Non-Dilutive Funding
Also known as: Grants, Non-Equity Funding
Capital provided to a company that does not require the company to give up equity or ownership.
Full Definition
Non-dilutive funding sources include federal grants (SBIR, STTR), foundation grants, innovation competitions, and strategic partnerships with milestone payments. For early-stage healthcare innovators, non-dilutive funding is especially valuable because it allows development to progress — including clinical studies and regulatory preparation — without the equity dilution associated with venture capital at early valuations. A well-structured non-dilutive funding strategy can significantly improve terms in subsequent equity rounds.
Example
A diagnostic startup funds its Phase I clinical study with a $250K NIH SBIR grant and a $100K foundation grant, avoiding equity dilution while generating the clinical data needed to raise a seed round at a higher valuation.