumes falling, non-dilutive funding is worth a serious look for purpose-led founders.
It comes in four forms: grants, programmes, social investment and in-kind support. Of those, only social investment is repaid.
Legal structure matters. CICs and social enterprises can reach funders that won't back a standard limited company.
Most of the work is finding what's open and checking eligibility early, before you spend hours on guidance notes.
It can run alongside an equity raise.
About the author. Paul Kilty is the founder of Shoots Funding, a funding discovery and application platform for UK charities, CICs, social enterprises and community groups. He has spent around twenty years in social impact fundraising, including as Fundraising Director at Impact Hub.
If you'd like to find out more, Shoots are offering a 14-day free trial with full access and no card needed.
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