The three routes differ in what they cost, how long they take and what they demand in return. Most companies eventually use more than one.
Grants
- Cost: no equity, no repayment. Cost is time and reporting.
- Typical sources in India: state startup missions, DPIIT-linked schemes, sector-specific programmes.
- Timeline: often three to nine months from application to disbursement.
- Constraints: funds are usually milestone-linked, reimbursement-based and restricted in how they can be spent.
- Fits: deeptech, hardware, R&D-heavy work and early prototypes.
Equity
- Cost: permanent dilution plus governance obligations.
- Timeline: eight to twenty weeks for an early round.
- Constraints: investor rights, reporting cadence, board or observer seats, and pressure toward a growth trajectory.
- Fits: businesses where capital compounds - scalable software, network effects, large addressable markets.
Debt
- Cost: interest and repayment obligations that begin regardless of performance.
- Forms: venture debt, working-capital lines, revenue-based financing, invoice discounting.
- Constraints: usually requires existing revenue, and often a prior equity round or collateral.
- Fits: funding predictable, short-cycle needs such as inventory, receivables or a known-return marketing spend.
Choosing between them
Ask what the capital is buying. If it funds a search for a business model, equity is usually the only honest option. If it funds a known, repeatable conversion of rupees into revenue, debt is cheaper. If it funds research whose commercial outcome is uncertain, grants exist precisely for that.
Sequencing matters: grants and revenue extend runway before a priced round, which usually improves terms. Debt taken before product-market fit converts a temporary slowdown into an existential one.