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What are the pros and cons of using awarded funds to start a company?
What are the pros and cons of using awarded funds to start a company?
Written by Kaela Worthen
Updated over a week ago

Awarded funds, like small business grants, business idea competitions, are a great way to get some funding without a requirement to repay or sell ownership. Unfortunately these opportunities are few and often take a long time to get approved.

Although not every awarded fund comes without strings attached, for early stage startups looking to grab a little money to get off the ground, they can be a great solution. We've broken out awarded funds into three categories; startup competitions, grants, and crowdfunding.

The Basics


For the right kind of startup, awarded funds can be a great way to raise money and connect with an audience. For scientific and defense related companies or non profits, government grants can be a good resource, for software startups pitch competitions can be a great way to get in front of VCs, and for consumer product companies crowdfunding can be a great way to raise money and connect with customers.

Business stages

Most startup competitions and crowdfunding campaigns tend to be when a company is just getting started—either pre-launch, at launch, or shortly after. Grants can be a part of a company's funding strategy throughout the entire lifecycle, however.


  • Once you have this money, it often comes with few strings attached compared to other funding sources—you don't have to repay it like a loan and you don't have to give up ownership of your company, either.

  • Often, the process of earning the money can also help earn you some publicity which may help your success in the long term.


  • It can be a LOT of work to find these funds. There aren't a lot available and the stipulations can be very strict on who can receive them.

  • Competition is often extremely fierce, making it a far from sure thing that you'll receive the funds even if you find the right option for you.

What happens if the business is successful

You maintain ownership, and you don't have to pay anything back—best of both worlds.

What happens if the business fails

Usually, nothing. Aside from the part where it's extremely sad that your idea failed—and if you managed to secure this kind of funding, it was probably a pretty awesome idea—you won't be punished in any way personally or commercially if your company comes to an end.

Types of awarded funds

Startup Competitions

Often referred to as Pitch Competitions, because startup founders pitch their business to judges (think of ABC's Shark Tank). The online publication Techcrunch's startup competition, called Startup Battlefield, might be the most famous startup competition. Startup Battlefield takes place once a year at Techcrunch's annual conference, where judges from top venture funds review thousands of online applications and select a dozen or so to attend the event an pitch in front of the judges and an audience. The winning company takes home a no-strings check for $100,000 and major bragging rights.

Free money? Yes. Quick? No. Likelihood? Low.

Months are going to pass by after an application, until the event takes place, and then, of course, you have to win. The best way to think about startup competitions like Techcrunch's might be as a great way to get the attention of venture funds who review the applications, not a reliable source of financing for startups.


The government has thousands of grants for early-stage businesses, they are all accessible on and worth checking out, especially if your startup working on scientific discovery, deeptech innovation, or defense technology.

Some states and universities have location driven grants, the purpose of which is to spurn entrepreneurship in their locality. We've found the easiest way to find these programs is to search "[State name] small business grant", most states keep a website dedicated to their programs with application information.

Unfortunately, for profit startups who aren't working on medical breakthroughs, missile guidance systems, or rural development aren't going find many grant opportunities.

There are many more grant for non-profits or charitable endeavors than for profit startups. If you are working on a non-profit and looking for a grant, we recommend checking out Instrumentl.


Kickstarter and IndieGoGo can be great ways for a startup to connect with their customers, create some buzz, and make some pre-sales. Another way to think about crowdfunding would be to call it a 'rewards-based' fundraising, in other words, successful campaigns on crowdfunding platforms reward funders with the company's product (video game, board game, toy, etc.)

An important note, we are not talking about 'equity crowdfunding', which refers to platforms like CircleUp, where a startup invites many small investors to purchase ownership in the startup. You can read more about equity fundraising here.

Crowdfunding's biggest success stories tend to be consumer products, take a look at Kickstarter's list of the 'Most Funded'; books, games, and gadgets. If you are building a company around that kind of product, crowdfunding could be a great route for you. If you aren't, it's likely not a good fit.

How to get it

Since the approaches are so distinct based on the type, we've incorporated this in their respective sections above.


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