In 2020 a new bridge will connect the city of Detroit in the U.S to Windsor in Canada. The bridge, Gordie Howe International Bridge, is named after the Canadian Hockey legend and an addition to the current Ambassador suspension bridge that was built in 1929. The bridge will reinforce the already strong ties between the Detroit and Windsor, a Canadian power house in auto manufacturing, R&D, logistics, and warehousing that over many decades has played a crucial role in cementing the strong ties between Washington and Ottawa.
Now the government of Canada, through introduction of new policies and investment schemes, appears determined to have more Windsors across the country. So, in July of this year as part of federal budget, a key step was taken toward that goal. The federal government introduced the Strategic Innovation Fund (SIF), a five-year, CAD $1.26 billion program whose goal it is to “make sure that Canada is a top destination for businesses to invest, grow and create jobs and prosperity for Canadians.”
A Thriving Innovation Ecosystem
Since its introduction in July, the SIF has been praised by many as a much-needed step toward making Canada a hotbed of startup and R&D activity, while others have criticized it for being insufficient. The Fund’s announcement comes at a time that many industries seek to find the right talent and fill many vacant positions in the nation’s high-tech sector. However, politically, luck has been on Canada’s side as an increasing number of foreign tech specialists in the U.S are pouring in to Canada due to President Trump’s immigration policies. This influx of tech talent is not limited to the private sector. Canadian academic institutions have seen a steady rise in applications from foreign students including students from the United States. For example, applications from the U.S to the University of Toronto have risen 80% over the last nine months.
Moreover, Canada’s venture capital (VC) industry seems to be on the financial version steroids as investment in Canadian startups hit nearly $4 billion in 2016, a 15-year high for the country with Ontario and Quebec as the epicenters of innovation activity.
The latter two Canadian provinces are among the top destinations for VC investment in North America. Ontario accounted for 48% of the growth with 225 deals valued at $1.8 billion, placing it in 4thth in North America.
What Challenges Can SIF Address?
Despite increasing dynamism in the Canadian innovation ecosystem, going to market and scaling remain key and persistent challenges for many Canadian startups. Despite developing new and innovative products, many Canadian startups have had significant challenges taking their products to the market. From a talent development perspective, this translates into weakness in developing sales, marketing, and product management teams. A portion of SIF can be allocated to such activities so that Canadian startups can address this challenge. What this entails is that some of this Fund could go to growth stage companies with proven products that are on the cusp of winning major clients and, therefore, are in need of expanding their sales and marketing teams to secure their market status and subsequent growth.
The government should also open its doors to Canadian startups. This means that Canadian startups should be able to access the government as a reliable buying customer. While the government should facilitate the innovation process for companies, ease their cost burden, and enable their entry into new markets, on the policy side it could cut down red tape associated with Scientific Research and Experimental Development (SR&ED), ease SR&ED eligibility requirements, and increase its annual budget.
Since its announcement, one of the key criticisms leveled at SIF has come from Canadian Advanced Technology Alliance (CATA), an influential industry lobbying group. Looking at the Strategic Innovation Fund and changes to SR&ED over the last several years, CATA argues that over a seven-year period (2009-2016), the federal government has reduced its innovation funding by $5.3 billion by steadily reducing the value of SR&ED tax credits. The reduced amount, CATA argues, translates into nearly four and a half times the value of the planned $1.26 billion Strategic Innovation Fund.
Critics also argue that before the term was in vogue, innovation meant changing industries and revolutionizing an entire business sector to the benefit of consumers that resulted in higher standards of living. Today, critics of the startup ecosystem charge that startups have entered a race to sell their business for profit after a certain stage and that grants such as SIF would only enable them to play this game more effectively and with greater ease. Based on this criticism, policy makers need to make sure that government grant funds are distributed to companies that work on seriously innovative ideas and products that have the potential to bring about change to the market.
This clearly begs the question as to what the ideal budget should be for such a grand project to have a genuine and long-lasting impact on Canada, its various business ecosystems, and its status on the global innovation stage. Undoubtedly, if you asked them, many Canadian business leaders would have their own proposed budget size for SIF based on their experience and market observations. They would also tell you that Canada has the ability to punch above its weight as already evidenced in biotech and in the country’s rising status in artificial intelligence (AI).
What Our Clients Are Asking
What our customers are most interested in is this: what types of companies and projects are eligible for SIF?
SIF is designed to support four types of innovation activities. They revolve around four key themes: R&D, growth, investment, and public-private partnership:
At RDP, since the Fund’s announcement, we have been approached by a whole range of businesses that seek to understand how they can apply for the Fund and what makes them eligible for it. The list of their questions is long, but we decided to share with you some of the key ones to bring our readers up to speed as to what industry leaders are seeking regarding SIF.
- What is the ideal timeline for the project?
- What is the minimum/maximum the government will fund?
- What would be an ideal budget for the fund?
- Is it a repayable loan or an actual grant?
- What is the processing time for the grant once submitted?
- What is the criteria they will use to judge the applications?
- If approved, how will the funding be paid out?
- What is the deadline?
- When is the best time to apply?
- Can I submit multiple applications at once?
- Has anyone else submitted an application yet? Or has anyone been approved yet?
There is a whole range of factors that impact your eligibility for SIF. Our responses to the above questions have varied based on an organization’s size, revenue, R&D expenditure, and business vertical. They also depend on whether the organization wants to export its products to foreign markets.
To find out about your organization’s eligibility for Strategic Innovation Fund and what steps you need to take to increase your chances of obtaining funds, contact the author.
Paul Anderson works in business development for RDP Associates in Toronto. RDP is a consultancy firm serving clients in Canada, U.S., Ireland, Netherlands, and the UK, specializing in government funding in the form of grants, R&D tax credits, and tax recovery. For information contact:
(416) 368.9341 x.299