Growth Capital, Through a VC’s Lens (and Why Non-Dilutive Pathways Are Finally Catching Up)

When VCs talk about “growth capital,” we’re usually talking about one thing: fuel that turns a proven engine into scale.

Not an experiment. Not “let’s see if this works.” Growth capital is deployed when a company has repeatable demand signals and needs capital to expand distribution, increase inventory, hire into proven functions, enter new markets, or finance a step-change initiative—without changing control of the business. That framing aligns with how growth equity / expansion capital is commonly defined: minority capital into a relatively mature company to expand or restructure, enter new markets, or finance an acquisition.

But here’s the nuance most founders miss:

The “right” growth capital isn’t always equity.
Equity is powerful—especially when a business is pre-profit and scaling aggressively—but it’s also the most expensive form of capital when your model is already working.

So the real question becomes: What kind of capital best matches your business’s cash conversion cycle and risk profile?

How VCs Think About Growth Capital (The Real Underwriting)

From an investor’s perspective, growth capital is underwriting a machine. The machine can be:

• Distribution (new channels, new geographies, retail rollout)
• Unit economics (CAC efficiency, contribution margin expansion)
• Working capital velocity (inventory turns, receivables timing)
• Operating leverage (gross margin stability + scalable opex structure)

VCs will look for “proof” that incremental dollars produce incremental results. In practice, that translates into a few recurring questions:

1) Is the demand real and repeatable?

Not “people like the product.” We mean:

• Are you seeing repeat purchase / retention?
• Is there a consistent sales motion?
• Do cohorts behave predictably?

2) Do incremental dollars have a clear job?

Growth capital works best when it has a defined purpose:

• inventory for confirmed POs
• marketing spend with known CAC ranges
• store expansion with modeled payback
• product and distribution scale with measurable pipeline

3) What is the payback window?

You don’t need perfection, but you need clarity:

• How long until this capital returns as cash?
• What happens if demand softens for a quarter?
• Does the company survive a downside case?

This is why “growth capital” can mean very different things across categories:

• CPG: inventory + retail expansion + trade spend + performance marketing
• Tech: go-to-market scale + distribution partnerships + product acceleration
• Real economy: new locations, equipment, staffing, and contract working capital

The Hidden Problem with Equity for Growth

Equity capital is incredible when:

• you’re building a category,
• your growth is nonlinear,
• you’re pre-profit but compounding fast,
• and you need long runway for breakthroughs.

But equity becomes less attractive when:

• the company is already producing cash,
• growth is more operational than experimental,
• and the “use of funds” looks like a balance sheet problem (inventory, receivables, buildouts, equipment).

In those scenarios, equity can feel like using a sledgehammer to push in a thumbtack.

Founders often rationalize equity as “cheaper because there’s no repayment.” True in cash terms—but not in ownership terms. If your business is already working, dilution can be the most expensive price you pay.

That’s why the capital stack is evolving.

The Rise of Non-Dilutive Growth Capital (and Why It’s Not Just “Debt”)

Non-dilutive capital is a broad umbrella. It can include revenue-based financing, venture debt, working capital facilities, and other structures designed to fund growth without selling ownership.

Revenue-Based Financing (RBF)

RBF is commonly described as funding provided in exchange for a fixed percentage of ongoing gross revenues until a predetermined repayment amount is reached. Payments flex with revenue: up when revenue is up, down when it’s down.

Where it fits best:

• predictable revenue
• strong gross margins
• clear ability to deploy capital into growth loops

Venture Debt (for VC-backed companies)

Venture debt is typically structured as a loan for venture-backed businesses—often alongside or after an equity round—and lenders may receive warrants as part of the compensation for risk.

Where it fits best:

• extending runway between equity rounds
• financing growth without resetting valuation
• funding working capital or capex for a scaling engine

SBA / Working Capital Programs (for many small businesses)

For real economy operators, working capital access is a huge limiter—and SBA-backed programs exist specifically to support working capital needs through the 7(a) umbrella (including monitored lines of credit in the 7(a) Working Capital Pilot).

Where it fits best:

• contract-backed growth
• transaction/asset-based financing needs
• stable operating businesses with working capital constraints

Key takeaway: Non-dilutive capital isn’t “good” or “bad.” It’s matching the financing tool to the cash-flow reality of the business.

The VC View: When Non-Dilutive Capital Is the Right Answer

From a VC perspective, non-dilutive growth capital becomes compelling when:

You have a proven growth loop

If you can confidently say: “Every $1 deployed here returns $X within Y months,” you may not need dilution to scale.

You want to protect ownership ahead of a bigger milestone

Non-dilutive capital can help you reach:

• a breakout retail moment,
• a meaningful enterprise contract base,
• a new geography,
• or a product expansion…

…before you price equity again.

Your bottleneck is balance-sheet-driven

Inventory, receivables, buildouts, equipment, and location expansion often map better to non-dilutive solutions than selling equity.

Where LvlUp’s Non-Dilutive Funds Fit In

At LvlUp, we’ve been watching the same macro trend: founders want to scale without giving up ownership when their business fundamentals support it. And in many categories, the need is obvious—growth is available, but capital structure is the constraint.

That’s why we built three dedicated pathways:

🔹 LvlUp CPG Non-Dilutive Fund I

For breakout consumer brands seeking anywhere from $20k to $20M in growth capital – across 10+ countries.

CPG growth is often working-capital heavy: inventory, retail expansion, trade spend, and marketing that requires upfront cash. The winners aren’t just the brands with demand—they’re the brands that can finance the wave without choking the business.

This fund is designed for brands that already have momentum and need scale capital without turning growth into a dilution event.

🔹 LvlUp Tech Non-Dilutive Fund I

For technology companies scaling product and distribution without dilution.

In tech, the “non-dilutive” conversation often starts with venture debt, but the deeper truth is this: many software and tech-enabled businesses hit a stage where growth is executional, not exploratory.

If you’re scaling a proven motion—distribution, partnerships, paid acquisition, or a repeatable sales engine—non-dilutive capital can be a strategic tool to:

• extend runway,
• preserve ownership,
• and reach the next valuation milestone without forcing a premature equity raise.

🔹 LvlUp Real Economy Non-Dilutive Fund I

For brick-and-mortar, restaurants, medical offices, services businesses, and tradesmen powering the real economy.

Most of the real economy isn’t “venture scale,” but it is essential—and it grows through buildouts, equipment, staffing, and working capital. The capital needs are real, and the solutions should be purpose-built.

We built this pathway to support operators who are scaling proven demand with practical, structured growth capital—without handing over the business.

A Simple Framework: Choose the Capital That Matches the Business

If you’re deciding between equity and non-dilutive growth capital, pressure test three things:

1. Predictability: Are revenues repeatable enough to support structured repayments?
2. Use of funds: Is the capital going into measurable growth levers (not vague “scale”)?
3. Downside plan: If growth slows, can the business still operate without crisis?

If the answers are strong, non-dilutive capital can be a founder-friendly way to scale—and in many cases, it can also improve your equity outcome later by helping you grow into a stronger valuation position.

Closing Thought

From a VC perspective, the best founders don’t just raise capital—they architect a capital stack that compounds their leverage over time.

Equity is still a core tool. But the modern growth playbook increasingly includes non-dilutive pathways—especially for companies that already have working engines and want to scale without unnecessary ownership loss.

If you’re building in consumer, tech, or the real economy—and you’re looking for growth capital that matches your model—LvlUp’s non-dilutive funds are designed to be a practical next step.