At QNova’s Partnering Forum, MTEC’s Chris Steele unpacked why many medtech companies misunderstand non-dilutive funding—and how signal, sponsorship, and requirements determine whether federal dollars actually lead to adoption.
Non-dilutive funding is often described as a lifeline for early-stage medtech companies. That framing, however, misses a more consequential reality. In today’s environment, non-dilutive funding is less a financial solution than a translation challenge—one that tests whether a company understands its true customer, how decisions are made inside the Department of Defense (DoD), and whether its technology is positioned to move beyond research into real-world use.
That perspective was central to a session at QNova LifeSciences’ 12th Annual Partnering Forum led by Chris Steele, PhD, Chief Strategy and Business Development Officer at the Medical Technology Enterprise Consortium (MTEC). Drawing on decades of leadership across Army, Navy, and DoD medical R&D, Steele framed non-dilutive funding not as an endpoint, but as an early indicator of whether a company understands the system it is trying to enter.
The difference between success and stagnation, he emphasized, rarely comes down to the size of a grant. Instead, it hinges on how effectively companies navigate signal, sponsorship, and requirements within a complex federal ecosystem.
A Shifting Federal Funding Landscape
The current federal R&D environment is turbulent, but not unfamiliar to those who have worked inside it. The DoD has long operated under shifting priorities driven by operational demands, emerging science, and changing administrations. What distinguishes the current moment is the scale and simultaneity of disruption.
Recent budget adjustments have eliminated nearly 60 percent of certain DoD grant opportunities, while parallel disruptions at the National Institutes of Health have tightened competition across the broader biomedical research ecosystem. At the same time, reductions in force across government agencies have thinned the ranks of program managers, clinicians, and contracting officers—the internal champions companies rely on to move technologies forward.
The result is a growing “time debt,” where fewer decision-makers are responsible for more programs, more emails, and more funding decisions. In this environment, Steele argued, the burden increasingly shifts to companies—not just to apply for funding, but to understand how the system works and where their technology truly fits within it.
Why SBIR Success Often Stops Short
The Small Business Innovation Research (SBIR) program remains one of the most visible non-dilutive funding mechanisms for medtech companies, but it is also one of the most misunderstood.
SBIR funding is not designed to support open-ended research. Its core purpose is to adapt commercial off-the-shelf technologies into government-relevant solutions. In theory, this should accelerate transition. In practice, many SBIR-funded projects stall once the award period ends.
The most common reason is not weak science, but misalignment. Frequently, the government sponsor overseeing an SBIR is not the organization responsible for shepherding a product toward procurement. Companies may successfully complete technical milestones only to discover there is no clear pathway to adoption.
Assuming that a funding opportunity is automatically tied to transition, Steele cautioned, is one of the most consequential mistakes teams make. By the time “what’s next?” becomes the question, it is often already two years too late.
Sponsorship Matters More Than the Money
A recurring theme throughout the session was the importance of who is managing a project—not just how it is funded.
Within the DoD, there is a critical distinction between organizations that fund research and those responsible for solving operational problems through deployed solutions. Money allocated to explore a problem is fundamentally different from money allocated to field a product.
Understanding that distinction requires insight into internal DoD structures that are often opaque to outside companies. Programs may be reorganized, consolidated across services, or shifted under joint authorities such as the Defense Health Agency—sometimes over the course of a decade.
For companies, this creates persistent signal confusion. A lull in funding may indicate disinterest, or it may simply mean a program is observing the outcomes of recent investments. Without visibility into what has already been funded—and who is positioned to carry a solution forward—it becomes difficult to know when to engage, when to wait, and whom to approach.
This is where Steele positioned MTEC’s role: not as a gatekeeper, but as an interpreter—helping companies understand where genuine opportunity exists and where noise obscures reality.
Rethinking What “Military Medicine” Means
Another source of misalignment lies in how companies define military relevance.
The Military Health System serves approximately 9 million beneficiaries, only about 1 million of whom are active-duty service members. The remainder includes retirees, dependents, and others with the same spectrum of clinical needs found in civilian healthcare.
As a result, technologies that do not appear “battlefield-specific” at first glance may still be highly relevant to DoD priorities. Conversely, programs that sound operationally aligned may sit outside the organizational structures companies expect.
Navigating this landscape requires more than keyword matching. It requires understanding how programs shift year to year, how terminology evolves, and how responsibilities move across offices. Without that context, companies risk pitching the right technology to the wrong audience—or misunderstanding a program’s true intent.
Requirements: The Word That Means Everything—and Nothing
Few terms create more confusion than “requirements.”
In one context, a requirement may describe an R&D need—an invitation to explore a concept. In another, it may define a formal procurement pathway with strict specifications and timelines. Funding a project under the former does not guarantee alignment with the latter.
This disconnect is not accidental. It exists to manage risk and allocate resources responsibly. But for companies developing novel technologies, it can create a frustrating gap between innovation and adoption.
Highly transformative organizations such as DARPA operate with broad latitude to pursue long-term breakthroughs. Other programs are far more pragmatic, focused on near-term deployment. Companies that fail to recognize where they sit on that spectrum often find themselves perpetually “too early” or “too late” for the opportunities they pursue.
The challenge, Steele emphasized, is rarely technical maturity alone. It is timing, language, and expectation management.
Why It Matters
Steele’s message was not discouraging—but it was clarifying.
Non-dilutive funding remains a powerful tool for medtech companies, particularly those operating at the intersection of healthcare and defense. But its value depends on far more than winning an award.
Success hinges on understanding who owns the problem, who controls the pathway to adoption, and how requirements evolve over time. In a constrained funding environment, mistakes in alignment are no longer easily absorbed. Confusing research interest with procurement intent, assuming transition without sponsorship, or misreading signal amid organizational noise can stall even promising technologies.
For founders and operators, the takeaway is clear: non-dilutive funding is not a shortcut. It is a strategy—and one that demands as much discipline, intelligence, and alignment as any venture round.
