The Best Non-Dilutive Ways To Finance A FOAK

Solugen (an aqua-ammonia producer) and ViaSeparations (a membrane technology company) both funded over 30% of their upfront project costs through equipment leases. JR Energy Solution, a battery toll manufacturer, had most of its equipment provided by its shareholders. Twelve, a sustainable aviation fuel startup, secured an off-take with Microsoft, backed by a prepayment, to finance its SAF FOAK. 

Upfront payments from customers or equipment leases from suppliers provide some of the best non-dilutive funding for FOAKs. Your suppliers or customers essentially commit to your project with real cash (in the case of customers’ upfront payments) or with what is, in fact, debt (in the case of equipment leases). None of it dilutes your founders’ share, and, what’s more important, signals trust to other existing and potential investors.

The US Office for Clean Energy Demonstrations, in its 2024 report on FOAK case studies, demonstrated that customer financing can cover up to 100% of pilots and demonstration projects (see chart). While this can happen, it is clear from the OCED report and from practice that such arrangements are relatively rare. What should be the conditions for your suppliers or customers to finance your FOAK?  

Source: OCED 2024

Up-front payments for FOAK

As I have repeatedly stated throughout my posts, having an off-take makes the life of a scale-up founder so much easier. If you have one, and you should, you could simply ask your client to wire you some advance payment. This, the wiring, not the asking, rarely happens, as your client very well knows that it will take a lot of time not only to build your FOAK but also to pass all customers’ inspections and product validation procedures, and then to survive the ramp-up. This will stretch over several years, and paying up front now for something that might or might not arrive in such a distant future is not prudent. 

Still, you could try to convince your customer of advance payments by tying them to specific milestones of your project. For example, completing factory commissioning or passing the first batch tests. These milestones are more likely to be clustered towards the end of your project timeline, as customers will push for proof of at least partial success before sending over any advance payments.

Equipment as an investment

Having an off-take with a customer is also a great way to start a conversation with your suppliers. During the lithium-ion gigafactory construction boom in Europe, between 2015 and 2025, many Korean battery equipment suppliers were eager to provide equipment finance for their customers. They saw an opportunity to secure their position in what looked like a fast-growing, decarbonisation-committed market. Sales pipelines of those customers looked solid, with off-takes signed by the likes of Volkswagen, BMW and Renault. 

When I was in Seoul in early 2026, the mood among equipment manufacturers was very different. After spectacular failures at most European gigafactories, I doubt many of them would be ready to lease their equipment to any new battery startup. Still, the travails of Korean equipment manufacturers clearly show the conditions under which you could get your key equipment on a lease. 

Another reason for manufacturers to wait for full payment for their equipment is if your project utilises the equipment in novel ways or for the manufacture of a novel product. For example, your battery manufacturing startup might be using dry-coating of electrodes in combination with other novel manufacturing technologies. A Tier 1 coating equipment manufacturer could be convinced to showcase their new dry-coating machines together with your startup. OEMs also seek to expand their markets, and often, deploying their products for novel uses serves as the best advertising. 

The best non-dilutive ways to finance a FOAK

Coming back to my foundational finance framework of grant-debt-equity, customer and supplier finance sit squarely on the debt side. They are essentially lending you their money, some with interest, like in the case of an equipment lease, and some essentially for free, as in the case of an advance payment. You aren’t diluted; your relationships with either suppliers or customers do not radically change, and they gain no additional influence over your decisions. 

Why aren't government grants mentioned here? After all, grants are non-dilutive, free and can be obtained earlier? Wouldn’t it make sense to start by looking at grant funding first? In my view, customer and equipment finance has a much higher chance of success than grants, as confirmed by OCED report. It requires much less time and effort to secure - you are in conversations with suppliers and customers anyway. And finally, it requires much less effort to upkeep.