Beyond Dilution: Venture Debt & Revenue Sharing for Deep Tech Ventures | The Scenarionist

How New Models pairing equity with venture debt and revenue sharing bridge the lab-to-market gap for capital-intensive Deep Tech.

In a market that prizes prudence, capital design can be an edge. Pairing equity with non-dilutive instruments can support milestones and preserve room to maneuver. See how venture debt and revenue-linked capital can fund equipment, pilots, and GTM while keeping founders—and early believers—meaningfully in the money.

In an era of tighter venture capital and rising capital needs, deep tech startups are exploring creative funding strategies to avoid excessive dilution of ownership.

Unlike traditional software startups, deep tech companies (in fields like advanced materials, quantum, aerospace, biotech, etc.) often require massive upfront investment in R&D, hardware, and manufacturing before revenues flow. Multiple equity rounds can leave founders and early backers with only a sliver of the company by the time it reaches scale.

This report examines how new financing models – notably venture debt(specialized startup loans) and revenue-based financing (investments repaid via future revenue share) – are empowering deep tech entrepreneurs to raise capital beyond equity dilution.

We’ll dive into the rise of venture debt and revenue-sharing globally, practical tactics from pre-seed through Series A, case studies, and actionable takeaways for founders and investors navigating the deep tech funding landscape today.

The funding landscape in 2025

Global VC investment fell sharply after the 2021 peak, and early-stage fundraising has become more difficult in 2024 [1][2]. Meanwhile, the demand for capital in deep tech is higher than ever – scaling a lab prototype into industrial production can cost tens of millions [3][4].

In periods of tighter equity markets, leaning solely on priced rounds can increase the risk of dilution and down-rounds. Non-dilutive financing provides a complementary toolset, allowing companies to access capital without ceding ownership. Throughout 2024, startups worldwide appeared more open to these instruments as venture funding moderated. In the U.S., for example, venture debt deals reached a record $53.3 billion—up 94% from 2023—as founders used loans to extend runway and avoid raising equity at low valuations [5].

This marked a strategic shift toward debt to preserve ownership in a challenging funding environment [6]. At the same time, revenue-based financing (RBF) emerged as an attractive alternative to equity and traditional loans, offering upfront cash in exchange for a share of future revenues instead of stock [7]. These models are complementing venture capital, helping deep tech startups fill funding gaps and reach milestones without constantly diluting founders’ stakes.

A new funding toolkit

For deep tech innovators, blending these non-dilutive options with classic equity can be game-changing.

As noted in a our recent deep tech VC guide, success requires “balancing venture capital, non-dilutive funding, and project financing” from day one [8]. Even famed deep tech companies have used such strategies.

Tesla, for instance, famously secured a $465 million U.S. Department of Energy loan in 2010 to build its Model S factory – nondilutive capital that allowed it to scale production without giving up equity, and which Tesla repaid early by 2013 [9][10]. (Not every company fared as well – competitor Fisker Automotive also took government loans but went bankrupt, underscoring that debt must be managed wisely [11].)

In sum, deep tech financing now extends beyond traditional venture capital. Venture debt provides repayable, non-dilutive growth capital, while revenue-sharing exchanges a portion of future income for upfront funds without relinquishing control. Used thoughtfully, these instruments can help bridge the “valley of death” from research to commercialization.

2. The Dilution Dilemma in Deep Tech Funding

Equity dilution has long been a pain point for deep tech startups. These companies often need large amounts of capital well before profitability – whether to build a semiconductor fabrication prototype, launch a satellite constellation, or conduct clinical trials for a new material.

Each venture capital round buys much-needed runway but at the cost of founder ownership. By the time a deep tech startup reaches Series B or C, founders may have ceded majority control, and early investors see their stakes diluted by later, larger rounds.

This dynamic can deter talent (founders and early employees worry their shares will be watered down) and even scare off investors if projected returns fall with each dilution [12][13]. In short, deep tech ventures face a capital-intensive journey where traditional equity financing alone can undermine ownership incentives.

Unlike a lean software startup that can often get to market on a few million dollars, deep tech companies typically cannot generate revenue for years during R&D and pilot production. They must raise multiple rounds just to reach a viable product. For example, a quantum computing startup might raise a seed round to prove the physics, a Series A to build a prototype chip, and a Series B for a beta system – all before any meaningful revenue.

Each round could dilute existing shareholders by 20–30%. By the time revenue is flowing, founders might own only e.g. 10%, making the eventual payoff (and motivation) much smaller relative to effort. Excessive dilution can also make later funding rounds unattractive: new investors may worry that earlier backers (and founders) lack incentive to keep pushing if their stake is too small.

Moreover, the current market conditions amplify the dilution challenge. Venture capital availability has tightened since 2022.

With VC investors more selective and valuations generally lower than a few years ago, raising equity now often means giving up more shares for less money (a double whammy of dilution). Many startups that grew accustomed to plentiful VC in 2020–21 have had to either accept “down rounds” (new equity at a lower valuation, severely diluting earlier investors) or seek alternative financing to bridge to better times.

This is why nondilutive funding sources are so attractive in 2025.

Every dollar a deep tech startup can secure via loans, grants, or revenue-share is a dollar it doesn’t have to raise by selling equity at today’s valuations.

For example, rather than pursuing an expensive interim equity round, a hardware-focused company might take