Canada offers several grants and programs specifically designed to support and accelerate the growth of tech startups.
Given the difficulty of the funding landscape, these grants can provide much-needed, non-dilutive funding and resources to help you develop your products, scale your operations, and achieve your growth objectives.
Here are some notable grants and programs available in Canada in 2023:
1. National Research Council Industrial Research Assistance Program (NRC IRAP)
IRAP is offered by the National Research Council (NRC). It provides financial assistance and advisory services to innovative startups that are engaged in research and development activities.
It supports projects focused on technology development, commercialization, and business expansion.
Note: On February 16, 2023, the Government of Canada announced that the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP) will be integrated into the new Canadian Innovation Corporation (CIC).
The CIC will be a new, operationally independent organization solely dedicated to supporting business R&D across all regions and all sectors of the economy.
- Eligibility: IRAP is available to Canadian SMEs that have the growth potential and demonstrate a commitment to conducting R&D activities. SMEs from various sectors, including technology, manufacturing, and services, can apply for IRAP funding. So, if you are an SME working in the Tech, Manufacturing, or Services domain, you’ll most likely be eligible to apply for IRAP.
- Funding Types: IRAP offers two main types of funding:
- Grants are non-repayable funds provided to SMEs to support eligible R&D projects.
- Repayable contributions are provided as loans, which must be repaid based on the terms and conditions set by IRAP.
- Project Types: IRAP funding supports various R&D activities, including product or process development, technology adaptation or adoption, innovation and commercialization, and business scale-up activities. Projects should demonstrate technical and commercial viability and align with IRAP’s objectives.
- Financial Assistance: IRAP funding typically covers a portion of eligible project costs, such as salaries, subcontractors, materials, and equipment directly related to R&D activities. The funding amount provided by IRAP depends on various factors, including the project’s scope, potential for innovation, and expected economic benefits.
- Advisory Services: In addition to financial support, IRAP offers advisory services to help SMEs develop their R&D capabilities and successfully execute their projects. This includes access to expert advice, technical guidance, and market intelligence to enhance innovation and business competitiveness.
- Application Process: SMEs interested in IRAP funding must submit an application that outlines their R&D project, expected outcomes, and the financial resources required. The application undergoes a review process, which may involve a feasibility assessment and evaluation of the project’s technical and commercial aspects.
- Reporting and Monitoring: Recipients of IRAP funding must submit periodic progress reports to track the project’s advancement and demonstrate its alignment with the proposed objectives. The NRC monitors the funded projects to ensure compliance with funding agreements and to assess their impact.
2. Strategic Innovation Fund (SIF)
The Strategic Innovation Fund (SIF) is a Canadian government funding program administered by Innovation, Science, and Economic Development Canada (ISED). SIF aims to support large-scale projects that foster innovation, growth, and competitiveness in various sectors of the Canadian economy.
- Objectives: SIF focuses on providing financial assistance to projects that contribute to advancing research and development (R&D), enhancing productivity and competitiveness, attracting investments, and creating jobs in Canada. The fund aims to support projects that have the potential for significant economic and societal impacts.
- Funding Types: SIF offers two types of funding: repayable contributions and non-repayable contributions. Repayable contributions are provided as loans that must be repaid to the government based on agreed-upon terms and conditions. Non-repayable contributions are grants that do not require repayment.
- Project Types: SIF supports various projects across various sectors, including aerospace, automotive, clean technology, digital technology, natural resources, and advanced manufacturing. Eligible projects may involve R&D activities, commercialization of innovative products or processes, expansion of production capacity, adoption of advanced technologies, and skills development initiatives.
- Funding Criteria: SIF funding decisions are based on a competitive evaluation process. Projects are assessed on their alignment with program objectives, potential economic benefits, innovation and technical merit, environmental sustainability, the potential to create high-quality jobs, and potential for attracting investments to Canada.
- Eligibility: SIF is open to Canadian businesses of all sizes, including large enterprises, small and medium-sized enterprises (SMEs), and research organizations. Eligibility criteria may vary depending on the specific streams and priorities identified by SIF.
- Application Process: The application process for SIF involves submitting a detailed proposal that outlines the project scope, objectives, expected outcomes, and the financial resources required. Applications undergo a rigorous review and assessment process, which may involve multiple stages and evaluations by expert panels.
- Monitoring and Reporting: Successful recipients of SIF funding must provide regular progress reports to ISED, demonstrating the project’s advancement, outcomes achieved, and compliance with funding agreements. Monitoring activities may include site visits, financial audits, and ongoing evaluation of project performance.
3. Build in Canada Innovation Program (BCIP)
BCIP is managed by Public Services and Procurement Canada (PSPC). It supports startups by helping them test and demonstrate their innovative products and services within the federal government. Successful applicants receive contracts for their products, providing an opportunity for market validation and early revenue generation.
- Objective: The primary objective of BCIP is to connect Canadian innovators with federal government departments and agencies with specific procurement needs. The program helps bridge the gap between innovative products or services and potential government buyers, allowing companies to demonstrate the viability and effectiveness of their innovations.
- Eligibility: BCIP is open to Canadian companies that have developed an innovative product or service with the potential for commercialization. The program primarily targets small and medium-sized enterprises (SMEs) but is also accessible to larger companies. The innovation being proposed should be at a late-stage prototype or beyond, ready for testing and evaluation.
- Call for Proposals: BCIP operates through a competitive call for proposals process. The program announces specific government procurement needs, and companies with relevant, innovative solutions can submit their proposals for consideration. The procurement needs to cover various sectors, such as health, environment, security, transportation, and more.
- Testing and Evaluation: If selected, the company’s innovative product or service undergoes testing and evaluation by the federal government department or agency that expressed interest in the innovation. The testing phase allows the government to assess the performance, functionality, and potential benefits of the innovation within its operational context.
- Pre-qualified Innovation: Upon successfully completing the testing and evaluation phase, it becomes pre-qualified. This means that federal government departments and agencies can purchase the innovation directly from the company. This happens without further competitive processes, providing a potential market opportunity for the company.
- Intellectual Property: Companies participating in BCIP retain ownership of their intellectual property.
- Commercialization Support: BCIP aims to support the commercialization of successful innovations. The program provides guidance and resources to help companies navigate the procurement process and explore opportunities. BCIP helps your startup enter the broader market or attract other potential customers.
4. Scientific Research and Experimental Development (SR&ED) Tax Incentive Program
SR&ED is administered by the Canada Revenue Agency (CRA). It provides tax incentives to businesses engaged in scientific research and experimental development. Tech startups can claim tax credits for eligible expenses related to their R&D activities.
- Objective: The main objective of the SR&ED program is to foster innovation and technological advancement in Canada by supporting R&D activities. It aims to incentivize businesses to invest in R&D and undertake projects that contribute to scientific or technological knowledge advancement.
- Eligibility: Canadian businesses, including corporations, partnerships, and individuals, can be eligible for the SR&ED program. The program is open to various sectors, including manufacturing, technology, engineering, pharmaceuticals, software development, and more. Eligible R&D activities can include experimental development, applied research, basic research, and certain support activities.
- Tax Incentives: The SR&ED program offers tax incentives in the form of three main benefits:
- Investment Tax Credit (ITC): Eligible businesses can claim a non-refundable investment tax credit on qualified SR&ED expenditures. The ITC is calculated based on eligible expenditures incurred during the tax year and can be applied against federal income taxes payable.
- Enhanced Investment Tax Credit (EITC): Small and medium-sized enterprises (SMEs) can qualify for an enhanced investment tax credit rate, providing a higher percentage of tax credit on eligible expenditures.
- Refundable Investment Tax Credit: Certain Canadian-controlled private corporations (CCPCs), individuals, and partnerships can receive a refundable tax credit on eligible SR&ED expenditures. This allows them to receive a cash refund even if they have no income tax payable.
- Eligible Expenditures: The SR&ED program covers a range of eligible expenditures, including salaries and wages, materials and supplies, subcontractor costs, and certain overhead expenses directly related to eligible R&D activities. Capital expenditures and market research expenses, however, are generally not eligible.
- Application Process: Businesses must file a claim for the SR&ED tax incentives as part of their annual tax return. The claim should include details of the R&D project, eligible expenditures, technical descriptions, and supporting documentation. The claim is subject to review and verification by the Canada Revenue Agency (CRA) to determine eligibility.
- Review and Audit: The CRA may conduct reviews or audits to assess the eligibility of the claimed SR&ED expenditures and activities. This process involves evaluating the technical and scientific aspects of the project, as well as the documentation and evidence provided.
An expert tax planning advisory like Novaa will help you apply for the SR&ED and avail various tax incentives for faster growth.
Book an appointment to find the right Tax Planning Advisory for your business with Novaa
5. Regional Development Agencies (RDAs)
Canada has several regional development agencies that offer funding and support programs tailored to specific geographic regions.
These agencies include:
- Atlantic Canada Opportunities Agency (ACOA),
- Canada Economic Development for Quebec Regions (CED),
- Federal Economic Development Agency for Southern Ontario (FedDev Ontario),
- Western Economic Diversification Canada (WD)
The Way Ahead
As a tech startup in Canada, these Grants can offer much-needed funding without needing to dilute your CAP table. It’s important that your business has a fundamentally strong financial model during application to avail the benefits from the above-mentioned grants.