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When You Can't Raise · Part 2 of 3
When You Can't Raise
- How AgTech Startups Grow When Venture Funding Dries Up
- What Non-Dilutive Funding Is Available to AgTech Startups? (current)
- When Should a Startup Cut Costs Instead of Chasing Revenue?
Ag and food tech startups can access non-dilutive capital through federal R&D grants, USDA program grants, commodity check-off and FFAR matching grants, asset and equipment financing, revenue-based financing, and customer-funded development. USDA SBIR awards $125,000 to $175,000 in Phase I and up to $650,000 in Phase II, while NSF SBIR goes to $305,000 and $1.25 million respectively. The constraint in 2026 is not availability, it is timing: federal grant calendars were disrupted by a six-month SBIR authorization lapse and a 43-day government shutdown, so money that would normally arrive in seven to thirteen months may take longer. Non-dilutive capital is a decision to make while you still have runway, not after it is gone.
Why consider non-dilutive capital at all?
Because the equity market is not available on the schedule most plans assumed. PitchBook counted 263 agtech deals in the first half of 2026, and Part 1 of this series covers what that means for companies that had planned to raise.
There is a second reason that gets less attention. Your customers are also short of cash. USDA forecasts farm sector working capital down 9.2% in 2026, with farm debt at a record $624.7 billion. Non-dilutive capital that lets you keep building through a stretch when growers are deferring purchases is doing a different job than bridging to a round, and it is the more realistic job in this market.
Debt financing reached 18.2% of total agrifoodtech funding in 2025, the highest share in a decade, according to AgFunder's Global AgriFoodTech Investment Report. One note on the data before the point: AgFunder and PitchBook define this sector differently and their totals are not directly comparable, so treat the share as a trend rather than a precise measurement.
Read the number carefully, because it cuts both ways. A rising debt share in a falling equity market can mean companies are diversifying their capital intelligently, and it can also mean companies that cannot raise equity are adding obligations shortly before they fail. Both are happening right now.
Which one you are doing comes down to one test. Non-dilutive capital that funds work which produces revenue is a good trade. Non-dilutive capital that only extends the calendar is a worse version of the problem you already have, because now it has a claim on your assets.
Which non-dilutive instrument fits your situation?
Part 1 of this series sets out four situations where pushing for revenue is the wrong call. Three of them are capital problems, and they do not point at the same instrument.
You cannot legally sell yet. You are funding a regulatory and scientific path. Federal R&D grants exist for precisely this work: USDA SBIR if the open question is agronomic or biological, NSF SBIR if it is an engineering or computing problem, FFAR if you already have a co-funding partner. The multi-year timelines on these programs are tolerable here, because your regulatory timeline is measured in years too.
Your gross margin is negative at the volume you can finance. The work is cost-down engineering, not selling. Grants can fund it and so can the customer whose own unit price depends on it. Conservation Innovation Grants apply if the cost reduction shows up as a measurable resource-efficiency outcome. Asset financing applies if the real problem is that you are buying deployable units with equity dollars.
Technical risk is unresolved and your sales cycle is longer than your runway. SBIR is the instrument. The twelve months you have are better spent answering the technical question than standing up a commercial function you cannot yet feed. A company that spends its final year hiring salespeople instead ends up with two discounted deals, a reference price it cannot repeat, and the same unanswered question it started with.
The fourth situation, a buying window that has already closed, is a runway problem rather than a capital-structure one. Part 3 covers that one.
If none of the four describes you, revenue is available to you and it is the better path. Non-dilutive capital is still worth having, but in that case it supplements a commercial plan rather than replacing one. Reading the list below and applying for whatever happens to be open is how founders lose a year.
What federal R&D grants are available to ag and food tech companies?
Two programs matter most, and the more useful one is often not the obvious one.
USDA SBIR and STTR. Phase I awards run $125,000 to $175,000 over eight months for SBIR and twelve for STTR. Phase II awards up to $600,000 over 24 months, or $650,000 with the Technical and Business Assistance supplement, and is open only to prior Phase I awardees. USDA funds ten topic areas including plant production, animal production, food science and nutrition, aquaculture, biofuels, and two separate engineering and biology tracks. There is no cost-share requirement.
The odds are better than most founders assume. USDA's FY25 Phase II round funded roughly 45% of applications per topic area against a total of $22.75 million, within an annual USDA SBIR budget of about $42 million.
Two things about SBIR that cost ag founders a full cycle when they learn them late.
The first is scope. SBIR funds research, and the restriction is codified in federal regulation, not left to reviewer discretion. 7 CFR 3403.7 states that proposals "must cover only scientific/technological research activities" and that a company "must not propose product development, technical assistance, demonstration projects, classified research, or patent applications." USDA's own solicitation goes further, excluding large equipment purchases, financial assistance to start a company, and, in its words, efforts "aligned with developing proven concepts for commercial markets or scaling up previously developed prototypes," which it describes as the responsibility of the private sector. If your remaining risk is commercial rather than scientific, SBIR is not the instrument, and a proposal that reads like a product plan will be declined on scope before anyone evaluates the technology.
The second is time. Because Phase II is restricted to prior Phase I awardees and each phase runs on its own annual solicitation cycle, the path from a first Phase I application to Phase II money in the bank is measured in years, not months. Phase I alone runs eight to twelve months of performance. SBIR is a way to fund multi-year research. It is not a way to solve a runway problem you have this season.
NSF SBIR and STTR. Frequently overlooked by ag companies, and often the better fit for anything with a hardware, robotics, sensing, or AI core. NSF Phase I goes up to $305,000 and Phase II up to $1.25 million, with a combined Fast-Track option to $1,555,000. That is roughly double what USDA offers. If your technical thesis is a computer science or engineering problem applied to agriculture, NSF may be the more natural reviewer.
Both programs require you to be a for-profit small business with 500 or fewer employees, majority owned by US citizens or permanent residents, with the principal investigator primarily employed by the company. SBIR requires your company to perform at least 66.67% of the work in Phase I and 50% in Phase II. STTR requires a formal partnership with a university or nonprofit research institution performing 30% to 60% of the work.
What USDA program grants can ag companies use?
Separate from R&D, and less competitive because fewer technology companies apply.
Conservation Innovation Grants total $65 million in FY2026, and the On-Farm Trials component carries an unusually large ceiling of $5 million per award with no match required. For any company whose product has a measurable conservation or resource-efficiency outcome, this is the largest single non-dilutive award available in agriculture and it is underworked by startups.
Value-Added Producer Grants are smaller and got smaller this year. FY2026 caps were cut to $50,000 for planning grants, down from $75,000, and $200,000 for working capital, down from $250,000, against roughly $25 million nationally with a 1:1 match required.
State agriculture and economic development programs are worth a morning of research. They are smaller, considerably less competitive, and most technology companies never look.
For a faster start than searching state by state, Grantable's Agriculture Grants (2026) database aggregates federal, state, and foundation agriculture opportunities in one searchable place, with filters for grant type, state, funding amount, and eligibility.
What about check-off dollars and FFAR?
These two sit outside the federal grant system and get overlooked, particularly by companies whose leadership came from outside agriculture.
Commodity check-off and state commodity board funding. Check-off programs collect assessments from producers and direct a portion to production research, administered under USDA Agricultural Marketing Service oversight. The boards' own materials describe universities and research institutions as the primary channel, and check-off dollars carry real legal restrictions on use, so this is not a general-purpose funding source. But for-profit companies do receive this money directly. The United Soybean Board awarded InnerPlant $300,000 to work on satellite detection of stressed crops, and the National Corn Growers Association has awarded companies through its Consider Corn Challenge. The realistic route is an innovation challenge or a targeted research partnership rather than an open application, which means the work is relationship building with your state and national boards well before there is a solicitation to answer.
Worth noting what you also get, which is often worth more than the check. A commodity board relationship puts you in front of the grower leadership of your target market, and a board-funded trial carries a credibility with growers that a self-funded one does not.
The Foundation for Food and Agriculture Research. FFAR was created by the 2014 Farm Bill to run public-private matching grants, and for-profit companies are explicitly eligible. Its applicant guidance states that it welcomes applications from "nonprofit and for-profit organizations" alongside universities. Program sizes range widely: the New Innovator award runs up to $150,000 a year for three years with no match required, Rapid Outcomes from Agricultural Research goes to $250,000, Seeding Solutions runs $300,000 to $1 million, and the Growing Impact Award requests run $300,000 to $2 million from FFAR against a minimum 1:1 match.
The match is the thing to understand before you apply. FFAR's standard model requires a dollar-for-dollar non-federal match, with at least half of that in cash. That makes FFAR a strong instrument if you already have a corporate partner, a commodity board, or a customer willing to co-fund, and a poor one if you are looking for capital you do not have to source elsewhere first. Check each program's own requirements, since some carry no match at all.
One correction worth making, because founders repeat it. Programs frequently described as prize money are not always non-dilutive. Grow-NY takes a small equity interest from its winners, and AgLaunch's accelerator funding is structured as a convertible instrument. Radicle Growth is a venture fund. That does not make them bad capital, and for many companies they are excellent capital. It does mean they belong in a different column than a grant, and calling them non-dilutive in front of an investor is a tell.
Are USDA grants still operating normally in 2026?
No, and any plan that assumes otherwise is fragile.
Three disruptions hit in sequence. SBIR and STTR authority lapsed government-wide for roughly six months, from September 30, 2025 until reauthorization in April 2026, extending the programs through September 30, 2031. A 43-day federal government shutdown ended November 12, 2025. And an early-2025 freeze affected more than $6 billion in USDA conservation and rural development funding, with litigation over cancelled programs continuing.
The practical effect is that solicitation calendars compressed and shifted. In a normal year, USDA Phase I solicitations release in June or July with applications due in the fall and money arriving the following summer, which is roughly seven to thirteen months from solicitation to funds depending on the phase. The FY2026 cycle does not reliably follow that pattern.
Check current dates directly at the USDA NIFA program page rather than planning against last year's calendar. And build the assumption of delay into the plan, because a grant that arrives four months late is a different instrument than the one you budgeted for.
What non-grant capital is available?
Grants get the attention. Lending is much larger.
The Farm Credit System held $459.2 billion in gross loans outstanding as of March 31, 2026, and accounts for roughly 45% to 46% of all US farm business debt. It is a lender rather than a grant-maker, with real underwriting and collateral requirements, but for companies with assets or receivables it is a deeper pool than the entire agtech venture market.
Equipment and asset financing works for hardware companies with deployable units, and it prices against the asset rather than the company. Revenue-based financing is available where recurring revenue already exists, and it is expensive capital that is nonetheless cheaper than equity at a down-round valuation.
What is customer-funded development?
A customer or channel partner paying you to build something. It is the most underused non-dilutive capital in the sector and the only kind that does three jobs at once: it funds the work, it validates the market, and it produces a committed buyer at the end.
It is underused because teams file development funding under finance when it is a commercial conversation. The company that will pay for development is usually an existing customer with an urgent problem, a corporate partner with a strategic gap, or a distributor who wants an exclusive window. None of those conversations start with a finance team.
The discipline is to scope it as development you were already going to do. Building something bespoke because someone will pay for it is how you end up with a services business and a roadmap that belongs to your customer.
What does non-dilutive funding actually cost?
It is not free money, and treating it as free is the failure mode.
The direct costs are visible: matching requirements on some programs, reporting obligations that continue for the life of the award, restricted scope that limits what the money can be spent on, and senior time spent on applications rather than customers. A USDA SBIR Phase I narrative runs seventeen pages.
The indirect cost is the one that damages companies. Grant-chasing distorts the roadmap. You begin building toward what is fundable rather than what is sellable, and those two diverge faster than people expect. Grant revenue is not product-market fit, and investors read a grant-heavy P&L accurately.
The rule is simple. Use non-dilutive capital to fund work you were going to do anyway. Do not let it decide what the work is.
Frequently asked questions
How much is a USDA SBIR grant?
USDA SBIR Phase I awards range from $125,000 to $175,000 over eight months. Phase II awards up to $600,000 over 24 months, or $650,000 including the $50,000 Technical and Business Assistance supplement. Phase II is only open to companies that completed Phase I. There is no cost-share requirement.
Can SBIR funds be used for product development?
No. Federal regulation at 7 CFR 3403.7 limits proposals to scientific and technological research activities and prohibits proposing product development, technical assistance, demonstration projects, or patent applications. USDA's solicitation also excludes scaling up previously developed prototypes, which it treats as the responsibility of the private sector. Companies whose remaining risk is commercial rather than scientific should look at a different instrument.
Can a startup receive commodity check-off funding?
Yes, though it is not a general application process. Check-off funds are administered under USDA Agricultural Marketing Service oversight and flow primarily to universities and research institutions, but for-profit companies do receive awards directly, usually through innovation challenges or targeted research partnerships. The United Soybean Board awarded InnerPlant $300,000 for satellite crop-stress detection work, and the National Corn Growers Association has awarded companies through its Consider Corn Challenge.
Does FFAR fund for-profit companies?
Yes. The Foundation for Food and Agriculture Research states that it welcomes applications from for-profit organizations alongside universities and nonprofits. Program awards range from about $150,000 a year to $2 million depending on the program. Most FFAR programs require a 1:1 non-federal match with at least half in cash, so the practical question is whether you already have a co-funding partner.
How long does it take to get federal grant funding?
In a normal cycle, roughly seven to thirteen months from solicitation release to funds in the bank, depending on the phase. The FY2026 cycle was disrupted by a six-month SBIR authorization lapse and a 43-day government shutdown, so current timelines may be longer. Plan for grants as a decision made while runway remains rather than a response to running short.
Is USDA SBIR still funded in 2026?
Yes. SBIR and STTR authority lapsed government-wide on September 30, 2025 and was reauthorized in April 2026, extending the programs through September 30, 2031. Solicitation calendars were compressed as a result, so verify current dates at USDA NIFA rather than assuming the usual schedule.
Can an agtech company apply to NSF instead of USDA?
Yes, and it is often the better fit for hardware, robotics, sensing, or AI-centered companies. NSF SBIR Phase I goes up to $305,000 and Phase II up to $1.25 million, roughly double USDA's ceilings, with a combined Fast-Track option up to $1,555,000.
What is the largest non-dilutive award available in agriculture?
The USDA Conservation Innovation Grants On-Farm Trials component carries a ceiling of $5 million per award with no match required, within a $65 million FY2026 CIG program. It suits companies whose products produce measurable conservation or resource-efficiency outcomes.
Grant amounts, program ceilings, and match requirements in this article were verified against each program's own solicitation or applicant guidance and are current as of August 2026. Federal and private grant programs run on annual cycles and several were disrupted in 2025 and 2026, so confirm current figures and deadlines at the source before you apply. Farm economy figures are drawn from the USDA Economic Research Service farm income forecast and the Federal Reserve, also current as of August 2026, and USDA revises that forecast three times a year.
Non-dilutive capital works best when it funds a commercial plan that already exists. If you are building that plan, we can help you build it and run it. 9 North Group embeds with ag and food tech teams as fractional operators. We don't just advise. We build. Schedule a strategy session.
Preserving runway is the other lever available when revenue and grants both fall short — Part 3 of this series covers when to cut and how to do it without destroying the company you're trying to save.
