Financial Supports for Canadian Tech

Everyone's favourite topic: Non-dilutive financing and tax incentives!

Show Notes
In this episode we talk about different grants, contributions, tax incentives, and non-equity financing that there is available in Canada, specifically British Columbia and how it has helped our businesses. Here is a list of the grants/programs/incentives that we discuss and links to find out more information:

SRED (Scientific Research and Experimental Development) Tax program The company Angela mentions in the episode which specializes in SRED claims is Infinity SRED

There are many contests & competitions to apply for, if you are interested in more information we suggest starting to take a look at organizations that support the type of contest/competition you might be interested in.

Incentives and contributions are great, we have used them along the way when they fit with work we were already undertaking. Just remember, it is better to focus on your product and less on distractions.

Fact Check

Jonathan mentions he is into a new marble league, if you are interested in checking it out it is in fact called Jelle's Marble Runs and can be found on YouTube.

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Credits

Produced by Jonathan Bowers and Angela Hapke
Music by Andrew Codeman (CC BY 3.0)

Transcript

Jonathan: When you move, when you move the arm, it makes this like sound like, check this out. Like when you hear that, Oh, whoops.
[00:00:10] Angela: Totally.

[00:00:10] Introduction

You are listening to Fixing Faxes, a podcast on the journey of building a digital health startup with your hosts, myself. Angela Hapke
[00:00:22] Jonathan: And I'm Jonathan Bowers and we have been infatuated with Marble League.
[00:00:30] Angela: I don't know what this
[00:00:30]Jonathan: it is the best sports to watch while there is no sports. Although the risk sports now, I actually discovered it last year, but I didn't watch it until, COVID times.
[00:00:38] Cause I didn't think Julie would enjoy it, but she really likes it. So imagine, imagine, imagine the Olympics, but if if the athletes were marbles. Yeah. So they, they like set up these, these courses and they put marbles at the top and the marbles just there's a machine that like releases them at the same time and the marbles go racing down the track.
[00:01:00] Angela: Okay.
[00:01:01]Jonathan:  but, but they have teams, so they have teams that are named.
[00:01:04] So I'm a fan of the O'Rangers. They're the orange team. And Julie likes the Misty maniacs because they look like, or know the minty. minty maniacs. They're minty colored. Cause she likes mint and it is phenomenally exciting to watch and you get very emotionally involved in it.
[00:01:22] If you pick a team it's so much fun. Yeah. And there's like there's drama
[00:01:29] Angela: I'm so confused about like, given, okay. So, Oh, there's so many questions I have. Where do I start? Given the race? Like the track or the course?
[00:01:44] Does a team pick a certain marble.
[00:01:48] Jonathan: Yes. So some of them, some of them are, like there's some, some events that require the whole team. Like there's, um, there's a, a push event. Like it's a strength event and they all raced down and they have to push this thing along the track. And the further it goes the higher your rankings are.
[00:02:03] Um, but then there's ones that are just, Like you're competing with all the other teams. And so there's just one marble and all the marbles have names. Yeah, they do. my favorite team names is team Momo and I don't understand marbles at all, but there's a team called team Momo.
[00:02:16] And one of the, the team captain, his name is Momo. but then there's Mo Momo. There's another marble on team. Momo. It's super fun.
[00:02:25] Angela: so captains are real people?
[00:02:29]Jonathan: No everyone is marbles. they're all marbles. The referees are marbles. There's a whole like stadium of marbles, I that cheer and they hold up a little marble signs
[00:02:36]Angela: And what, sorry, what is it called again?
[00:02:40]Jonathan: It's it's called, Jelle Marble League. I think it's the name of the person who created Jelle's Marble League.
[00:02:51] Angela: I want to say that I'm going to go check this out, but I'm really not sure that I'm going to
[00:02:55] go check this out. Do you think my daughter would think this is funny too?
[00:02:59] Jonathan: I think so. I think if you watched it with her
[00:03:01] Angela: Like there's no bad words in it.
[00:03:03] Jonathan: no, it's
[00:03:04] Angela: Okay.
[00:03:05] Jonathan: Um, You need to pick a team though, like go from the opening ceremonies. There's an opening ceremonies. Pick it. Yeah. There's an opening ceremonies. Pick a team, like decide on just some random team and that's the team you're going to
[00:03:17] Angela: You got to stick with
[00:03:18] Jonathan: It's awesome. Like, there'll be a, there'll be a moment where your team like comes back from the, from the back of the pack and overtakes, and you're going to cheer. I promise you you're going to cheer. So I think, I didn't think Julie would think this was funny or fun or anything, but she really likes it.
[00:03:32] And, uh, we've been watching John Oliver and he he's sponsored the whole season. Yeah. So it's, it's a marble league presented by the, uh, Yeah, John Oliver, and every, every episode, a $5,000 donation gets made to a food bank in the name of one of the marble teams that wins
[00:03:54] Angela: I love it. That's actually quite cute.

[00:03:56]Grants and Goverment Funding

[00:03:56] Jonathan: Yeah. It's super fun. Love to see how we transition out of marbles into something.
[00:04:00] Angela: Oh, Lordy.
[00:04:01] Well, so today's episode might put you to sleep. We're going to talk about grants, not equity, funding, and taxes incentives.
[00:04:13] Jonathan: I mean it's okay. So it's not that
[00:04:19] bad.
[00:04:19] Angela: It's not
[00:04:20] Jonathan: it's super boring, but it's an interesting, it's an interesting thing to talk about because, Canada, and in some ways, particularly BC is a very, is a really great place to start a technology company because of all of the government incentives.
[00:04:36] Angela: exactly it. There's a lot of people saying that, Canada is going to be like the up and coming leader in tech, a lot of it has to do with the way that we welcome the way that we welcome tech firms, but also the way that we welcome tech talent too. Probably more importantly.
[00:04:57] So that's, that's kind of cool. And I know for us, there's a there's, there was a couple of grants that we got that. It really got us over some super important bumps along the road. Like the only reason that Jackie's with us is because of the grant that helped, right from the get go
[00:05:16]Jonathan: Tell me a little bit about the, about the grants that you received.
[00:05:19]Angela: Backing up to about a year and a half ago now I was in contact with our local IRAP representative. So IRAP is the Industrial Research Assistance Program put on by the national research council in Canada here. And they have different types of pots of money. And maybe actually you should probably talk about, you know, kind of like more of the IRAP grant program, but what we accessed through them was a youth unemployment grant.
[00:05:51]They had some certain qualifications that they had, and it was to be, like a relative recent grad from a post secondary institution. Um, so, and, and youth, so under 30, and I'm sure there was a couple other things like unemployed or underemployed. And right at the same time that I was talking to Kevin about that, I was also talking to Jackie who was still in university at the time about her honors thesis that she was doing, which was aligning beautifully with what we were doing. And then I was, I was thinking at the time, man, if I could afford to hire this young woman coming out of university, that would be great.
[00:06:33] And right at that, But I think within that week or the next week, Kevin informed me that there was some, some money available around youth employment. And I was like, Oh, well, I have the perfect person and, uh, that's how we hired Jackie right away.
[00:06:47] And I think they covered. I want to say it was 80% of her salary for like six months. And that was the only way I could have hired somebody. And I don't know what I would do without her. So thank goodness.
[00:06:58]Jonathan: I don't think they're called grants.
[00:07:01] Angela: am I calling it something wrong?
[00:07:03] Jonathan: Well, I think, no, I think they call it a contribution. So
[00:07:09] Angela: You're right. They did use that language a lot. Sorry,
[00:07:15] Jonathan: yeah. There's a lot of, there's a lot of restrictions on
[00:07:18] Angela: what we can call it. Yes. Thank you for, for clarifying that for me,
[00:07:24] Jonathan: a lot of these funding opportunities, these government funding opportunities exist to help de-risk some of these investments, particularly that small companies might be making, like, you know, making a hire
[00:07:37] Angela: is such a huge cost to, um, startups.
[00:07:42] Jonathan: Well, it's the biggest cost usually. Yeah.
[00:07:45]Angela:  and in our case It would have been a harder road. Had I not. we found a perfect fit and, we had more momentum with that hire than we would have otherwise.
[00:07:57] Jonathan: Yeah.
[00:07:59] Yeah. And it, it, I liked those ones. They also incentivize you to hire, you know, take that chance on someone relatively new. So it's, it's also de-risking that, right? Like, you don't really know if a new graduate is going to perform at the level that you need them to, or want them to, or be able to grow into that.
[00:08:18] But if, if, if you're taking some of that risk off the table and, you know, giving them a little bit more opportunity to grow into that role, that's I get, like, I really liked the grants for that.
[00:08:29] Um, just, you know, just let's de-risk this opportunity, hire someone, hire someone new, give them their first job. and I think that aligns really well with, our, our culture a bit too. Like both of us, both you as CRS and us as Two Story Robot.
[00:08:46]Angela: because you're more familiar with IRAP's other programs. Did you want to talk about that at all? Or.
[00:08:53]Jonathan: So the one, the one contribution that we receive from IRAP was a, was a small project. So it's under $50,000 and same, same kind of deal. Like they cover 80% of salary costs. but it allows us to explore a product that we wanted to build, with very little risk and we still had to, we still had to sell it to show the ability to actually pay for the entire project without the grant, or sorry, without the contribution. Uh, but once you got the contribution, then you're just kind of on the hook for the 20% plus whatever overhead you'd have to pay to keep that, you know, keep the lights on and then you get to you just kind of just get to explore this product and try and build this product, without, without a lot of that risk and it may not have ever happened.
[00:09:41]downside is we, you know, we ended up. It just didn't work. We didn't have market traction for that, for that product.
[00:09:47] Angela: but it allowed you to try.
[00:09:49] Jonathan: yeah. And yeah, it allowed us to try and we learned a ton about just the process of building, building products, which led to getting hired Fresh Grade and some other things.
[00:10:01] Angela: I think the, the whole idea of, de-risking projects to allow the creative freedom, to really explore and research and, and develop new things, is the idea behind it. But I know for us it's, it has been exactly that. We should say that also the, the process to accessing these types of contribution is a bit as a competitive process. There's limited, contribution availability out there and that, uh, like we've, we've asked a couple times for projects to be considered and we haven't been approved.
[00:10:39]But anybody that I've spoken to that has access to IRAP money has said very, very good things about it and what it's done for them.
[00:10:48] Jonathan: It's a great, it's a great program. It's, it's not overly burdensome to
[00:10:53] Angela: No.
[00:10:54] Jonathan: it's actually pretty, it's pretty easy. Um, we, when we had our agreement, it was right at the right during the time that, NRC got hacked,
[00:11:05] um, and then we had to do everything by mail or by fax and it was, Oh, it was, it was, it was unpleasant. Yeah. I remember at one point yeah. Fax. I remember, I remember cause we didn't have a fax machine cause why,
[00:11:23] Angela: Well, no. Why would you,
[00:11:25] Jonathan: and it took me all day to figure out how to send a fax.
[00:11:29]Angela: so you should have just gone to your local doctor office.
[00:11:33]Jonathan: Yeah. I tried like our copier, the copier in the building had the ability to fax that didn't work. I w went up to Staples and said, Hey, can I fax this? And they said, uh, yeah that's going to cost you a hundred and some odd dollars. So why? Cause we charge by the page differently for a long distance fax.
[00:11:52] And this is, that doesn't make any sense, like
[00:11:54] Angela: Oh my goodness. Yeah.
[00:11:57] Jonathan: so. Ridiculous. and then I came back and like explored all these things. But by the time it was all said and done, I had spent an entire, I wasted the whole day.
[00:12:06] Angela: day
[00:12:07] Oh, my word. Oh, my word,
[00:12:10] Jonathan: machines
[00:12:11] Angela: fax machines. No.
[00:12:14] Jonathan: know. So silly.

[00:12:16]Tax Credits

[00:12:16]Angela: the other thing I did want to talk about was recently we received, like SR&ED tax credits. And so it's our, our first year, because 2019 was our first tax year where we were, we would have had activities that would have qualified for SR&ED. And I wanted to talk about that a little bit because.
[00:12:38]number one, I was so impressed with the whole, uh, like I, we had a company that helped us out and they were amazing. I hardly did anything and yes, I paid them to, you know, a commission to do this, but, um, I didn't even think we would have qualified until a friend of mine she owns a tech company and Regina had told me about how
[00:13:03] she also did the same thing and she's like, how's it just, just contact this guy and see if, if, uh, you know, maybe, maybe CRS has some activities for, for last year in blah, blah, blah. And it was amazing. He was just like, got me started and filled out the application for me, submitted everything for me. And I was just like, I w I was amazed at how slick the process was and, um, what a great tax incentive.
[00:13:31] So SR&ED is Scientific Research and Exploration and Development
[00:13:36] Jonathan: Scientific Research and Experimental Development.
[00:13:39] Angela: development, um, tax credit. So anybody that's doing, um, Just new, new specifically. It can be in the resource sector too. Right. So like mining and, and, you know, like engineering and things like that. But also for tech back it's, it's building something new, uh, which what we're, which is exactly what we're doing and as a majority of our time and effort.
[00:14:01] And so, yeah, we did that through them and I mean, you have to. So when you have contributions through IRAP and then tax credits top of it, it just like, I was, I'm just so impressed with how, um, how well that all came together for us. And a couple of them were surprises too. And I was like, Oh, thank goodness.
[00:14:21] Cause this year was. tight year, so it continues to be a tight year. So very like, and these are the kinds of things that help us go through these first few years as a tech company. I mean, you're really not profitable until typically year three. And so it makes it, uh, it makes the tough times a little easier.
[00:14:41] So that
[00:14:42]
[00:14:42]Jonathan: so one of the really interesting things about SR&ED is there. They're trying to incentivize technical uncertainty. And they, they don't care if it succeeds or not. Like that's not, that's not on the metric. So you don't have to do something that is successful. You just have to try to solve a problem that has never been solved before.
[00:15:00] Angela: I think this is why I'm so impressed with these types of, incentives. Let's just call them incentives and blanketed. That way is so much of what we're trying to do. Has a low success rate. Yet there's so many spinoff benefits of it. Even if it does fail, we learn things. We can try new things. Um, like all, all of those, all of those spinoffs are amazing.
[00:15:29] And we have, um, Um, incentive programs and, and either government or non-governmental bodies that are supportive of that, that at least trying, even if you fail, we know that there's going to be learnings from it. We know X, Y, and Z will come out of it. Um, and they love that. I love that because, so I'm such a big proponent of systemic change and how hard systemic change is and can be that the failure rate is so high when it comes to trying new things and trying to change things, um, that it's. So it's so nice to feel a bit supported in a way that is meaningful around that, like financially
[00:16:17] Jonathan: Yeah. Yeah.
[00:16:19] We did our own SR&ED claim in the first couple of years that don't rec I don't recommend doing that
[00:16:24] at all. Um, But I, I did it. I sent it off and the, the person from Canada Revenue phoned me up and said, okay, you've done this kind of wrong in some spots.
[00:16:36] Here's what you need to do. You need to fix this part here. And I need some other documentation here and send it to me whenever you can send it to me, send it to me here. And I sent it and they come back to me like, yep, this looks good. Um, I need you to change this piece here.
[00:16:49] And I would change that and send it back. It took, it took a long time and it was really complicated and I was really frustrated with it because I waited too long. but they were so helpful
[00:16:59] Angela: They were cold. They were collaborative.
[00:17:01] Jonathan: Yeah. Yeah. I mean, he wasn't like, he wasn't helping me game it in any way. He would just like pointed out the fact that I probably filled this out wrong and I needed to clarify that, but gave me the opportunity to fix it. And didn't say like, why you did this wrong? That
[00:17:14] Angela: wrong. Send it back
[00:17:15] without help.
[00:17:17] Jonathan: just reject it.
[00:17:17] They just, like, I recognize that there was a problem
[00:17:20] Angela: That's so lovely. So my first SR&ED claim was done and I'm going to plug this guy cause I think he's amazing. His name's Daniah and it's Infinity SR&ED. And, um, so he helped my friend Kristy. So Kristy connected me to him and literally with, I think. I don't know, three phone calls, quite a few emails, like, you know, a few emails back and forth.
[00:17:43] She got all the information that he needed. He made our first shred claim. And, and literally like then Daniah emails me and he's like, okay, Angela.
[00:17:53] So they've processed it. Um, you're expecting this much back. And then he like connected like my accountant, um, directly. And I was like, it did honestly very little and then just like money in my bank account. The company's been counting on mine
[00:18:12] Jonathan: Yeah. Yeah. And it comes as a check. Like it's not like a rebate on future tax
[00:18:19] Angela: Yeah. This is not, uh, a tax. Yeah. Uh, re is that what it's called a rebate or whatever? Yeah. Like it's not like a tax credit. Oh no. It's
[00:18:27] called
[00:18:28] Jonathan: is a tax credit, but you just get it as a
[00:18:30] Angela: It's a check.
[00:18:32] Jonathan: It's not deducted from your tax filing later on in the year. You just get it back right now and you can, you can like, there's no stipulations on what you spend it on. You're probably going to spend it on salaries, but, um,
[00:18:43]Angela: yeah, I just, I thought that was really, really slick. It was a bit of a surprise to me that we were even going to be SR&ED-able last year. Um, now that we look back on it and I'm like, Oh, well of course we were, but just at the time, I had no idea. So it's always worth looking into, even if you don't think that you might qualify for it yet, because we didn't even have a product at that point.
[00:19:02] Right. We were in the midst of building one
[00:19:04] Jonathan: that's, that's good. Right? And There's some great programs like the Venture for Canada, which is a new program that I didn't know about. Um, they will back 50% of a, of, uh, uh, co-op student. So they have to be enrolled in co-op. Um, And they will pay for 50% of their salary up to like $5,000.
[00:19:27] I think it is. Um, that's a super, super great program.
[00:19:31] Um, but you can also stack that against another grant that BC has as in the, so Innovate BC has a, has their ISI grant. And then they have this other thing called co-op they're funny.
[00:19:41] One is you must be corrupt students. The other is you
[00:19:44] Angela: You must not be a CO-OP. Exactly. Yeah, we'll be hiring an intern for the fall semester with the, she is not a co op
[00:19:54] Jonathan: The ISI that's the innovative innovation skills initiative
[00:19:58] Angela: exactly. And it's a, it's a collaborative program between Innovate BC and New Ventures BC
[00:20:04] Jonathan: Yeah. Yep.
[00:20:06] Um, have you hired the person yet? Have you identified the
[00:20:08] Angela: Yeah, we have, yeah, September 8th or ninth.
[00:20:13] Just part time. So they, because, because they are in school right now also, so they're going to be going to school while they do this.
[00:20:20] Jonathan: local or? Sweet, that's exciting.

[00:20:24]Are Incentives All They Are Cracked Up To Be

[00:20:24] I actually have a, kind of a, also like an opposite view to grants and tax incentives. Um, and it's, it's something that, a bit of a mentor of mine had sort of pointed out was that it may actually disincentivize companies to do the thing that they're supposed to do, which is get revenue from customers.
[00:20:45] Angela: Oh, okay. I can see how that can be distracting.
[00:20:50] Jonathan: you can get, yeah, you can get really distracted with pursuing grants and because there's all of these available incentives, it becomes a bit of a distraction to pursue them all and, um, you know, to go and, you know, try and get your IRAP grant.
[00:21:03] And if you can't get it, then, well, you know, don't try. But really like if you just, if you took it, the approach to building your product a little differently, you might not need the grant in the first place. I still think there's lots of room for, for grants in certain applications. And obviously if they're there, you're going to go and try and take advantage of them.
[00:21:19] But I think it creates a, a weird, um, I don't want to say like a lack of hustle, but like a little bit of a lack of a hustle in companies, because they just think that the government will just support them
[00:21:31] Angela: Oh, that's and you know what? That is a, that is a totally fair perspective. As a company that has emerged from a government funded project, we could have gone down that rabbit hole or real easily. What I think helped us is focusing on the product that you want to build, focusing on what the users want.
[00:21:55] And in our case, you know, the other stakeholders being the patients, what makes the most sense for that? And. Pairing that with, I have a bit of a background in grants and funding and kind of knowing what's out there. So that was more organic for me is that the focus was build this and then
[00:22:15] is there anybody out there that has some incentives to help us build this? And if not, we're building it anyway. But anything and maybe that's the way I've approached it is everything is a bonus to me. The SR&ED was a total bonus. I mean, didn't, didn't expect that one at all.
[00:22:33] The youth employment grant was probably more pivotal. Um, because I knew I did want her, I, I, I don't, I don't think I could have hired her without it. So that was huge. But when you're talking about IRAP money, that is an interesting one because you have to be very, very specific on what you're doing. So here's a really good example of we've been in talks with IRAP about potential projects and things like that.
[00:23:01] Just as, as advisors through IRAP are supposed to have conversations with companies like us, about. And, um, there's been a couple of times where we've moved ahead quickly enough that the program wouldn't have caught up with us. Like we would have had to apply for a program, but by the time the money had come up, we would have already built it.
[00:23:22] It would have already been done. Like we're like now we're beyond that. We're going on to the next thing. but that could have been a spot where we could have delayed it. Cause it was like, Oh, we'll just wait for that IRAP money. Yeah. Wait for the grant, wait for the incentive to come out and then yada, yada.
[00:23:37] So I think you're absolutely right. As, um, specifically someone in like my seat, you can get so distracted and that was actually leading into the other thing I wanted to talk about too, was these contests. And these, um, purses and pockets of money were like these pitch contests
[00:23:57] and I will tell you, especially as a female founder, there are so many that are targeted at me. Like in any given week, I am getting probably five to six emails about something that somebody would like us to apply for and be part of, and I'm that, that can be
[00:24:22] Jonathan: Oh, yeah. Cause I mean the, yeah, it's the point of every business is to enter pitch competitions and.
[00:24:29] Angela: I can't I can't I'm so, um, and last year he got caught up in that a little bit. I will say, like, there was a couple, I probably entered four or five, um, unsuccessfully in most cases, but. This year it was one thing I told myself. I was like, you're not doing that this year. You're not entering these competitions.
[00:24:49] You're not entering these contests. Um, you're focusing on the work that you need to do. I believe that the success will naturally come if it's meant to be. Um, but by distracting me getting up on stage and giving pitches and trying to sell me and the company to a bunch of people is just.
[00:25:09] Who are not, let's be very clear. These people are not my customers at all. Like not even close, um, just there was no value in it for me, or very little value, I should say, because there, there is, there is monetary value to it, but, and the chances of success are so low.
[00:25:26] Jonathan: Yeah.
[00:25:27] Angela: Yeah. So anyway, 2020 is the year where we focus on a product and we do not focus on contests.

[00:25:34]The Oppression of Pants

[00:25:35] Nora. my youngest went horseback riding for the first time when she was out in Saskatchewan
[00:25:41] Nora doesn't like to wear pants a lot and she's potty training.
[00:25:44] So she's in panties all the time. And so she, so she rode a horse for the very first time. Bear back in panties. It was so cute.
[00:25:59] Jonathan: why should we have to live under the oppression of pants,
[00:26:02]Angela: Nora's words,
[00:26:05] I no like pants
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