How to finance a business

The choice is not only about raising capital, but also about securing the best conditions for growth, ownership, and flexibility.

This guide provides an overview of the most important financing options in Denmark and helps you make the right choice, whether you want to bootstrap, find investors, or apply for public funding. 

Bootstrapping: Financing the business yourself

You do not need investors or a million kroner in the bank to build a business. Bootstrapping means financing the business yourself, either through personal savings, revenue from day one, or perhaps by working alongside building the business.

The advantage is that you retain full control and do not have to give up equity or navigate investor expectations

And precisely because resources are limited, you are forced to think clearly: What is most important right now? What can you do without? How far can you get without giving up ownership? 

Bootstrapping works best when start-up costs are low and you can quickly validate your business model. If you have a product or service that can be sold from day one, it is an obvious path to take.

This could be a freelance-based business that you run alongside other work, or a software solution with low development costs where you can quickly onboard your first customers.

For some, bootstrapping is a temporary solution until the business has proven its value to potential investors. For others, it is a deliberate choice to avoid giving up control. 

When you are carrying the entire load yourself, often alongside other work, the pressure can quickly become overwhelming.

Bootstrapping therefore requires not only financial discipline but also a realistic plan for your time and energy. Set clear goals and recognise that progress does not have to be fast in order to be meaningful.

Soft funding: Grants without giving up equity

Soft funding refers to public funds, grants, subsidies, and programmes that provide capital without requiring you to give up equity in your business. It requires planning and paperwork, but it can be a valuable lever, especially in the early stages. 

Technology-intensive startups and startups developing sustainable solutions in particular often have good opportunities to obtain soft funding.

In Denmark, the largest public support schemes are typically administered by the Innovation Fund Denmark, regional business hubs, private foundations, and universities

 There are one-off grants as well as funded programmes, accelerator programmes, and innovation competitions offering prize money or valuable advice.

Start by clarifying your area of focus and your company’s level of maturity, and then investigate which programmes are the best match.

Soft funding can serve as a quality stamp, signalling to potential investors and partners that others believe in your idea.

Many programmes also provide access to networks, guidance, and industry insights that can otherwise be difficult and expensive to obtain. 

However, competition for funding is often intense, and the application process can be extensive. It requires a clear business plan, well-defined objectives, and realistic budgets.

If you have the patience to navigate application requirements and can manage budgets, milestones, and documentation, soft funding can be a rewarding path forward for your business.

Apply for the IDA Startup Grant of DKK 25,000

External funding: Faster growth, less control

Do you dream of scaling quickly but lack the financial resources to do so? Are you, for example, developing a hardware product with a long development cycle and high production costs?

External capital can provide both the funding and expertise needed to take the next step with your startup. 

External capital is not only about money. It is also about gaining access to networks, skills, and knowledge that can help mature your business and accelerate development.

However, it requires that you are prepared to share ownership and are clear about what you want for your business. 

For many startups, the first investors are typically business angels; private investors who contribute both capital and experience. They usually invest amounts between DKK 100,000 and 2 million, often as part of a group of investors.

A good business angel brings more than just capital to the table. Many have built companies themselves and can contribute with advice, networks, and an understanding of the challenges you may face as an entrepreneur.

But personal chemistry matters, because you are not just gaining an investor, you are gaining a new partner. Be clear about what you are looking for:

Do you primarily need industry insight, fundraising experience, or a strong network? And be honest about your expectations for the collaboration, so both parties know what they are signing up for.

For some startups, the next step is venture capital funds, which invest in startups with significant growth potential and ambitious goals.

They typically invest larger amounts and expect substantial returns through an exit, such as an acquisition or an initial public offering.

External funding can accelerate your business, but it requires that you are prepared to give up some control. Choosing the right investors is therefore just as important as securing the capital itself. 

Crowdfunding: An alternative source of financing

Do you have a product that can engage friends, family, and other interested supporters? If so, crowdfunding may be an alternative way to finance the first version of your product.

Crowdfunding means creating a campaign for your product on a crowdfunding platform and then raising money from many smaller contributors. 

The most well-known form of crowdfunding is reward-based crowdfunding, such as through Kickstarter, where contributors receive an early version of your product.

Equity crowdfunding, through platforms such as Republic or Funderbeam, gives investors an ownership stake in the company and functions more like a traditional investment.

In addition to providing financing, crowdfunding has the advantage of serving as market validation. A successful campaign confirms demand and can generate valuable visibility ahead of a full product launch. 

A successful crowdfunding campaign requires more than just a good idea. It requires a strong presentation, a clear strategy, and a solid network that can create momentum from the outset. 

IDA’s partnership with Lån & Spar

IDA also collaborates with Lån & Spar Bank through LSB Business, a solution aimed at self-employed professionals and those who are about to start their own business. 

Do you need input on how to bootstrap or which soft funding opportunities are right for you? Or are you considering investors or a crowdfunding campaign? We can help you discuss all of these considerations.