Posts tagged Canada
Today, during Ontario’s Civic Holiday, I finally got around to filling out Deloitte Technology Fast 50™ CEO Survey. There was an interesting question that sparked a thread that I’ve been thinking about lately:
“Specifically, do you think the SR&ED tax credit program is pretty good as is, or needs improvement? If it needs big changes, what would be the first change you would make?”
For those of you who don’t know what the SR&ED program is, go learn more because it can save your business tons of cash over time and help you finance your business with non-dilutive government assistance.
For those of you running (or have previously run) early-stage stage startups, here are my thoughts: Currently SR&ED will refund a portion of a startup’s R&D costs based on expenses incurred during the previous year – some of those earliest expenses claimed were incurred 18 months prior to the claim. For startups, this is an eternity. Today, startups can grow and die violently before they get their first SR&ED claim, which could have helped them to pay one more employee, solve one more problem or help one more customer.
The Canadian government should consider modifying the SR&ED program to include a faster-reimbursement timeframe for startups (making less than $1,000,000 in revenue per year). For example, this could mean making claims quarterly and being reimbursed within 60-90 days – this would massively improve startup financing in the short-term. A modification, as requested, would help startups build value and growth potential more quickly and help the overall competitiveness of the Canadian technology sector.
Will anyone help to stand behind an initiative to get the Canadian government to improve the SR&ED program for startups? Join the conversation in the comments below.
I figured it would be appropriate to write about the lack of a growing and robust venture capital community in Toronto since it cropped up in three places over the last 2 days – once with several folks at Startup Drinks last night, today over coffee with Jeremy Laurin of OCE’s Investment Accelerator Fund and on Quora (the new social network launched by the ex-CTO of Facebook). On a side note, Quora is actually pretty snazzy with super-high-quality people.
Back to the main point of this thread — I’ve been talking about this situation for roughly 3.5 years now — first in the biotech/life science VC community in Toronto and now with the ICT community. I believe there is one problem at the root of both sectors — we need a kick-start in Canada.
What does that mean, a kick-start? Well, most people believe that there is a fundamental funding gap in Toronto’s venture community between pioneering research (in universities, by startups, etc…) and venture capital finance-able deals. That may be the case, but that is a different argument for a different day. I believe there is a more substantial funding gap that exists once a ’successful Canadian company’ reaches the point of raising a round of capital greater than $15 million. The existing VCs in the community (generally) just can’t get those kinds of deals done. It’s not in our Canadian cards (given the average fund size, risk thresholds, etc…). Canadians need later-stage financing options (or Government money) to back those deals and to create a better later-stage ecosystem.
So, what happens instead? Great Canadian companies knock on the doors of VCs South of the border who are flushed with cash and willing to invest larger amounts in later rounds. For the record, I love US VCs. However, for the purpose of this discussion, or monologue rather, they have tended to bring companies close to home to minimize their geographical risk with the investment. Now, as companies continue to grow and are eventually sold, the successful founders and key employees of those companies often (not always) stay South of the border to further progress their careers — joining US companies, or launching other companies in those locales. Worse for Canada, those successful folks often reinvest in US VC funds or Angel invest in other local US companies rather than Canadian startups.
Envision that cycle reoccurring over and over for the last 30 years. The trend becomes large enough that a substantial amount of capital, and human capital for that matter, gets lost from the Canadian startup ecosystem.
Some say that there is a lack of venture capital in Toronto because there just aren’t great deals. I disagree. I think that there is a lot of talent in Toronto and in the surrounding areas, like Waterloo for example.
Now, the scenario I’ve described may not be the only reason for the lack of capital in Toronto (or Canada), but I feel that it is a significant part of the problem. What are your thoughts?
Thus far, 2010 has been a year of self-awareness for me. First, I kicked-off the year by deciding to track my workouts, number of books read, hours of sleep and how I’m feeling each day. So far it’s been a very rewarding and enlightening experience (let me know if you want a copy of my Google Doc I’m using to track everything). However, as Q1 is wrapping-up, I have already seen my workout pacing decrease as my day-to-day responsibilities increase. I didn’t like this one bit. To re-prioritize exercise within my lifestyle, I have committed to running a 10km race in 41 days. I have neither ran 10k nor raced in any event previously. Wish me luck.
Sporting Life 10k For Kids with Cancer
The Sporting Life 10k is scheduled for May 2, 2010 and is supporting Camp Oochigeas, a camp for children with cancer. With no government funding, Camp Oochigeas relies on the generosity of volunteers, donors, community participants and the Hospital for Sick Children to provide year-round programs for children affected by childhood cancer at their campsite in Muskoka and at no cost to their families. I am personally raising at least $250 (update: at least $500) for this charity — please support me in my fundraising efforts.
Gearing-up: Nike + iPod
To get in-gear for the 10k, I joined Nikeplus.com (my profile page) and consulted their “coach”. Unfortunately, Nikeplus only offers a 12-week program — not 42 days (as at yesterday) — so I figure I’ll follow the first 5.5 weeks of the program to get in-shape for the big run. Yesterday, I was assigned my first run from coach — I had to run 4.82km! Talk about being thrown into the deep-end. So, I ventured to the University of Toronto gym to run the indoor track with my Nike + iPod sensor and iPhone to track my progress.
Although I had to walk for a few periods of time, here are my net results for run #1:
- Distance: 4.82km
- Duration: 30:42
- Pace: 6′22″ /km
- Fastest Kilometer: 5′42″
- Calories Burned: 371
If you join Nikeplus, add me as a friend (username: jsookman).
More Details on the 10k Race
It is Canada’s easiest and one of the fastest downhill 10k’s (a good starter, I think…), and it runs right down the middle of Canada’s most famous street—Yonge Street! The start line is four blocks south of Sporting Life (at Yonge & Roselawn). From there, the course heads south on Yonge Street all the way to Richmond Street. It then turns west on Richmond, south on Peter/Blue Jays Way past Gretzky’s to Front St. The course then goes west along Front, south on Bathurst, west on Fort York Blvd. to finish! See the map below.
Once again, please consider contributing to Camp Oochigeas. It is performing miracles for these children.
I want to draw your attention to a blog post that I wrote on the BlackBerry Partners Fund website a few months ago. In times of recession, when cash is tight and purchase orders are scarce, understanding how and where to receive financing becomes of paramount important.
For additional details, please refer to the full article.
Here are some of the highlights:
- Apply for IRAP funding (provided by the NRC)
- Apply for SR+ED tax claims through the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program
- Funding Source: The Investment Accelerator Fund (IAF). Through investment of up to $500K, the IAF helps launch high potential technology ventures.
- Funding Source: MaRS Discover District has a number of services that can help entrepreneurs. They have funding from the Ministry of Research and Innovation for business projects and investments of up to $500,000 in seed capital.
- Ontario Centre of Excellence for Communications (OCE) and Information Technology helps startups by co-investing in the research and development of leading-edge, industrially relevant, technologies through partnerships at universities, and moving the results into the marketplace, through existing companies or new, spin-off enterprises.
If you are a mobile start up, please feel free to apply for Jump Start Financing at the BlackBerry Partners Fund, which can invest up to $500K USD into innovative start ups.