From University Spin-Out to Series A

Problem

Our first company started as many do: an idea from a university laboratory with a clinical expert and a technical founder. The challenge—how to get enough capital to test feasibility and establish proof-of-concept without giving away crucial equity?

Approach

We targeted NSF SBIR Phase I to finance early technical milestones and market validation. The award enabled the team to hire the first engineer, build initial prototypes for testing, and validate the market opportunity with an initial $225k in non-dilutive funding. Leveraging the SBIR program allowed focused learning and progress without immediate dilution.

Outcome

The company completed a successful Phase I and parlayed those data into a Phase II award of $1.6M. This non-dilutive capital allowed the company to:

Complete preclinical validation

File initial patent applications

Build a functional prototype ready for pilot studies

Establish early commercial partnerships

With strong technical validation and de-risked product development, the company successfully raised a Series A round with significantly better terms than would have been possible pre-SBIR. The equity preservation enabled by federal grants meant founders and early employees retained meaningful ownership.

Key Takeaways

Non-dilutive funding changes negotiation dynamics: Investors respect teams that have secured competitive federal grants. It signals technical credibility and reduces perceived risk.

SBIR milestones align with VC expectations: Phase I proves feasibility, Phase II demonstrates commercial viability—exactly what Series A investors want to see.

Strategic timing matters: We submitted Phase I early in the company's life, allowing 18+ months of funded development before needing venture capital.

Leverage begets leverage: The NSF grant gave us runway to be selective with investors and negotiate from strength rather than desperation.

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Want similar results for your medtech startup? Non-dilutive funding isn't just about the capital—it's about the optionality it creates. Start your inquiry to discuss how SBIR grants can accelerate your path to Series A.