I run a life sciences, biotech or medtech business. What are my options?
SBIR and STTR awards, R&D payroll tax credits, specialist equity rounds, venture debt and public markets, cheapest first.
Biotech, pharmaceutical, diagnostics and medical-device companies often face years of laboratory work, pre-clinical studies, clinical trials and FDA review before they can sell a product. Without customer revenue, ordinary bank loans are rarely an option; most companies combine federal research awards and tax credits with staged equity rounds.
- SBIR and STTR research awards: 11 federal agencies — including the Department of Health and Human Services (which includes the National Institutes of Health) and the National Science Foundation — run SBIR or STTR competitions. As of October 16, 2026, an agency may award up to $335,937 in Phase I and up to $2,239,578 in Phase II without an SBA waiver, with no repayment and no dilution. Under STTR, the company partners formally with a US research institution (such as a university or nonprofit research organization), with the small business performing at least 40% of the work and the research institution at least 30% under a written intellectual-property agreement.
- R&D tax credit against payroll tax: while a company is pre-revenue or has gross receipts under $5 million (and no gross receipts more than five years back), it can elect on Form 6765 to apply up to $500,000 a year of its federal research credit against employer payroll taxes. Domestic research and experimental costs can also be deducted in the year incurred for tax years beginning after December 31, 2024 (section 174A).
- Specialist equity, corporate venture and public markets: clinical and regulatory milestones take more capital than awards alone cover, so life sciences companies raise in stages from specialist angels, venture capital funds and pharmaceutical or medtech corporate venture arms. Because late-stage trials are expensive, biotech companies sometimes go public on Nasdaq or the NYSE earlier than companies in other industries, often using the SEC's scaled disclosure rules for emerging growth companies.
11 routes to look at, cheapest first
Compare the first 4 side by side- L0
Free or nearly free
Little or no cash cost, though most take time and admin. Some bring money in, and a few have small fees.- Grants, tax credits and prizes
Prize competitions and accelerators
Cash prizes from federal agencies and others for solving a set problem, and accelerator or incubator programs that give coaching, contacts and sometimes money. Prizes take no ownership; many accelerators do, so read the terms.
6 months or more - Grants, tax credits and prizes
Research and development tax credit
A federal tax credit for qualifying research spending. Young companies with little or no income tax to pay can use up to $500,000 a year of it against their payroll taxes instead.
Months - Grants, tax credits and prizes
SBIR and STTR research awards
Federal research and development funding for small US businesses, won in competitions run by 11 federal agencies. Nothing to repay and no ownership given up, but your project must match an agency's published topic.
MonthsUp to $2.2m
- Grants, tax credits and prizes
- L3
Specialist secured debt
Borrowing secured on specific assets such as invoices or inventory, with more fees and conditions than mainstream debt. - Equity rungs. These routes cost no interest, but you give up part of the ownership and control of your business. They are ranked by how much you give up, not by a made-up interest rate. Over time, equity can be the most expensive money of all.E1
Light dilution
You sell a small share of the company, usually to many small investors or people you know, and keep control of how it is run.- Hybrid instruments
Convertible notes
A loan from investors that usually turns into shares at your next funding round. It puts off agreeing a valuation, but until it converts it is real debt, with interest and a repayment date.
WeeksMay give up shares - Hybrid instruments
SAFEs (simple agreements for future equity)
An investor pays now for the right to shares later, usually when the company raises a priced round. Quick and cheap to agree, with no interest or repayment date, but it is a promise of future ownership, and its terms decide how much of the company you give up.
WeeksGives up shares
- Hybrid instruments
- E2
Significant dilution and investor rights
Investors take a meaningful stake and usually get rights such as a board seat, a veto over big decisions, or a preferred return.- Private equity investment
Angel investors
Wealthy individuals, alone or in groups, buy a stake in an early-stage company and often bring advice and contacts. It is a securities offering, usually made under the SEC's Regulation D, mostly to accredited investors.
MonthsGives up shares - Private equity investment
Corporate venture capital
A large company invests its own money in a smaller one whose product or technology matters to its business, in return for shares. You can gain a customer, a partner and a route to market, but you share plans with a company that may compete with you or want to buy you.
6 months or moreGives up shares - Private equity investment
Venture capital
Investment from venture capital funds in fast-growing companies, in return for shares (usually preferred stock) and a say in how the company is run. Large sums for growth, but only for a few businesses, and at the cost of ownership and control.
6 months or moreGives up shares
- Private equity investment
- E3
Major dilution, loss of control or public obligations
Investors take control, or the company becomes publicly traded and takes on ongoing public rules, costs and scrutiny.- Public and quasi-public markets
Regulation A offerings
A public offering of up to $75 million in 12 months that the SEC must qualify before any sale, lighter than a full registered IPO. Anyone can invest, with limits on investors who are not accredited in the larger tier.
6 months or moreUp to $75mLoans, or shares if you choose - Public and quasi-public markets
Stock exchange listing (IPO, direct listing or SPAC)
Become a public company by listing your shares on a national securities exchange such as the New York Stock Exchange or Nasdaq, through an initial public offering, a direct listing or a merger with a SPAC. Access to large amounts of capital, with ongoing public reporting, costs and scrutiny.
6 months or moreGives up shares
- Public and quasi-public markets
Worth knowing
- If you are spinning out of a university or hospital lab, agree the license and intellectual-property terms in writing early; both STTR awards and venture investors require clear rules on who owns and can commercialize the IP.
- Register on SAM.gov well before a solicitation closes — you need a Unique Entity ID to apply for SBIR or STTR awards, and agency review cycles take months.
- Note the SBIR/STTR ownership rules (13 CFR 121.702): the business must have 500 or fewer employees (counting affiliates) and be more than 50% owned and controlled by US citizens or permanent residents, though some SBIR agencies also accept businesses majority-owned by multiple venture capital, hedge fund or private equity firms.
- Specialized laboratory equipment with resale value can sometimes be leased or financed once you have grant funding or equity runway in place, preserving cash for trials and staff.
Sources
- SBIR.gov: About SBIR and STTR (agencies and award limits) · checked October 17, 2026
- SBIR.gov: How to apply (phases and eligibility) · checked October 17, 2026
- 13 CFR 121.702: size and eligibility standards for the SBIR and STTR programs · checked October 17, 2026
- IRS: Research credit against payroll tax for small businesses · checked October 17, 2026
- IRS: Instructions for Form 6765 (revised December 2025) · checked October 17, 2026
- SEC: Emerging growth companies · checked October 17, 2026
Facts about each route are sourced on its own page.