Should I apply for a grant or seek investors – or both?

For this post, we hand over to Dr James MacFarlane, founder of Grantwise, to share his expert advice on navigating the UK grant funding landscape and how to approach applications with the strategy and precision you need to succeed.

While James is your go-to for grant strategy, SeedLegals can help with the rest of your funding journey – from securing equity investment to claiming R&D tax credits and extending your runway. Whether you’re raising now or planning ahead, we’re here to help you grow. Book a free call with one of our experienced team to find out more.

Every founder wonders at some point: Should I apply for grants?

On the surface, grants look amazing: instant funding, minimal due diligence and a chance to bring new capital into your business without giving away equity.

Why wouldn’t you jump on that?

But, if you peer just below the calm surface, you begin to spot the rocks.

Grants aren’t quite as simple as ‘free money’ and for some startups they can be a distraction or even a hindrance.

In this article, I’ll cover:

• Why grants aren’t always the right fit for every startup
• How to make grants work as part of a blended funding strategy
• Ways to use the application process to help your business grow
• What a best-case grant success story looks like
• Whether you really need to choose between grants and investors
• Top tips to help you decide if applying is worth your time

Grant timescales are slow

Grant timelines can be painfully slow, especially for early-stage highly agile companies. If you are looking for a lifeline, quick capital to extend runway or avoid a fundraise, grants won’t deliver.

Their lengthy application processes, (6-9 months) and delayed disbursements (a further 3-6 months) make them impractical for companies needing an immediate cash injection, despite their surface appeal.

Ultimately grant projects should always be viewed on the medium to long-term horizon. Think of grants as your baseline power generators, reliable but slow to start, rather than your emergency backup.

They’re best suited for planned R&D projects which achieve specific goals rather than as financial life preservers.

Grants are hyper-competitive

It’s not uncommon for Innovate UK schemes to have success rates of less than 10%, sometimes even lower (the success rate for the recent closed SMART competition was less than 2%).

In other words, the vast majority of applications are rejected. If you’re applying to a popular grant competition, you’ll be up against hundreds (if not thousands) of other innovative projects.

A strong application isn’t something you can throw together at the last minute. It’s a serious piece of work, and often the deciding factor between success and rejection. So remember your 6 Ps: Perfect Prior Preparation Prevents Poor Performance.

A well crafted narrative, a strong project consortium, significant external market validation and compelling technical innovation are all essential to be in with a chance. Most of these need time to be nurtured and grow to the point where you can use them in an application – so reactionary or rushed applications are always at a disadvantage. Start planting these seeds early, you never know when you might need to sit under the tree.

Grants are not for everyone

Not all projects or businesses are a good fit for grants. Grants typically target disruptive or radical innovation – projects that aren’t just building on existing tech, but inventing something new. They’re also often aimed at markets that haven’t seen meaningful innovation in decades.

For the most part, grants therefore are better suited to deep tech organisations with large market appeal, rather than tech organisations solving niche problems.

This does not mean that your company is not innovative. Nor does it mean that you are not leveraging tech to solve real-world problems. But there’s a difference in scope: a company using AI for automated grading and teaching insights is less likely to receive grant funding than one developing algorithms to detect early warning signs – for example, identifying when students need extra learning materials to improve outcomes.

Simply put, if your product doesn’t involve some meaningful technical invention, you’ll struggle in key parts of the application. And with success rates so low, your project needs to be near-perfect – you can’t afford to weaken your chances of top marks in any section.

On top of this, grants are rarely more than 70% of the total project cost (ie you still have to find 30% of the capital from other sources) and typically come with strict restrictions on what parts of the project you can and can’t spend money on, how you report progress, and which milestones you must achieve.

How to win at grants: Make them part of your strategy

Rather than viewing grants as an all-or-nothing lifeline, it’s more productive to see them as one option among several funding sources.

Think of a three-legged stool – no single leg does all the work. You can combine:

• Revenue or market traction – The most fundamental pillar, even in early stages
• Investor funding – Bringing in angels, seed funds or VCs for acceleration
• Grants and incentives – Non-dilutive resources for R&D-heavy work

But the real key to winning at grants isn’t just getting the funding – it’s using the application process itself as a strategic tool. In the next section, we’ll look at how to get the most value from the process, whether or not you secure the grant.

View grants as more than capital

The secret to grant success isn’t just securing funding – it’s using the application process itself as a strategic tool. Shifting your perspective to see value not just in the outcome, but in the process of crafting the proposal, is the key to making grants work for an early-stage company.

When approached strategically, grants deliver multiple benefits:

• Catalyse potential partnerships – Grants often require collaboration – for example, with universities or research institutes or industry players. Use the application, or the funding call, as your ‘low-risk entry ticket’ to start building relationships you’ve been targeting. Not only does this open doors to potential (and often large) customers but the focus of a deadline helps keep those conversations moving forward.
• Refine your vision – The nature of the grant application process forces clarity about every aspect of your company: your technology, market fit, wider impacts and commercial roadmap. As one successful founder noted: “Our Innovate UK application made us completely rethink our go-to-market strategy. These changes proved crucial even though we ultimately didn’t get the grant.”
• Get valuable feedback – Rejection always stings, and even if you ultimately don’t win the funding, there’s immense value hidden within every piece of feedback you receive. Think about it: three to five leading industry experts have taken the time to share objective, impartial insights on your entire idea. That’s a rare opportunity – one you can use to test new ideas or sense-check different approaches.

Grants at their best: The impact of getting it right

Despite the challenges, grants can be transformative. They’re non-dilutive – so you’re not giving away equity – and especially valuable for deep-tech or scientific innovations, where there’s often too much residual risk for venture partners to get on board early. This is particularly true when the funding environment tightens.

A well-timed, well-structured grant can supercharge your R&D, help you prove out complex technology, connect you with valuable collaborators, or broaden your market from a niche to a global audience – all without additional dilution. That ‘stamp of approval’ from a respected grant body can also attract follow-on investment from angels or VCs.

What’s more, grants can often be daisy-chained together – one successful project leads to the next, and then the next. Many UK startups and scale-ups have secured 10+ successful grants this way.

That’s the ideal scenario: a well-aligned grant strategy that fits seamlessly alongside your investor strategy and product roadmap. It helps de-risk technology development, hit key investor milestones, and smooth out financial planning.

Investors vs. grants: Do you have to choose?

In most cases, no. For the majority of UK startups, both grants and investors can play a role – but it’s important to understand how different incentive schemes interact, especially when it comes to state aid rules and R&D tax credits.

Think of grants as a bridge or accelerator for specific, high-risk R&D tasks. Investor funding, on the other hand, tends to be faster, more flexible, and comes with strategic networks and support.

Most grant programmes also require you to prove you have ‘match funding’. If you’ve already secured investment, you can show you’re able to cover your share of the project costs. And if you’re still raising, a grant offer letter can be a powerful tool – it shows investors their capital could be instantly leveraged, sometimes by 3x or more.

Final thoughts: How to approach grants strategically

Grant funding is far from easy money. It’s slow, competitive and has strict rules about how you spend it. But when it aligns with your long term tech roadmap and you can afford the wait, it can seriously extend your R&D capabilities without diluting your equity.

Here are my top tips for deciding whether a grant is right for your startup — and how to approach the process strategically:

• Assess fit – If you’re creating a disruptive or radical innovative tech, grants might be ideal.
• Be prepared – Block out time (lots of it) to draft, redraft and refine your application.
• Consider your investment timeline too – Don’t limit yourself; grants can complement fundraising rounds or extend runway between rounds.
• Avoid ‘grant grift’ – Only apply if the grant project genuinely supports your commercial goals. Don’t let the scope of a funding call drag you into building something off-track.

Above all, view grants as one funding pillar, not your entire strategy. Get your core business in shape (revenue, customer traction), weigh investor interest and only then decide if chasing a grant makes sense. Because, in the right scenario, when they work, they really do work. Good luck and happy funding!

Ready to take the next step?

If a grant opportunity seems to match your R&D vision, start planning early – reach out to potential collaborators, confirm eligibility and draft a clear project plan. Speak with a fellow founder who’s been there before and don’t be afraid to chat with an expert to get their view – be that a national contact point (Innovate UK / Business Connect) or an Innovation Consultant.

Sometimes the best decision about grants is knowing exactly when to say ‘yes’ and, importantly, when to say ‘no’.