The funding most founders never look at, why it doesn’t dilute you, and the order to go after it in.

Software founders have a well-trodden path of angels and VCs. Build something physical, with stock and installation and working capital, and that path narrows fast.

We asked Zimi CEO Michael Maas, who’s funded a capital-intensive hardware business to around R50m, where the money actually comes from…

Founders default to equity because it’s the only funding they’ve read about. For hardware, two large sources don’t touch your cap table at all: climate and innovation grants, and development finance institutions. Neither is easy money, but neither takes a slice of your company, which makes them the wrong things to skip and go straight to a VC.

Climate grants were a strong enabler for Zimi, particularly for developing new projects, and they’re especially useful for R&D. The critical part is that they don’t dilute you at all. Michael’s single biggest “do differently” is that he’d have gone after them sooner, because every rand of grant money is a rand you didn’t sell equity for at the worst possible valuation.

Grants come with deliverables, which is why Michael frames them the way he does: close a R10m grant, and it’s like closing a R10m project. You have to actually do the work and report on it. That framing is useful in both directions, because it tells you a grant demands real delivery capacity, and it tells you the win is as significant as landing a large customer.

Development finance institutions, like the Development Bank of Southern Africa, were critical for Zimi’s capital-intensive work. Michael is precise about the fit: he wouldn’t recommend anybody doing software go to the DBSA, but for hardware-intensive builds they have a genuinely startup-focused mindset. Know which side of that line you’re on before you spend three months on an application.

You can’t survive on grants alone, and this is where equity earns its place. South Africa has good angels, and the practical advantage is speed: an institutional round can take 12 to 18 months even when it’s going well, while Zimi closed some angels within a month. Get in touch with them early and connect them to the vision long before you need the cheque.

The last piece is the most counterintuitive: you can delay fundraising for a very long time. Michael would push revenue traction harder and earlier, both because it funds the business and because it lifts your valuation when you finally do raise. His observation on being short of cash is worth keeping: when your back’s against the wall, you’d be surprised how innovative you get at selling now and getting paid upfront.

Sequenced this way, you fund the expensive early years with money that costs you nothing but delivery, bring in angels for speed, and reach the equity conversation later with revenue behind you and a stronger number. Which is roughly the opposite of the hardware founder who goes straight to VCs and gets told the sector’s too capital-intensive.

Michael’s full talk from Founder Collab Live is available to members inside the Founder Collab, where he goes further than we could cover here:

You’ll also get access to 40+ masterclasses from SA founders and operators on sales, fundraising, UX, paid media and more inside The Founder Collab.

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