Exits and alternatives
Grants and non-dilutive funding
Public and research money that does not buy shares, and when the paperwork is worth it.
Non-dilutive funding does not buy shares. Grants, research credits and paid public programs put cash in without adding a line to the cap table. They are slow and scoped. They shine when the work is research-shaped and commercial revenue is years away — exactly where a classic SaaS venture timeline breaks.
The big idea
A research lab applies for a government contract to build a prototype. The agency pays for the work and does not take common stock. That is the picture. It breaks when you treat the grant like free venture money: the scope, reporting and timeline are the product the funder bought.
Common US-centric examples (programs change; verify current rules):
- SBIR / STTR and similar small-business research grants for deep tech, biotech and defense-adjacent work
- R&D tax credits that refund or offset tax on qualifying research spend
- University, foundation or government innovation grants
- Startup-studio or corporate pilot budgets that pay for prototypes
Tip
Treat grant writing as a pipeline skill, not a lottery ticket. One full-time person hunting non-dilutive capital can be rational for a hardware or biotech team. It is usually wasted motion for a pure consumer social app.
Walking through it
A two-founder hardware team needs 18 months of bench work before a customer can pay. A $1.2M SBIR-style grant covers salaries and materials for that window. Ownership stays 100% common plus an option pool. The cost is six months of proposal writing, milestone reports, and a scope that cannot quietly become a consumer app.
The same $1.2M as seed equity might have been faster to close, and would have sold several percent of the company plus a growth story the science cannot support yet.
Common mistakes
- Chasing grants for a consumer or pure SaaS idea. Reviewers fund research-shaped work. You will spend months on a no.
- Ignoring scope lock. Money that cannot follow a pivot is expensive if you are still searching.
- Treating one application as the plan. Grants are a pipeline. One person, many submissions, current rules each time.
Check yourself
Why are grants a better match for biotech than for a consumer social app?
The work is research-shaped, revenue is years away, and venture timelines break — grants pay for that gap without dilution.
A grant is "free" in equity terms. What do you still pay?
Time, paperwork, milestone reporting, and a locked scope.
Key takeaways
- Non-dilutive money does not buy shares; grants and credits are the usual forms.
- They fit long research cycles, not fast consumer experiments.
- Run them as a pipeline with current rules, not as a single lottery ticket.
Further learning
Next, customer funding — paid pilots and pre-sales that also avoid dilution.
Related
Alternatives to venture capital
A map of bootstrap, RBF, grants, customer funding and debt — and how to pick the game you are playing.
Customer funding
Paid pilots, services wedges, rewards crowdfunding and community rounds that put cash in before a priced raise.
Bootstrapping
Growing from revenue and savings instead of institutional equity, and what you keep and give up.