canadian grants: a crash course in non-dilutive funding
TRANSCRIPT
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Canadian Grants: A Crash Course in Non-Dilutive Funding
Presented by Erik Ashdown Director, Business Development Boast Capital
Prepared by Erik Ashdown
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Agenda
I. Types of non-dilutive Funding II. Mandates of Funding Programs III. When to Access Programs IV. Pre-emptive VS retroactive V. The SR&ED Program VI. How Funding Programs Stack VII. Case Study
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I. Types of non-dilutive Funding
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What is out there: Stage Amount Format
Futurepreneur Early $45K Loan
IRAP Early - Mid $50K - $250K Grant
CMF Early - Late $50K - $1M Loan*
IDMTC All 17.5% - of R&D Tax Credit
SR&ED All 64% - of R&D Tax Credit
MITACS Mid - Late 50% of human capital
Grant
BCIP Mid – Late $250K - $1M Contract
SDTC Late $250K - $2M Grant
Bridge Financing Med – late $100K - ? Loan
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II. Mandates of Funding Programs
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Futurepreneur About • Start up stage • Loan with personal guarantee • 18 – 39 age group • 45K for full time entrepreneur • Works in conjunction with BDC Requirements • $50 application fee • Business plan • MVP Prototype (if tech related) Mandate • Early stage entrepreneur from any discipline to start any business
Contingencies • Personal guarantee • Must begin payback after 1 year (interest only for first year)
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About • Three funding stages
• Pre-production – Idea stage • Production – Development of product • Marketing – Distribution & syndication of product
• Contributes 75% of costs of project with a cap of $1M • Funding is in form of a repayable loan
Requirements • Business plan • Financing plan 25% of total project costs • Market channel partner Mandate • Companies building interactive digital media content • Gaming, VR, Some data visualization Contingencies • Paid back within 7 years • Paid back with 100%
Canadian Media Fund (CMF) Experimental fund
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Industrial Research Assistance Program (IRAP)
About • Innovation funding for early stage technology • Project based • First grant is usually $50K • Funds up to 75% of R&D costs Requirements • Vetted IRAP application • Functional early stage prototype of technology • Project must address technological innovation
Mandate • Fund innovative early stage Canadian Technology
Contingencies • Paid as reimbursement within 30 days of payroll submission • Monthly reports
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Interactive Digital Media Tax Credit (IDMTC)
About • Refundable provincial tax credit • Filed at year end with federal SR&ED claim Requirements • Previously applied to provincial government 3 months before year end • Paid application fee of % based on claim • Digital content creation that contains audio, visual, interactive
components Mandate • Provincial tax credit to incentivize of 17.5% on interactive digital media Contingencies • Audited by provincial government
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MITACS About • Provides post graduate students & professor to work on specific
company project • Covers 50% of project cost of graduate and professor’s wages Requirements • Specific project • Cover 50% of graduate salaries • Lab / working space • Project plan Mandate • Facilitate graduate students into industry
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Built in Canada Innovation Program (BCIP) About • Federal government will be first customer of a given product or service • Contracts are $250K - $1M depending on the government agency Requirements • Business plan • Prototype of technology from controlled environment • Zero sales prior to the submission of application (sales can be made after
applcation) • General government / Military* Mandate • Aid in the commercialization & distribution of Canadian technology Contingencies • Product must be delivered to specification based on SOW • Must suit the need of a specific government organization need • Paid based on contract terms
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Sustainable Economic Development Canada (SDTC)
About • Non-dilutive financing • SDTC will fund up to 1/3 of your firm’s pre-commercial development and
demonstration project (paid in milestones in advance – cash flow positive project) • 2/3 of project cost must be co-invested by you and your partners • Minimum SDTC investment of ~$250K. Project sizes range from $1M to $XXM • SDTC is looking for big wins in environmental benefits Requirements • Innovation (i.e. patents), Marketing plan • Business (Management and Financing) Plan and Environmental benefits • Prototype of technology ready for scale-up • Zero commercial sales of technology prior to the submission of application • Developing innovative technology Contingencies • Heavy due diligence of your invited detailed proposal • First to commit funding & last to invest (need for strong industry pull partners) Prepared by Erik Ashdown
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Bridge Financing About • Loan • Done by banks or private institutions • Will require something to loan against in the event of default • Amount of loan and terms of repayment vary Requirements • Asset which can be loaned against
• SR&ED / IDMTC • Contract • Revenue • Inventory
Mandate • Fund companies who are searching for short – medium term
financing Contingencies • May require a personal guarantee • High interest rates
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III. When To Access Programs
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Business Plan
Prototype Production Commercialization
Futurepreneur
IRAP
CMF
IDMTC Retroactive Retroactive Retroactive
SR&ED Retroactive Retroactive Retroactive
MITACS
BICP
SDTC
Bridge Financing
When to Access Programs
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Industries Programs Apply To Agritech
(hardware) VR Game Medical Device
Consumer App
Ecommerce site
Futurepreneur
IRAP
CMF
IDMTC Pending
SR&ED
MITACS
BICP
SDTC
Bridge Financing
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IV. Pre-emptive vs. Retroactive Funding
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Pre-emptive vs. Retroactive
Pre – Emptive - Grant • Requires application • Require proactive plan • Requires business intelligence to file • If approved will be for proposed invoice or grant
amount
Retroactive - Tax Credit
• Requires documentation and proof of work • Requires procedural documentation • Required engineering / scientific intelligence to file • Contingent on technical auditor, and proof of addressing
program guidelines by CRA definition
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Grant vs.“Funding” Impact on SR&ED
• Grant - non-repayable • “Funding” - repayable and or secured
• examples - loan, equity “Funding” can be leverages by SR&ED, Grants reduce the amount of SR&ED you can claim.
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QUALIFYING CRITERIA
Must meet three criteria to qualify for SR&ED:
1. Technological Uncertainty 2. Technological Challenges 3. Technical Content or Iterations
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SR&ED BENEFITS
Return rates for SME CCPCs:
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SR&ED BENEFITS
Return rates for non-CCPCs:
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VI. How the non-dilutive Funding Programs Stack
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How do SR&ED & IDMTC Interact
SR&ED How much? IDMTC How much?
Futurepreneur Yes 100% of eligible work Yes 100% of eligible work
IRAP Yes Company paid portion of project Yes Company paid portion of
project
CMF Yes 100% of eligible work Yes 100% of eligible work
MITACS Yes Company paid portion of project Yes Company paid portion of
project
BICP Yes 100% of eligible work Yes 100% of eligible work
SDTC Yes Work not supported by SDTC Yes Work not supported by
SDTC
Bridge Financing
Yes 100% of eligible work Yes 100% of eligible work
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Case study
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Business Plan
Prototype Production Commercialization
Futurepreneur Yes
IRAP Yes
CMF Yes Yes Yes*
IDMTC Retroactive Retroactive Retroactive
SR&ED Retroactive Retroactive Retroactive
MITACS Yes Yes Yes
BICP Yes
SDTC Yes Yes
Bridge Financing
Yes Yes
Which programs would we use?
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Erik Ashdown Director, Business Development 778-874-4713 | [email protected] BoastCapital.com | @BoastCapital