Since its opening, program officials responsible for the Strategic Innovation Fund (SIF) have been inundated with Statements of Interest, application requests and a whole range of inquiries from Canadian businesses about their eligibility. My sources tell me that response has clearly far outpaced what the government had originally anticipated. It may sound surprising that a large number of applications were filed for a funding program that was just launched in the middle of summer, but the reality is that the Fund’s size, CAD $1.2 billion, is too big for many businesses to ignore.

Moreover, the fact that SIF is open to a whole range of business sectors of the Canadian economy (start-ups, SMEs and large enterprises), makes it all the more significant.

Background

This Fund was initiated in the 2017 federal budget, which was dubbed the “Innovation Budget”. The Economic Advisory Council’s report issued in February 2017 set out the framework for the Fund. The original idea was to select certain industries such as automotive, aerospace and cleantech, and find companies in them that have exhibited significant growth. Then those selected companies would be provided with funding that would accelerate their growth. This initial idea later morphed into something much broader. Hence Strategic Innovation Fund.

So, who qualifies for the Fund?

Certainly companies in the following sectors are qualified:

– Automotive;
– Aerospace;
– Cleantech;
– Information and communication Technology (ICT); and
– Agri-food

However, the government later decided to open SIF to all sectors to apply.

As noted above, there was also an inference in the budget that “quality investments” would be made under this program. We take that to mean that companies that have been in business for at least 5 years; have a 20% year over year growth in revenue and staff, and are well-funded, at least in the short term.

While the government later back tracked on these criteria, by opening up the fund to many other sectors of the economy, we believe the majority of companies that “win” funding under SIF, will have met the original criteria.

What types of projects qualify for Strategic Innovation Fund?

There are 4 streams to this fund:

Stream 1

R&D that accelerates technology transfer and commercialization of innovative products, processes and services. So think of this stream as SR&ED or IRAP type projects through which new innovative products are developed.

Stream 2

Facilitate growth and expansion of firms in Canada. If your solution has gone viral, or you have too many orders to fill and you need more staff, infrastructure, and new equipment, or you plan to expand globally, then you would likely fit in this category.

Stream 3

Attract large scale investments to Canada.

Stream 4

Advance industrial research through collaboration with academia, non-profit organizations, and the private sector.

How much funding is available?

Overall, the government has allocated $1.26 billion for the Fund over a five-year period. Under streams 1 to 3, the government will contribute a maximum of 50%, and 100% under stream 4. At this point, the program officials have not provided any ranges of funding or even what specific costs will be funded. However, given the size of the fund, I am confident they will continue to receive applications requesting millions of dollars.

What is the process?

The current process involves a company filing for a Statement of Interest, which is roughly a four-page document outlining a project. Once you file, processing time takes at least four weeks. At that point there would be two outcomes: your application is either denied, or you are asked to submit a formal proposal. The formal proposal is expected to be a 40-page document. From there, the process time will vary and be typically proportional to the amount of funding you are seeking. The more funding you ask for, the longer the processing time will take. If you are denied at the initial stage, expect the government to provide feedback on your application.

How can you win funding?

So for funding program that is open to all, how are you going to differentiate yourself from other applicants and compete with them? What do you think makes your application stand out? Well, put yourself in the shoes of the program officials, or better yet, the taxpayer. Why would the average taxpayer want to give your company money? In other words, why and how is your project good for Canada?

As I mentioned above, we believe that companies in the preferred sectors with a history of rapid growth will be given priority. Two groups of businesses are particularly sought by this program:

1. Early- and growth-stage SMEs with high-growth that are developing and commercializing new technologies. These firms typically grow at over 40 percent a year in revenue, with some having the potential to become major global companies based in Canada.
2. Established high-impact SMEs. These companies are found across all economic sectors and geographic regions, responsible for a disproportionate amount of Canada’s economic and job growth. These firms are defined as having over 20 percent annual growth in revenues, which can translate into $10 million or so. These companies are perceived to have the potential to export to global markets.

Currently, many of these firms are not VC-backed; therefore, leveraging more funds is key to their growth.

Can you make my life easy?

Now, as many of us know applying for government funding and grants can be a harrowing experience with stories about companies being denied and subsequently disappointed to the point that they decide permanently to stay away from grant applications. Then there are stories about companies that seem to live on grants with winning streaks at obtaining government funding. Yes, you guessed it right, receiving grants is never a sure thing. If we had to estimate the success rate across the board, it would be probably around 50%. So ask yourself the following:

1. Am I prepared to invest the time without a guarantee for success?
2. Is the grant strategic for me? Receiving a grant can clearly allow you to take on more risks (i.e. hire more staff; invest in new technology; undertake riskier product development). So you need to determine how strategic the fund could be for you. Remember that the whole point of offering this funding is for the government to incentivize the kind of activity they want to stimulate; the more your strategic goals align with those outlined by the government’s Innovation Agenda, the better your chances are.
3. Do I have a process in place and know what is expected at the outset in terms of the required information and time commitment as well as the key criteria to win?
4. Do I have any stats on the likelihood of success? You can usually get an idea on the number of approved grants that have been in place for a number of years.

Because grants are not a certainty, to move forward, you need to make an educated and informed decision. While the government should also work hard to give businesses certainty, companies can never get a firm “yes” or “no” response until they have put some effort into the application process. Therefore, an informed decision can go a long way in reducing the potential risks involved.

At RDP, we are in the thick of it all. As the Strategic Innovation Fund unfolds and makes its presence felt across the economy, we receive daily information about it and use it to inform our clients. If you are interested in learning about your eligibility and wish to start your application process, feel free to contact us:

[email protected]
(416) 368-9341