by Akela Consulting
If you’re a founder, you’ve probably felt the pressure of raising money while trying to hold onto your vision and your company. Traditional funding—like venture capital or angel investment—is great, but it comes at a cost: equity. Every check you cash means giving up a piece of your business.
But here’s the good news: non-dilutive funding exists, and it could be a game-changer for your startup.
Programs like SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) offer federal grants and contracts to fund innovative projects. And the best part? They don’t take any equity. Zero. Nada. Instead, these programs give you the freedom to grow your business while keeping ownership intact—and sometimes, the funding agency even becomes a future customer.
In this article, we’ll dive into how SBIR grants and other federal government grant programs work, why they exist, and how you can apply. Whether you’re new to the grant writing process or looking for ways to fund your next big idea, we’ve got you covered.
What Is a Federal Grant?
Federal grants and contracts are funds awarded by government agencies to support specific projects and initiatives. Unlike loans, grants don’t need to be repaid, and unlike venture capital investments, they don’t require giving up equity. They’re designed to fuel innovation, support research, and drive advancements in technology, health, energy, defense, and more.
Programs like SBIR and STTR stand out because they specifically target small businesses working on cutting-edge ideas. These grants are sometimes called "America’s Seed Fund" because they help startups and small businesses develop technologies that can have a big impact on the economy, society, and even national security.
The SBIR and STTR Programs: A Quick Overview
The SBIR and STTR programs are two of the most significant sources of non-dilutive funding for startups in the United States. Here's a quick breakdown:
SBIR (Small Business Innovation Research)
Focuses on funding small businesses to research and develop innovative technologies with commercial potential.
STTR (Small Business Technology Transfer)
Similar to SBIR but requires collaboration with a nonprofit research institution, like a university or lab.
These programs span multiple government agencies, including:
NSF (National Science Foundation)
Fostering research across STEM disciplines.
NIH (National Institutes of Health)
Supporting health-related innovations.
DoD (Department of Defense)
Advancing dual-use technologies for defense and commercial markets.
DoE (Department of Energy)
Stimulating new technologies that address energy needs.
Other key federal agencies, such as NASA, the Department of Homeland Security (DHS), the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the National Institute of Standards and Technology (NIST), the National Oceanic and Atmospheric Administration (NOAA), and the Department of Education, actively support small businesses through their own SBIR and STTR programs.
Why Does the Government Offer Non-Dilutive Funding?
It might seem too good to be true—why would the government give money without expecting equity or repayment? The answer lies in the bigger picture. These programs aren’t just about funding innovation; they’re about solving national challenges, staying ahead in technology, and boosting the economy.
For agencies like the DoD, funding dual-use technologies (with both military and commercial applications) ensures they have access to cutting-edge solutions. For the NIH, it’s about improving public health. The government gets what it needs, and startups get what they need—capital, credibility, and often a future customer.
SBIR Award Sizes: Funding Your Startup in Phases
One of the standout features of the SBIR program is how it structures funding into distinct phases, each tailored to a specific stage of your research and development.
Phase I
This is the starting line. Phase I awards are typically smaller (around $150,000 to $300,000) and are meant to support feasibility studies—essentially, testing whether your idea is worth pursuing further. It’s about proving your concept and demonstrating its potential.
Phase II
If your Phase I project reaches the R&D milestones you set out to do, then you can apply for Phase II funding. These awards are significantly larger— typically between $1-$2 million—and are designed to support the continued development and prototyping of your technology.
Phase III
But here’s where things get really exciting: Phase III. While technically not part of the SBIR funding structure, Phase III refers to the commercialization phase, often funded through a sole-source contract with the government agency that backed your earlier research. This means you could have a direct pathway to selling your product or service without going through competitive bidding.
Open Topics vs. Specific Topics: What’s the Difference?
When applying for SBIR or STTR funding, you’ll often encounter two types of grant
opportunities:
Open Topics: These are broad and flexible, allowing you to propose innovative solutions to a wide range of challenges. For example, AFWERX Open Topics invite ideas that could solve Air Force needs, even if the exact problem hasn’t been defined yet. Whereas, the NSF SBIR program essentially offers an open-topic for high-risk innovation with a potential high market impact.
Specific Topics: These are targeted calls for solutions to clearly defined problems. Think of them as a wishlist from the funding agency. For example, the Department of Energy may solicit specific energy efficiency technologies, security of the electrical grid, or sustainability tech, whereas NASA may solicit next generation propulsion technology etc.
Both types have their advantages, and the right choice for you probably includes identifying and applying to a combination of open and specific topics.
Choosing a SBIR Grant Writer or SBIR Consultant
Let’s face it: writing a winning grant proposal is no small feat. From understanding
eligibility requirements to crafting a compelling narrative, the process can be overwhelming. That’s where professional SBIR consultants come in.
A good grant consultant will:
Help identify the best opportunities for your business.
Guide you through the SBIR grant application process.
Ensure your proposal aligns with the funding agency’s goals.
Help you apply to a volume of programs to increase your likelihood of receiving funding.
Whether you’re a beginner or a seasoned founder, working with an expert can make all the difference.
Key Deadlines and the Application Process
The SBIR/STTR programs follow a predictable schedule, with solicitations released throughout the year.
For example:
AFWERX Open Topics are a great opportunity for tech startups.
Agencies like the NSF, Dept. of Energy, and NIH have multiple cycles annually on a set schedule.
The DoD publishes multiple annual cycles on schedule as well as monthly releases of out-of-cycle opportunities.
The good news? There’s always a good time to apply. The key is staying organized, understanding the timeline, and managing the grant application process effectively.
Final Thoughts: Why Non-Dilutive Funding Matters
Non-dilutive funding is more than just "free money." It’s a way to grow your business on your terms, keep control of your company, and build relationships with agencies that could become your biggest customers. Programs like SBIR and STTR are designed to help startups like yours turn big ideas into reality—and with the right support, you can make it happen.
If you’re ready to explore non-dilutive funding for your startup, consider working with an experienced SBIR grant writer or consultant to maximize your chances of success.
Talk to Akela today to explore SBIR programs for you and your company.
