The federal government and a limited number of corporations serve as the primary sources for software development grants. The majority of technology grant programs only offer funding for nonprofit organizations, for-profit businesses and colleges and universities. Grant seekers may face fierce competition and programs typically include strict guidelines for funding use. Certain grant programs support only open-source software development, while others fund development of proprietary software products.

Small Business Innovation Research

The U.S. Small Business Administration oversees the Small Business Innovation Research program, which offers funding to help small businesses pay for research and development of technological services or products. Eleven departments of the federal government offer SBIR grants, including the Departments of Commerce, Energy and Transportation. The SBIR program awards funding only to for-profit, American-owned companies that have no more than 500 employees. As of June 2011, the SBIR program offers funding in two phases: a maximum of $100,000 to support startup efforts during the first six months; and a maximum of $750,000 in the second phase to expand results and explore commercial potential over a two year period. The SBIR program doesn't offer funding to move the developed technology to the marketplace.

Small Business Technology Transfer Program

The Small Business Technology Transfer program, administered by the U.S. Small Business Administration, offers technology research and development grants for nonprofit research organizations and for-profit small businesses. Five federal agencies and departments offer STTR grants, including the Department of Defense, National Science Foundation, Department of Energy, National Aeronautics and Space Administration and the Department of Health and Human Services. For-profit businesses must be American-owned, with 500 or fewer employees. Nonprofit organizations eligible for STTR funding can include postsecondary educational institutions, federally-funded research and development centers and nonprofit research organizations located within the United States. Projects eligible for STTR funding can include commercial, scientific or technical development initiatives.

Software Development for Cyberinfrastructure Program

The National Science Foundation sponsors the Software Development for Cyberinfrastructure program. The SDCI program offers funding for the development of technology that benefits engineering and science, with a primary focus on computer networking performance and cyber security. Only open-source development projects can qualify for SDCI funding and the NSF extends unrestricted eligibility for the program. However, as of June 2011, the NSF has granted SDCI funding only to universities. Typical grant awards range from $100,000 to $3 million, but the NSF has offered higher levels of funding for certain projects.

Corporate Grants

A limited number of corporations offer grants for software development. For example, Microsoft offers funding through the Software Engineering Innovation Foundation awards program. The SEIF program only extends eligibility to nonprofit research institutions and universities. Microsoft extends project eligibility to all software engineering areas and encourages projects that incorporate Microsoft products, such as C#, .NET and F#. Projects eligible for SEIF funding may involve empirical software engineering, Web application development or secure software engineering. Microsoft provides funding for only one year and grants range from $15,000 to $75,000, as of June 2011.