The Holy Trinity of FOAK Finance

You don’t need to have a financial degree or a background in finance to understand the key principles of funding a FOAK. As someone who graduated with a finance degree and worked with infrastructure investments all of his life, I know how finance types like to swarm you with jargon and seemingly endless financial options. Shut out this noise. There are three main types of funding available to FOAK scale-ups, and, for that matter, to anyone who raises funds. Below is the breakdown of FOAK funding with extremely extreme examples and some statistics thrown in at the end for good measure.

Equity

First, are the money people give you and expect high returns, but are ready to tolerate high risks. That’s equity. In traditional finance theory, equity investors take the highest risks, get paid last in the event of bankruptcy, but can lay claim to all the profits of the company. As a founder, you are an equity investor, even though you might not have put in a single dime.

Equity investment can take several forms. The most straightforward one is cash for a share in the firm’s stock. Founders most often contribute to equity in kind, with their effort and technology. Some might contribute with intellectual property. Others might contribute with equipment.

Equity finance is the prime source of finance for FOAK projects and for startups in general. After all, startups are risky businesses, and equity is the second most risk-tolerant type of funding. So expect a lot of negotiations around company valuations and who gets what share.

One example of pure equity funding is a green fertilizer startup, ATOME. It went public in 2021 and raised $12,5M of equity capital in two rounds of IPO. They have subsequently raised an additional $7M in equity over the following years. At the time of writing, these equity injections allowed them to shore up enough assets to start negotiations on a $400M project finance for their FOAK green ammonia plant in Paraguay.

Several factors allowed ATOME to raise so much equity. First, they had an A-rate team of finance and industry professionals, with a track record of successful infrastructure projects and IPOs. Second, they had de-risked their project as much as possible. They had the construction site, the off-take, and the cheap, abundant power supply secured. The ATOME approach, however, is extreme and relies heavily on the experience and the network of its founders.

Debt

The second type of funding, are the money people give you, but expect it to be returned on a precise schedule and with fixed interest. That’s debt. People who give you debt finance generally don’t like risk. They like to give money to safe, predictable businesses with stable cash flows. And they will be the first in line to get paid in case of bankruptcy.

Debt can take on many forms. It can be as simple as a loan for a fixed term with a fixed interest rate. It can be bonds, issues on the open market. It can be equipment, shipped to you with payments spread out over months.

Debt issuers look for two things: stable cash flows and collateral, i.e., something of value, that they can take from you in case you fail to pay on time. And guess what, your FOAK isn’t likely to have any of those. That’s why banks and bond markets are generally not the places where you can raise capital for FOAK.

Of all climate technologies, solar and wind were primarily financed by debt. The key here was long-term fixed-price off-take agreements, secured with either big, reliable customers or more often with the government. In my case, when building the first large-scale wind farms in Russia, we were able to secure approximately $1B of debt for our first 600 MW of wind farms and a wind turbine factory. While at the time of signing a loan agreement, we had neither the sites, nor the technology, nor a wind turbine factory, two things worked in our favor and were crucial to convincing the banks.

First, we had secured 10-year conditional off-takes with the government. These contracts would enable us to sell electricity at a very high price should we build on time and meet necessary local content requirements. Second, our sole shareholder was Rosatom, the Russian state nuclear corporation, with a sovereign credit rating. While Rosatom did not provide explicit guarantees for the loan, its presence in the deal was enough to convince banks of our creditworthiness.

This is again an extreme case of almost 100% debt financing for a FOAK. But extreme cases are good as they show exactly the conditions under which such extreme cases are likely to happen. By measuring your own project against these extremes, you’ll be able to get a more accurate picture of the right funding mix for it.

Grant

Now, the third type of funds you can get is the money that people give you, and don’t expect much in return. That’s a grant. Grant can be thought of as having the highest risk tolerance. They are not expected to be repaid, and they do not lay claims to any share in the company; that’s why they are called non-dilutive finance. This might sound fantastic, but in reality, this is not so.

As a founder, you are likely to be quite familiar with grants already. You’ve probably raised a few during your early development stages. Governments and various foundations, public and private, are keen to spur technological development and regularly give away free money to promising technologies. The sums are usually modest, barely enough to run a team of a dozen researchers, rent a lab, and purchase a minimum amount of materials.

When it comes to financing something of an order of magnitude higher, like €10M+, grants suddenly tend to make themselves scarce. Why? Because by the time you are in your pilot-demo-FOAK stages, you start talking more about customers and profits, rather than science and technology. That’s something that grant issuers are trying to avoid, as their mandate isn’t to support commercial technologies, but to spur innovation and science.

You could probably consider the Manhattan Project to be an example of 100% grant funding for FOAK, but that’s certainly not a climate tech project that we can relate to. When it comes to climate tech, FOAKs with a large share of grant funding are rare. One such example is Ineratec, a German provider of e-fuels and synthetic chemicals. As of 2025, Ineratec raised almost €40M of grant funding, with the latest round of €31M in grant money coming in March 2025. Out of the total of over €170M raised, grants account for almost 24%.

Grants, however, are not completely free money. They are hard to get, and may come with many strings attached. This is such a special financing option that it deserves a separate discussion on how to understand whether your FOAK needs a grant or not, and how to manage one once you get it. You can read more on grants in this post.

What can a founder expect from FOAK finance?

In the age of the Republic of Genoa's dominance over the Mediterranean, the main way of making a fortune was to trade overseas. This was a dangerous enterprise. Storms, disease, and pirates were all very real and present dangers for any maritime startup of the era. And as you can imagine, the main source of funding for such ventures came from equity.

A survey by Net Zero Insights, published in Building and Scaling Climate Hardware: A Playbook, illustrates the challenges of climate tech FOAK financing (see the chart below). As in the times of the Genoa Republic, climate FOAKs are overwhelmingly financed with equity.

Source: https://planet-a.notion.site/4-Capital-Stack-174ea18bcd7a497ab8a739c8a5657d0e

Investors' appetite grew almost exponentially until 2022, and then dipped. This happened not only to climate tech but also to a range of other industries, owing to tightening capital markets coming to their senses after the pandemic era's boundless government spending.

At the same time, a share of debt significantly increased, as climate tech matured and many FOAK projects secured off-takes. Grant funding, not surprisingly, did not amount to a significant share, despite growing in real terms.

The statistics by the Net Zero Insights clearly show that equity capital is the only type of capital that can consistently stomach FOAKs. Still, as the examples above and some of the examples in the following sections show, this doesn’t mean that your FOAK is doomed to be 90 %+ equity financed and founders squeezed to mere percentage points of the cap table.

In the following blog posts, I will detail what type of expectations different investors have and how to manage them, so that you, as a founder, can keep your share. For now, it is important to get a firm understanding of the three main sources of finance - equity, debt, and grants. Don’t allow yourself to be overwhelmed by your CFO’s or investors’ attack with various financial instruments, such as mezzanine debt, convertible bonds, or SPAC (God forbid!). All are a mix of two or three, or a new take on just one. So, if someone presents you with a novel finance tool, ask them - is it a debt, equity, or a grant?