What is Grant?
In business, a grant is non-dilutive funding awarded by government agencies, foundations, or organizations that does not require repayment or equity, typically tied to specific purposes like research, innovation, or social impact.
Grant Types and Strategies
Government grants for startups span a wide range of programs. In the US, SBIR and STTR programs provide up to $2M+ in non-dilutive funding for early-stage technology development. In Europe, the European Innovation Council Accelerator offers up to €17.5M in combined grants and equity. National programs in the UK (Innovate UK), Germany (BMWi), France (BPI), Israel (Israel Innovation Authority), and Singapore (Enterprise Singapore) provide similar support for domestic innovators.
Successfully winning grants requires understanding the evaluation criteria and aligning proposals accordingly. Government innovation grants typically prioritize technical novelty, commercial viability, additionality (would this work happen without the grant?), and economic impact (how many jobs, how much GDP?). Startups with strong technical co-founders and research institution partnerships tend to be most competitive for grants. Grant writing is a specialized skill: many successful grant-seeking startups hire dedicated grant writers to improve win rates.
Grant Types and Tax Treatment
Common grant types in startup contexts include: restricted stock grants (RSGs/RSAs: outright share grants subject to vesting), restricted stock units (RSUs: promises to issue shares upon vesting), incentive stock options (ISOs: tax-favored options for employees), non-qualified stock options (NSOs: general-purpose options), stock appreciation rights (SARs: phantom options paying out based on appreciation), and performance shares (vesting tied to performance milestones). Each instrument has different tax timing, accounting treatment, and administrative complexity. Startups typically use restricted stock for founders, ISOs/NSOs for employees, and RSUs at later stages when option exercises become impractical.
References
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