The messy middle: 4 smart ways to fund your startup between raises
👋 Hi, it’s Kevin, and I’m here with a 🔥 edition of The Midnight Text, Forum Ventures’ bi-weekly newsletter that provides honest answers to the unspoken questions that keep founders awake at night.
I’m a Managing Director at Forum Ventures, guiding portfolio founders on the zero to one journey. My journey as a founder was anything but smooth. Although we had a great outcome––bootstrapping to a couple million in revenue and selling to Deel in 2021––I made every mistake you can make. And I’m passionate about helping founders avoid those same mistakes.
Up today: The messy middle.
There are stretches in company building where you are not raising a round but you still need a bump of capital to move faster. Just enough cash to pull something forward that you already know you need. Maybe it is hiring the engineer who can finally unblock a feature customers have been waiting on. Maybe it is upgrading infrastructure so you can support a larger customer. Maybe it is putting real weight behind a go to market motion you already validated by hiring an SDR or scaling a paid channel that worked in a small test.
These are all practical things that speed up the business, but they require capital you might not have lying around. And in today’s market, speed is the only real edge most companies have. Product is no longer defensible on its own.
The good news is you do not need to wait for a formal raise to unlock that speed. There are unconventional financing methods that you can lean into between rounds that can bring in small amounts of capital while you are still building, without stopping everything to run a full fundraising process. This is the messy middle. This is where creativity matters most. And boy did I spend a lot of time in the messy middle.
Based on my experience as a founder, here are the four methods that I most often recommend to the founders I co-build with at Forum.
1. Your customer becomes your investor
Most founders do not think about this, but customers can be one of the fastest sources of capital in the messy middle.
If you are deep in a commercial negotiation with a customer and you can see that they really believe in what you are building, you can open the door to a different kind of conversation: offer them a chance to participate as an investor.
This can look like one of two things.
The first is getting a CEO or executive at a customer to write a small personal angel check. I did this twice myself. Two CEOs from our customer base each wrote 25k checks. They simply wanted to support the company and had the ability to invest personally.
The second is bringing the company itself on as an investor. It might be unrelated to your commercial partnership, but you may even offer your product free in perpetuity in exchange for the investment. This tactic is how I turned a 30k annual contract into a 100k upfront investment at a time when I needed cash to make a new hire.
Here is the script I give founders to use if they think this is the right conversation to have:
“Hey, I know we have been talking about a commercial agreement these last few weeks. But I have really been impressed with you and your team and I want to throw something at you that is a bit out of left field. Instead of negotiating the commercial side, what if we brought you on as an investor instead and gave you access to the product free in perpetuity? I think we can build something cool here together and I want to bring you on as a partner and give you some upside in it too.”
This approach is low risk because if they say no, you go back to the normal commercial conversation. And if they say yes, you unlock capital quickly from someone who already understands your value.
This route is not for every founder. You need a solid relationship with the customer and you need to be comfortable with them on your cap table. But if both of those boxes are checked, this can be one of the fastest and cleanest paths to capital.
2. Invoice financing: Turning long term contracts into actual cash
This is one of the most useful, least understood tools in the messy middle. Founders often celebrate multi year contracts because they create long term stability and tell a strong story to investors and future customers, but the revenue trickles in over time. That does not help you hire or accelerate the roadmap today. Invoice financing gives you access to that money upfront.
Here is how it works in plain terms. You sign a customer to a two, three, or even five year contract with no opt outs. The customer might be paying monthly or annually. Very few companies can pay the whole thing up front. But once the contract is locked in, a financing partner can advance the majority of the contract value upfront and take over the payment stream. In its simplest form:
They pay you most of the total contract value up front (70% to 90% of the total contract value is common)
They take over the rights to the payments.
They collect the money as the customer pays over time.
You get the majority up front. Now you can use that money to hire, build, or accelerate your roadmap.
Some founders also offer discounts to get customers to prepay a portion. But in most cases, invoice financing is how you convert slow drip revenue into capital today.
There are lots of lenders out there with an invoice financing product. You should always check the terms and make sure the percentage they keep is reasonable. But for founders with long term contracts, this is one of the most effective ways to generate cash quickly without giving up equity.
3. Debt as a practical accelerator
Debt financing becomes a real option once you have $200k+ in ARR and a predictable cash flow. In many cases, it is one of the fastest ways to pull forward a specific investment you already know you want to make.
When I talk to founders about using debt, I focus on clarity. You should know exactly what you will use the money for and how it moves your business forward. For example, if you know that hiring a certain engineer or AE will unlock more revenue, or if a customer needs a product investment you can scope clearly, short term debt can help you make that move now.
Founders sometimes avoid debt because it sounds risky, but with proper modeling, it can be one of the cleanest and least disruptive capital tools you have. You need to look at your burn, model the repayments, and confirm your business can sustain it.
Throughout my company, I took a $30k loan, then a $60k loan, then a $200k debt facility. All made massive impacts on my short-term growth and trajectory.
If the numbers work, I highly recommend you go for it.
4. Grants: The quietest, most overlooked source of capital
Grants are not glamorous, but they are real and they are often underutilized.
Almost every sector has grant programs. Healthcare, education, energy, climate, manufacturing, workforce development. Many cities and states have economic development grants. Universities have them too. These are usually non-dilutive and designed specifically for companies that are early but real.
Founders can often pull in ten to fifty thousand dollars this way with some paperwork and time. And with new AI grant-writing tools, the time to apply is getting much faster.
I managed to pull in three separate non-dilutive grants from my college, totalling $25k. At the time when we were just starting out paying ourselves $1k per month, that made a huge difference.
It is not a replacement for revenue, but it is a meaningful source of capital in the messy middle.
In Summary
You do not need to wait for a formal fundraise to unlock capital. You just need to get creative.
Today we talked about customers becoming investors, debt financing, invoice financing, and grants. But there are likely even more ways to find cash between institutional raises.
The messy middle is not a stall point. It is simply the part of the journey where you have to be more resourceful. And once founders understand what is available to them, they often realize they can move faster long before a formal round ever makes sense.
Keep those creative juices flowing.
You got this.
–– Kevin
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