# Funding a software startup: the routes and what each asks of you A plain-language map of the routes to money for a software startup, from customer revenue to grants, loans, investment and crowdfunding, and what each asks. Canonical URL: https://worldenterprise.org/insights/funding-a-software-startup-the-routes/ Last updated: 2026-10-10 Publisher: World Enterprise, run by World Enterprise Group Incorporated > **No promise of funding** > > WE makes no promise of funding. This material helps you prepare evidence for investors. It does not predict that any company will raise money, and it is not legal or financial advice. *This article is general information, not legal or financial advice. It was written on October 10, 2026, from the public sources listed on this page, and it does not describe any agreement with World Enterprise. Programs and rules change, so confirm the current position with a qualified lawyer or accountant before you rely on any of it.* Money reaches a software company by a handful of routes, and each one asks something different of the founder: time, ownership, repayments, paperwork or legal exposure. This article maps the routes in plain terms, says what each involves according to public sources, and points to the other articles on this desk for the detail. It does not rank the routes and it does not say which one suits your company. That depends on your market, your plan and the advice of your own counsel. ## The routes at a glance | Route | What it is | What it asks of you | |---|---|---| | Customer revenue | Money paid by the people who use the product | A product people pay for, and records that show what came in and when | | Grants and program awards | Awards from public agencies for research and development work | An application to a specific program, and work that fits what the agency funds | | Loans and revenue-linked financing | Money that is repaid, with a lender's conditions attached | Repayments from the business, and eligibility checks by the lender | | A SAFE or convertible note | A contract with an investor about shares you will issue later | Legal documents, accredited investors, and a clear record of what you have promised | | A priced round of preferred stock | Shares sold now at an agreed price | A negotiated term sheet, board approval and a full set of legal agreements | | Crowdfunding under Regulation CF | Small investments from many people through a registered online platform | A public offering process run through an intermediary, with disclosure to investors | None of these routes excludes the others, and the table is a map, not a menu. A company can be paid by customers while it holds a grant, and an investor may ask how the company's other money is structured. ## Revenue from customers The route that involves neither a lender nor an investor is a customer who pays. This desk treats it as a funding route in its own right, with its own mechanics: what annual billing and prepayment do to the timing of cash, and why money received is not the same as money earned. The article on funding a first SaaS from customer revenue covers it, and the runway and burn arithmetic article shows how long any pool of cash lasts. ## Grants and program awards The SBIR and STTR programs are the best-known example for technology companies in the United States. The SBIR.gov site says the programs are funded through 11 participating federal agencies, and that each agency runs its own program. The site says entrepreneurs apply for awards. It describes the funding as not requiring the company to give up shares, which is why founders sometimes look at it early. What it asks of you is an application to a specific program and work that fits what that agency funds. Whether the technical work inside a software product counts as research and development is a question for the agency that runs the program, not something this article can settle. The grants and SBIR article goes through the program structure. ## Loans and revenue-linked financing A loan is repaid, whatever happens to the company's valuation. The U.S. Small Business Administration says that lenders and loan programs have unique eligibility requirements, and that businesses normally must meet size standards, be able to repay, and have a sound business purpose. New York's Financial Services Law defines sales-based financing as a transaction repaid over time as a percentage of sales or revenue, with the payment amount rising or falling with the volume of sales. Those are the two ends of a wide field. What a given lender calls its product, what it costs and what it requires you to pledge are all in the contract, which is why this desk's article on revenue-based financing and venture debt tells you what to ask rather than what to choose. ## Investment by SAFE or convertible note Y Combinator, which publishes the SAFE, describes it as a short contract an investor signs to fund your startup now in exchange for the right to shares of stock in your startup later. Y Combinator describes the note as debt on which interest accrues and which has a maturity date, whereas a SAFE has neither. The article on how the two instruments differ lays them side by side. The plain-language guide to [SAFEs](https://worldenterprise.org/fundability/safe-explained/) on this site defines the terms you will meet in the documents. ## A priced round In a priced round the company and its investors agree a price per share and the company issues preferred stock on the day the money moves. The principal terms of that stock are summarized in a term sheet before the long legal documents are drafted, and the NVCA model term sheet says that no other legally binding obligations are created until the definitive agreements are signed. The article on reading a term sheet line by line follows a published model, clause by clause, and says what each one does. It never says what to accept. ## Crowdfunding Regulation Crowdfunding lets certain companies offer and sell securities to the public on an internet-based platform. The SEC's Regulation Crowdfunding page says the rules require all transactions to take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal. The Regulation CF article covers the rules and why a founder outside the United States should check the issuer requirements first. ## What every route that sells securities has in common Every route above that sells ownership or a right to ownership, as opposed to a grant or a plain loan, runs into securities law. The SEC states the rule briefly: every offer and sale of securities must either be registered under the Securities Act of 1933 or rely on an available exemption from registration. The SEC's Form D page says Form D is used to file a notice of an exempt offering of securities with the SEC, and that a company must file this notice within 15 days after the first sale of securities in the offering. The practical consequences are the reason this desk keeps returning to your counsel. Who may invest, what you may say while looking for investors, which filings follow and which state rules also apply are all questions with legal answers that differ by place and by date. ## Questions to bring to your counsel and accountant - Which of these routes could apply to a company formed where mine is formed, and which are closed to it? - If I take investment, which securities exemption would the offering rely on, and what do I have to file? - What would each route do to the ownership of the company, now and after later rounds? - What does each route require me to repay, report or promise, and to whom? - How are the proceeds treated for tax, and does the answer change with the instrument? - Which documents belong in my [data room](https://worldenterprise.org/fundability/data-room/) before I talk to anyone, and which are in order already? ## Where to read next If you are weighing who might invest, [choosing the right first investors](https://worldenterprise.org/insights/choosing-the-right-first-investors-for-a-saas-company/) covers the criteria worth writing down. The [investor readiness checklist](https://worldenterprise.org/fundability/investor-readiness-checklist/) lists the evidence a careful investor may ask for, and [questions to ask your counsel before you sign](https://worldenterprise.org/insights/questions-to-ask-your-counsel-before-you-sign/) prepares the conversation with your lawyer. To see how long a pool of cash lasts at your current spending, the [metrics calculator](https://worldenterprise.org/tools/metrics-calculator/) can do the arithmetic. The [glossary](https://worldenterprise.org/glossary/) is the place to look up an unfamiliar term. > **Routes combine over a long horizon** > > Few companies use one route for ten years. Customer revenue, a research award, a loan and an investment can each fund a different stage, and the order matters more than any single choice. The routes are easier to compare once the horizon is explicit. The [bootstrapping versus raising](https://worldenterprise.org/insights/bootstrapping-versus-raising-over-a-ten-year-horizon/) article puts them against survival data, the [time between funding rounds](https://worldenterprise.org/insights/the-time-between-funding-rounds-what-carta-data-reports/) article reports how long the gaps between rounds have run in one platform's data, and the [SBIR and STTR](https://worldenterprise.org/insights/sbir-and-sttr-as-patient-capital-for-research-based-companies/) article covers research awards. Public counseling through the [SBA resource partners](https://worldenterprise.org/insights/using-sba-resource-partners-sbdc-score-wbc-and-vboc/) is available to founders on any route. For research awards in depth, see the [SBIR and STTR guide](https://worldenterprise.org/sbir-sttr/). The [ecosystem directory](https://worldenterprise.org/ecosystem/) lists independent angel groups, investor-relations programs, incubators and SBA partners, and the [funding clock](https://worldenterprise.org/data/years-to-milestones/) data page shows how long each stage has taken in published figures. ## What this article cannot tell you This article cannot tell you which route fits your company, how much money you can raise, or whether any investor, agency or lender will say yes. World Enterprise makes no promise of funding, and nothing here predicts that any company will raise money. It describes United States sources only: federal securities rules, a federal loan program, federal grant programs and one New York statute. A company formed or operating elsewhere may face different rules, and state securities rules, which this article does not cover, can apply as well. The sources were fetched on October 10, 2026, and programs, thresholds and forms change; check the current version of each page before relying on it. The sources do not say how often any route succeeds, how long any of them takes, or what any investor or lender will decide, so this article does not either. It names no investor, lender, platform or law firm, because naming one would imply a recommendation. Tax treatment, accounting, and the details of every route are left to your accountant, your lawyer and the other articles on this desk. ## Sources - Exempt Offerings. U.S. Securities and Exchange Commission. - Filing a Form D Notice. U.S. Securities and Exchange Commission. - SBA loans. U.S. Small Business Administration. - About SBIR and STTR. U.S. Small Business Administration, SBIR.gov. - The SAFE, the standard way startups raise money. Y Combinator. - SAFE vs. convertible note vs. priced equity round. Y Combinator. - Financial Services Law, article 8, section 801, Definitions. New York State Senate. - NVCA model term sheet for a Series A preferred stock financing. National Venture Capital Association. - Regulation Crowdfunding. U.S. Securities and Exchange Commission.