Non-dilutive funding is capital that does not take equity in exchange — grants, soft loans, loan guarantees, prize money, and public innovation programmes. For a MedTech startup facing the long pre-revenue runway that MDR (Regulation (EU) 2017/745) imposes, non-dilutive capital is often the cheapest money on the table. The European landscape in 2026 runs in three layers: EU-level instruments (the EIC Accelerator and Horizon Europe), national programmes in every member state, and regional grants at the province or Land level. The right sequence is almost always non-dilutive first, equity second — but the time cost of applications is real and has to be planned for.

By Felix Lenhard and Tibor Zechmeister. Last updated 10 April 2026.

TL;DR

  • Non-dilutive funding is capital that enters the company without taking equity. For MedTech startups, it is often the single cheapest form of capital available.
  • The European non-dilutive stack runs in three layers: EU-level (EIC Accelerator, Horizon Europe and related instruments), national programmes in every member state, and regional programmes at the province or Land level.
  • Specific programmes shift year to year. Every programme named in this post is framed as historically available — current windows, eligibility, and amounts must be verified directly with the administering agency before any figure enters a business plan.
  • The trade-off of non-dilutive funding is time and constraint. Applications take months, reporting is substantial, co-financing is often required, and the funded scope is usually narrower than the company's full workplan.
  • Sequencing matters more than total amount raised. Non-dilutive capital taken early, against milestones that will later make an equity round raise on better terms, is worth far more than the same euro amount taken in crisis mode later.
  • Every euro raised through non-dilutive sources is still subject to the same MDR obligations under Regulation (EU) 2017/745, Article 10. The funding source does not change the regulatory burden; it changes how you finance meeting it.

Why non-dilutive funding matters so much for MedTech

Most of the founders we have coached who failed at fundraising did not fail because they could not find investors. They failed because they reached the investor conversation too early, with too little progress, and had to give up too much of the company to raise the capital needed to finish the regulatory work. By the time the CE mark was in sight, the cap table was so crowded that the next round was no longer plausible on reasonable terms.

Non-dilutive funding is the tool that buys a founder out of that trap. A grant that funds prototype development and pre-clinical work does not sit on the cap table. A soft loan that bridges the gap between a research phase and an angel round does not dilute. A public innovation award that validates the project in front of later investors costs no equity and adds a credibility signal that the equity conversation benefits from.

This is especially valuable in MedTech because the pre-revenue window is long. The parent post in this category — funding a MedTech startup — lays out the 18–24 month pre-revenue reality in detail. For a capital-intensive regulated project, the non-dilutive layer is often the difference between raising an equity round against real milestones and raising it against a slide deck and a promise.

The rule is not "use only non-dilutive money." It is "use non-dilutive money first, for the work it can fund, and then raise equity for the work it cannot."

What counts as non-dilutive

Non-dilutive is a broader category than "grants." For planning purposes, it is worth distinguishing the main instruments, because they carry different obligations and fit different moments in the company's life.

Grants. Direct public funding of a defined project, typically with a co-financing requirement (the company contributes a share of the project budget). Grants do not have to be repaid if the project runs to plan and the reporting obligations are met. They are the purest form of non-dilutive capital.

Soft loans. Loans with concessional terms — below-market interest rates, long grace periods, partial forgiveness under certain conditions, or collateral requirements that a normal commercial bank would not accept. Soft loans appear on the balance sheet as debt but do not touch the cap table.

Loan guarantees. Public bodies backstop a commercial bank loan the company could not otherwise secure. The company signs a normal loan agreement with the bank; the public guarantor takes a share of the default risk. Useful when the company has revenue or collateral but is still considered risky by commercial lenders.

Equity-style public instruments. Some public promotional banks and innovation agencies operate instruments that look like equity but come from public sources — convertible grants, prize money that triggers on milestones, or public co-investment funds that enter alongside private investors on the same terms. These are technically dilutive but often on terms more founder-friendly than pure private capital.

Prize money and innovation awards. Competitive awards, sometimes significant in size, that combine funding with a validation signal useful in later equity rounds.

Tax credits and R&D refunds. Not strictly "funding" in the incoming-capital sense, but a meaningful reduction in the effective cost of R&D in many EU jurisdictions. Worth knowing about and claiming where eligible.

For the rest of this post, "non-dilutive" mostly means grants and soft loans, because those are the two instruments that account for the bulk of the non-dilutive capital that MedTech startups actually raise.

The EU-level layer — EIC Accelerator and Horizon Europe

Above the national layer sits the European level. The Commission runs a set of research and innovation instruments that member-state companies can apply to directly. For MedTech, two are worth knowing about at a general level.

Horizon Europe is the EU's multi-year research and innovation framework programme. It funds collaborative research projects — usually consortia of several partners across multiple member states — across a wide range of topics, including health and medical technology. For an early-stage MedTech startup, Horizon Europe is typically accessed as a partner in a larger consortium rather than as the lead applicant, and the funding covers research work rather than commercialisation.

The EIC Accelerator (European Innovation Council Accelerator) is an EU-level instrument aimed specifically at single companies with high-potential innovations. It combines grant funding and equity-style investment and has historically supported MedTech projects with meaningful capital. Selection is competitive, the application and evaluation cycles run in months, and the successful applicants have typically come to the process with significant preparation.

Both programmes exist at the general level — the detailed terms, open calls, evaluation criteria, and budget envelopes change as the framework programmes cycle and as individual calls open and close. Every specific figure, deadline, and eligibility criterion must be verified directly at the Commission's current portals before it enters a funding plan. Treat any number you read in any blog post — including this one — as historical orientation, not a guarantee of what is open today.

For dedicated spoke posts going deeper on each, see Horizon Europe for MedTech startups and EIC Accelerator for MedTech.

National programmes — the backbone of the non-dilutive stack

Underneath the EU layer sits the national layer, and this is where most non-dilutive capital for MedTech startups actually comes from. Every EU member state operates some combination of a national research funding agency, a national promotional bank or development bank, and one or more national innovation programmes targeting high-potential projects.

The names change by country. In Austria, the three main levers are FFG (the research promotion agency), AWS (the promotional bank), and BASIS-style innovation programmes — covered in detail in Austrian funding for MedTech startups. In Germany, the equivalent stack includes BMBF programmes, KfW instruments, and Land-level innovation funding — see German funding for MedTech startups when you need the detail. Similar stacks exist in the Netherlands, France, the Nordic countries, and beyond — each with its own names, forms, and cycles.

The general pattern transfers across borders even when the specific programmes do not. Every national stack we have looked at has roughly the same structure:

  • A research funding agency that pays for R&D, typically on a co-financed basis, typically with substantive reporting requirements.
  • A promotional bank that provides soft loans and loan guarantees for the transition between research and commercialisation.
  • One or more innovation-focused programmes that specifically target high-potential projects and can carry larger single-project amounts.
  • A tax-credit or R&D-refund mechanism that reduces the effective cost of qualifying work.

The working rule for any founder planning a funding sequence in a new jurisdiction is to map these four categories first, identify the current programmes in each, and then talk directly to the administering agencies before committing any specific figure to a business plan. The agencies are usually more accessible than founders expect, and a thirty-minute phone call with the right programme officer saves weeks of reading through outdated web pages.

Regional grants — the layer most founders underestimate

On top of the national layer sits a regional layer that varies by province (Bundesland in Germany and Austria, région in France, provincia in Italy, and so on). Regional programmes are smaller individually than national programmes, but they are also less crowded and more accessible, and for some project types they can be the single best layer to start with.

Regional programmes typically fund things like early prototype work, incubator residencies, co-working and lab infrastructure, applied research projects tied to a local university, and market-entry support for companies incorporated in that province. Amounts range from the tens of thousands into the low hundreds of thousands depending on the programme.

The error that most foreign founders make is treating the regional layer as a rounding error compared to the national and EU layers. It is not. For a company in its first twelve to eighteen months, a well-targeted regional grant can cover exactly the work that the company needs to do next, on faster cycles than the larger programmes, with less paperwork and less competition. The downside is that regional programmes are only accessible if your company is actually incorporated and operating in that region — the eligibility is local by design.

For founders in jurisdictions with strong regional layers — Austria, Germany, and several others — mapping the regional programmes alongside the national and EU layers should be part of the baseline funding plan, not an afterthought.

Soft loans and the loan-guarantee layer

Alongside grants, the other substantial non-dilutive instrument for MedTech is the soft-loan and loan-guarantee layer operated by national promotional banks. These are less visible to founders than grants because they look like debt and feel like banking, but for certain moments in the company's life they are better suited than grants are.

A soft loan makes sense when the company needs capital quickly, cannot wait for the multi-month grant cycle, and has a reasonable expectation of being able to service the loan out of future revenue or a planned equity round. A loan guarantee makes sense when the company has a relationship with a commercial bank but the bank requires backstopping before it will lend. An equity-style public instrument — convertible grants or public co-investment — makes sense when the project is too early for commercial banks and too far along for pure research grants.

The common feature across these instruments is that they do not take cap-table equity on founder-unfriendly terms. They either sit as debt, as guarantees, or as co-investment on terms that match whatever the company is raising from private investors. For founders who want to preserve cap-table optionality as long as possible, the soft-loan and guarantee layer is worth taking seriously, not brushed aside as "just banking."

The trade-offs — time, constraint, and reporting

Non-dilutive capital is not free. The price is paid in time and in constraint.

Time. Grant applications take weeks to write well and months to evaluate. From the decision to apply to the first euro of drawdown, six to nine months is not unusual. For a founder who needs money in six weeks, the grant route is not the route. This is exactly why mapping application windows at the start of the year — not the start of the crisis — is the first discipline of non-dilutive funding.

Scope constraint. Grants fund defined projects with defined deliverables. The work that the grant pays for has to match the work that the company would be doing anyway; if the grant's scope drifts away from the company's real priorities, the founder ends up doing two projects in parallel — the grant project to satisfy the reporting, and the real project to build the company. This is a drain that shows up months into the grant and is painful to unwind.

Co-financing. Most grants require the company to co-finance a share of the project budget, often 20 to 50 percent. The co-financing has to be real money that the company has on hand or can raise separately. Founders who miss this line end up with awarded grants they cannot draw down because they cannot match the funding.

Reporting and audit. Public money comes with public accountability. Reporting requirements continue through the life of the project and often beyond. For a small team, the reporting overhead can absorb meaningful founder or operations time. Factor that into the true cost of the grant.

Tibor's line from the MDR side applies here with full force: if you cannot afford to do the regulatory work properly, you cannot afford a MedTech project. Non-dilutive capital helps pay for the regulatory work; it does not make the work smaller.

How to sequence non-dilutive with dilutive

The sequence that works for most MedTech startups is not "non-dilutive or dilutive" — it is non-dilutive first, dilutive later, with the non-dilutive capital used to reach the milestones that make the eventual equity round raise on better terms.

A practical version of the sequence:

  1. Map the non-dilutive landscape at the start of the year — EU layer, national layer, regional layer — and build a calendar of application windows and eligibility criteria.
  2. Apply in parallel where the programmes are complementary rather than mutually exclusive. Running three applications in parallel is not three times the work of one; the core material on the project, the team, and the innovation angle is reusable.
  3. Use the first tranches of non-dilutive capital to build the prototype, run the initial usability work, define the intended purpose and classification rationale, and assemble the early regulatory plan. These are exactly the milestones that make an equity round easier to raise.
  4. Raise the angel or seed round from a position of demonstrated progress and partial non-dilutive co-funding already in place. Investors react differently to a founder who has already closed several hundred thousand euros of grant capital than to one who is raising the first euro into the company.
  5. Stack later tranches of non-dilutive capital alongside equity where the programmes allow it. Many European innovation programmes are explicitly compatible with private co-investment, and some require it.

The alternative sequence — raising equity first and then trying to backfill with grants — usually fails on the grant side, because many programmes exclude work that is already being funded by private investors or that has already started at the time of the application. Order matters.

For the equity side of the stack once non-dilutive is in motion, see venture capital for MedTech in Europe and the parent post funding a MedTech startup.

The Subtract to Ship angle on non-dilutive funding

The Subtract to Ship framework applied to non-dilutive funding is not "apply to everything." It is "apply to the programmes whose funded scope matches the work you would be doing anyway, and skip the ones whose scope would pull you away from the real project."

The subtraction discipline here has two sides. On the opportunity side, it says: every grant, every soft loan, every tax credit that funds real MedTech work is worth considering seriously, because the cost of giving up equity for the same euro amount later is far higher than founders assume in the moment. On the constraint side, it says: not every grant is a good grant. A small award with heavy reporting obligations and a scope mismatch drains more time than it creates, and the right answer is to skip it and pursue a better-fitting programme.

The test for each possible application is the same test the framework applies everywhere: does the activity — in this case, the grant application and the subsequent project — trace to real MDR or commercial progress the company needs to make anyway? If yes, apply. If no, skip, and spend the time on something that does.

Reality Check — Where do you stand?

  1. Do you have a current-year calendar of the non-dilutive programmes you plausibly qualify for, at EU, national, and regional level?
  2. Have you verified current programme terms directly with the administering agencies, or are you working from figures in blog posts, slide decks, and hearsay?
  3. Does your financial model include the co-financing share for every grant you are planning to apply for, as real money you actually have?
  4. Have you mapped the reporting burden of each grant you are considering, and is that burden realistic for the size of your team?
  5. If your non-dilutive applications all failed, would your equity round be raising to fund genuine R&D or to fund work that should have been grant-fundable?
  6. Is your sequence non-dilutive first, dilutive second — or have you already taken equity in a way that now blocks some of the grants you could have raised?
  7. Does your funded scope match your real project scope, or are you about to run two projects in parallel?

Frequently Asked Questions

What is non-dilutive funding? Non-dilutive funding is capital that enters a company without taking equity in exchange. The main instruments are grants, soft loans, loan guarantees, public innovation awards, equity-style public instruments on founder-friendly terms, and R&D tax credits. For MedTech startups facing a long pre-revenue runway, non-dilutive capital is often the cheapest form of funding available.

Is non-dilutive funding better than equity? Cheaper in cap-table terms, but slower and more constrained. The right answer is not "one or the other" — it is non-dilutive first for the work it can fund, equity later for the work it cannot. Using non-dilutive capital to reach milestones that make the equity round raise on better terms is the most common successful pattern across the MedTech startups we have coached.

What are the main European non-dilutive programmes for MedTech? At the EU level, Horizon Europe and the EIC Accelerator are the two most visible instruments, though they operate very differently — Horizon Europe funds collaborative research consortia, and the EIC Accelerator funds single high-potential companies. At the national level, every EU member state operates its own research funding agency, promotional bank, and innovation programmes. At the regional level, province or Land programmes add a third layer. Specific programmes change — verify current terms directly with each administering agency.

How long do grant applications take? Plan months, not weeks. From the decision to apply to the first euro of drawdown, six to nine months is a reasonable expectation for most substantive grants. Reporting obligations then continue through the life of the project. This is why mapping application windows at the start of the year is the first discipline — a grant that arrives six months late does not save the company.

Can I take non-dilutive funding and venture capital at the same time? In most cases, yes. Many European innovation programmes are explicitly compatible with private co-investment, and some actively require it. The constraint is usually on the specific scope of work being funded: a grant will not pay for work that is already being funded by a private investor under the same project. Stacking is possible and common when the scopes are distinct.

Does non-dilutive funding help with MDR certification? Indirectly. Most non-dilutive programmes fund R&D, prototype development, and applied research — the work that feeds into the technical file, clinical evaluation, and usability documentation that Regulation (EU) 2017/745, Article 10, requires manufacturers to assemble. Most programmes do not fund Notified Body fees directly. Plan the regulatory budget alongside the grant budget, not assuming the grants will cover it.

Sources

  1. Regulation (EU) 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices. Article 10 (manufacturer obligations). Official Journal L 117, 5.5.2017.
  2. European Innovation Council — EIC Accelerator programme information. https://eic.ec.europa.eu — verify current programme terms, open calls, and eligibility directly with the Commission before relying on specific figures.
  3. Horizon Europe — EU research and innovation framework programme. https://research-and-innovation.ec.europa.eu — verify current calls, consortium rules, and funding envelopes directly with the Commission before relying on specific figures.
  4. National research funding agencies, national promotional banks, and regional innovation programmes across EU member states — verify current programme terms directly with each administering agency before relying on specific figures.

Note on current-terms verification: Every programme name, instrument, and amount referenced in this post is framed as historically available for orientation. Non-dilutive funding windows change, eligibility criteria shift, and programme names are replaced under successor initiatives. Before any specific figure or programme from this post enters a business plan, pitch deck, or board document, confirm the current terms directly with the administering agency. This is a working rule, not a disclaimer.

This post is part of the Funding, Business Models & Reimbursement series in the Subtract to Ship: MDR blog. Authored by Felix Lenhard and Tibor Zechmeister. The non-dilutive landscape is wide, the programmes shift year to year, and the sequencing decisions that matter most are the ones made before the first application is written — when the specific shape of your project, your jurisdiction, and your current window exceeds what a landscape post can cover, a sparring partner who has walked founders through the stack from first application to first drawdown is the shortest path to a funding plan you can actually run.