7 sources of R&D funding in Canada

6 min read
Doug Bonderud

Success isn’t static. For entrepreneurs to achieve long-term return on investment (ROI), innovation and evolution are critical. The foundation of these business best practices? Research and development (R&D) initiatives that:

  • Streamline current offerings
  • Create new products
  • Sharpen the business’s competitive edge

Effective R&D offers the dual benefits of improved productivity and product differentiation, in turn helping organizations stand out in increasingly competitive markets.

Work from two Nobel prize-winning economists suggests that increased R&D spending also creates a self-sustaining loop:

”Spending generates new ideas, leading to economic growth, which provides the resources for yet more research spending, generating a virtuous cycle.”

Many government agencies now recognize the positive impact of research and development on economic growth. In Canada, many opportunities exist for companies to use both public and private funds to help drive better R&D.

Let’s dig in.

Related: How to do minimum viable product research

Where to find R&D funding in Canada

Planning to do research and development in Canada? Check out these sources of research and development funding.

  1. SR&ED tax incentives.
  2. The Strategic Innovation Fund.
  3. Global collaboration.
  4. Personalized innovation plans.
  5. Specialized R&D programs.
  6. Post-secondary partnerships.
  7. National Angel Capital Organization.

Backed by both public and private partnerships, Canadian R&D is generating global impact. Keep reading for details.

Finding R&D resources

Maybe you’ve got a great idea on deck, or you’re looking to innovate on an existing product — what are your options for R&D support in Canada?

1. SR&ED tax incentives

The Government of Canada supports R&D through its Scientific Research and Experimental Development (SR&ED) tax incentive program. In 2015-2016 alone, the program offered more than $3 billion in SR&ED investment tax credits.

Canadian-controlled private corporations (CCPCs) can receive refundable tax credits of up to $1,050,000 per year.

R&D Man Wearing Virtual Reality Headset

CCPCs receive a tax break on 35 percent of the first $3 million of qualifying SR&ED expenditures, reducing total taxes payable. This initiative allows you to “deduct the SR&ED expenditures to reduce their tax liability in the current year or carry these expenditures forward indefinitely.”

Editor’s note: Don’t have a website yet? Launch one today with our 30-day risk-free trial. Includes all you need to put your startup in front of lenders and investors.

2. The Strategic Innovation Fund (SIF)

If you’re planning a large-scale R&D project, the SIF program could help offset your total costs. This program targets Canadian for-profit organizations looking for $10 million+ in contributions — to date, SIF has backed 63 projects with more than $2 billion in funding. All applicants must complete a Statement of Interest to begin the process.

3. Global collaboration

The government of Canada also facilitates collaborative R&D with technology innovators in:

  • Asia
  • Europe
  • Latin America
  • The Middle East
  • The United States

The Canadian Trade Commissioner Service provides a list of collaborative opportunities and in some cases provides financial support through the Canadian International Innovation Program (CIIP).

4. Personalized innovation plans

Innovation Canada has an interactive web portal where you can create a custom list of financing sources, expertise and facilities that could support your R&D efforts. Simply enter your location and key R&D needs, along with an overview of business operations to find best-fit programs and services.

5. Specialized R&D programs

Select businesses can also benefit from specialized R&D support. For example:

R&D Toyota Auto Prototype
The biggest companies in the world got that way through continuous R&D.

6. Post-secondary partnerships

Businesses looking to enhance R&D results and gain access to government grants might be well-served by partnering with local universities.

This offers a dual benefit: Access to some of the brightest minds in Canada and eligibility to apply for Alliance Grants, which cover $20,000 to $1 million in R&D expenses per year for up to five years.

7. The National Angel Capital Organization (NACO)

Some ideas don’t fit pre-defined agency categories. Other research and development initiatives are too large in scope and scale for government grants to underwrite.

R&D Angel Wing

Not all R&D funding happens via government channels.

Here, NACO may provide an alternative solution. This national community of angel investors, incubators and accelerators is committed to fostering growth in early-stage companies across the country. To date, NACO includes 40 angel networks, 4,000 angel investors and has provided over $850 million in direct financing across 2,200 investments.

The Canadian connection

Canadians are no strangers to solid R&D. While we may apologize for taking first place in tech sprints and sporting events, there’s no denying that Canadian researchers and companies are changing the world with their discoveries:

Direct hydrogen extraction

A team of Canadian researchers has developed a “large-scale, economical method to extract hydrogen (H2) from oil sands and oil fields.” Using a combination of injection oxygen and specialized filters, H2 can be freed and captured at a fraction of current costs and without releasing massive amounts of carbon.

Reduced cannabis odour

With cannabis now legal in Canada, companies are investing R&D dollars into boosting sales and eliminating roadblocks.

CannabCo is tackling the task of reducing cannabis odour, and is currently raising capital for a pilot facility in Brampton.

If successful, CannabCo says the new approach will eliminate cannabis smell when stored and “virtually” all odours during combustion.

Cancer containment

In 2017, Queen’s University Ph.D. student Caitlin Miron identified a “quadruplex” compound that may help stop the spread of cancer. By using the compound as a kind of microscopic superglue, there’s promising potential to stop cancer cells from reaching DNA sections that empower replication.

Further R&D — both private and public — will be required over the next five to seven years, as this breakthrough is assessed for medical and commercial effectiveness.

Reinventing research and development

R&D produces direct benefits both for startup companies and the countries in which they operate. And while Canadian organizations and researchers have a long history of cutting edge R&D, it’s often difficult for entrepreneurs to self-fund research at the speed and scale needed to stay competitive.

Small businesses need to think outside the box.

From tax incentives, strategic funding and global collaboration to university grants and angel investors, Canadian companies can choose the financial foundation that best matches their R&D roadmap.

The information contained in this blog post is provided for informational purposes only, and should not be construed as an endorsement or advice from GoDaddy on any subject matter.