I run a technology or software business. What are my options?
SBIR/STTR awards, R&D tax credits, SAFEs, angels, venture capital, revenue-based finance and venture debt, cheapest first.
Software and technology companies often spend heavily on engineering and product development before they have steady sales or physical assets a bank will take as collateral. Which routes fit depends on whether you are building a high-growth company that plans to raise equity rounds, or a recurring-revenue business that wants to keep its ownership.
- Non-dilutive research money and tax credits: if your project addresses a research topic published by one of 11 federal agencies, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) awards provide up to $335,937 in Phase I and up to $2,239,578 in Phase II without an SBA waiver (limits as of October 16, 2026), with nothing to repay and no equity given up. Separately, a qualified small business (under $5 million in gross receipts for the year and no gross receipts more than five years back) can elect on Form 6765 to apply up to $500,000 a year of the federal research credit against its employer payroll taxes, and under section 174A domestic research and experimental spending can again be deducted in the year it is incurred for tax years beginning after December 31, 2024.
- SAFEs, angels and venture capital: early-stage technology companies commonly raise from angel investors and seed funds using a Simple Agreement for Future Equity (SAFE) or convertible note, and later through priced preferred-stock rounds under Regulation D (usually Rule 506(b) or 506(c), with a Form D filed with the SEC within 15 days of the first sale).
- Why investors ask for a C corporation: only a domestic C corporation can issue qualified small business stock (QSBS) under section 1202 of the tax code. Under the 2025 budget law (Public Law 119-21), for qualifying stock acquired after July 4, 2025, an eligible investor can exclude 50% of the gain after holding for 3 years, 75% after 4 years, and 100% after 5 years, up to a $15 million per-issuer cap (or 10 times basis, if greater) while the company's gross assets do not exceed $75 million. LLCs and S corporations cannot issue QSBS.
- Borrowing against recurring revenue or a VC round: once a software business has predictable subscription revenue, annual upfront billing or revenue-based finance can fund growth without selling shares. Companies that have already raised institutional venture capital sometimes add venture debt alongside a round to extend their runway between equity raises; venture lenders typically take a security interest and warrants for a small share of equity.
13 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.- Own cash and no-cost
Customer prepayments, deposits and pre-orders
Ask customers to pay some or all of the price before you deliver. The cash comes in before your costs go out, so you need to borrow less, but until you deliver you owe customers the goods or their money back.
Days - 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 - Crowdfunding and community finance
Rewards crowdfunding
Raise money online from many backers who get a reward, often the product itself, instead of a share of the business. No repayment or dilution, but you must deliver what you promised, and the money is usually taxable income.
Months
- Own cash and no-cost
- L3
Specialist secured debt
Borrowing secured on specific assets such as invoices or inventory, with more fees and conditions than mainstream debt. - L4
Expensive or fast
Quick to arrange, often unsecured, and usually the most expensive way to borrow. - 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.- Crowdfunding and community finance
Regulation Crowdfunding
Raise up to $5 million in 12 months from the public, including people who are not wealthy investors, by selling shares, debt or other securities through one SEC-registered online platform.
MonthsUp to $5mLoans, or shares if you choose - 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
- Crowdfunding and community finance
- 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
Worth knowing
- Keep project-by-project records of technical uncertainties, experiments and engineering time from the start; from tax years beginning after 2025, Form 6765 requires business-component reporting (Section G) for most research credit claims.
- The payroll tax election for the research credit must be made on an original income tax return filed on time (including extensions), not on an amended return.
- Before signing a second or third SAFE, run the numbers in our SAFE and convertible note calculator so you can see how much of the company will convert at your next priced round.
- Make sure every founder and contractor has signed an agreement assigning their intellectual property to the company before you talk to institutional investors or venture lenders.
Sources
- SBIR.gov: About SBIR and STTR (agencies and award limits) · 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: Early-stage investors (friends and family, angels, venture capital) · checked October 17, 2026
- Public Law 119-21 (July 4, 2025), section 70431: expansion of the qualified small business stock exclusion · checked October 17, 2026
- OCC Bulletin 2025-45: Commercial Lending, Venture Loans to Companies in an Early, Expansion, or Late Stage of Corporate Development (December 5, 2025) · checked October 20, 2026
Facts about each route are sourced on its own page.