Archive for the ‘SR&ED News’ Category

Li-ion Motors Corporation has announced that they will make plans for additional collaboration with Canadian firm Lithium Electric Vehicle Corporation (LEVC) to take advantage of Canada’s Scientific Research and Experimental Development (SR&ED) program.  Li-ion’s fully electric vehicles (the Inizio and the Wave), along with their battery-management and electric propulsion technologies, are technological advancements over the traditional fuel-powered vehicles.

The Canadian SR&ED program has made it possible for Li-ion to work with LEVC in order to maintain its world-wide edge in electric propulsion system.  This is because the Canadian SR&ED program is the most R&D-friendly program worldwide.  Through this collaboration, Li-ion aims to bring their products to market with full certification.

Although much criticism has been heaped onto the SR&ED program as of late, especially after the Jenkins Report, the Li-ion case is an example of how the SR&ED program is effective at encouraging research and development in Canada, while keeping jobs within Canada.

During a speech today at the Creative Economy Summit, the Minister of State for Science and Technology, Gary Goodyear, announced that Canada will continue to make key investments in science and technology.

“Through our government’s science and technology strategy, we are keeping our economy strong, creating high-quality jobs and ensuring Canada is a premier destination for the world’s top researchers.  By supporting innovation, we are not only encouraging cutting-edge research but also bringing promising creative ideas to the marketplace.”  (Gary Goodyear)

In regards to SR&ED, the federal government is currently studying the recommendations of the Jenkins report, and while they do not necessarily subscribe to all of the recommendations, they agree with the need to address the challenges present in business-related R&D.  Gary outlined the achievements of Canada’s science and technology strategy, which is aimed at attracting and retaining the world’s brightest researchers, increasing R&D investment, and commercializing promising research.

In an interview with Reuters, Energy Minister Chris Bently refused to alter controversial rules that require local content for all projects.  The FIT review will be complete by the end of March, and it is expected that cuts will be made in the generous government subsidies that have previously jumpstarted renewable energy businesses in Ontario.

Ontario launched the feed-in-tariff (FIT) program in 2009 as a means to create jobs to replace jobs lost in the declining manufacturing sector.  The FIT program pays above-market rates to producers of renewable energy, such as solar power, wind power, and biomass.

Although cuts will be made to the FIT program, our view is that reductions can be offset by other funding mechanisms, such as refunds from the federal government’s SR&ED (Scientific Research & Experimental Development) program.  The SR&ED program offers a refundable tax credits of up to 40% of prior R&D expenses incurred within Canada, for the last 2 fiscal years.  The local content requirements will likely make many activities eligible for SR&ED.

Waterloo and Toronto, February 15, 2012 - North Innovation Fund (NIF), a privately-held alternative financing firm providing ongoing SR&ED accrual loans to early stage Canadian companies in a variety of technology-based sectors, today announced the launch of its first Fund.

The Fund was created to identify high growth and innovative companies that are in need of non-dilutive growth capital to accelerate their transition from early stage to commercialization.  NIF’s objective is to play a role in Canada’s ecosystem through ongoing SR&ED accrual debt financing. The SR&ED program, a federal tax incentive program that encourages research and development activities in Canada, has long been the primary source of funding for early stage companies in Canada.

According to Thompson Reuters Canada, between 2000 and 2010, venture capital investment decreased by more than 80 percent from approximately $5.9 billion to $1.1 billion. During the same period, the number of companies receiving venture capital decreased by more than 64 per cent from 1007 to only 357 during that same period.

“We have identified an important gap in the early stage capital markets ecosystem. There needs to be more non-equity (i.e., non-dilutive) funding sources to bridge the funding gap.  The SR&ED program in Canada works and provides much needed funding to early stage companies – the only problem I see, is the fact that they have to wait over 12 months to receive their cash”, explained James Ro, Managing Director of North Innovation Fund.  “We want to play a role in helping Canadian technology companies reach their next level of growth by financing ongoing SR&ED accruals in advance so that they can use the proceeds to hire more staff, fund working capital needs and execute their growth plan”.

For more information regarding North Innovation Fund and to contact the Fund regarding SR&ED financing or SRED financing opportunities, please visit www.northinnovationfund.com.

According to 2011 year-end figures from the Canadian Venture Capital and Private Equity Association, a four-year high of $1.5 billion from VC was disbursed to Canadian startups last year.  Although this was the highest level since 2008, this was far short of the $2.1 billion invested in 2007.

New funds for VC hit $1 billion in 2011, up only 2% from 2010, which pales to the 32% jump in the United States from 2010.  High-tech startups have had to look for alternative sources of funding in the past few years, due to limited VC supply.  With limited growth capital available, startups have had to rely on government funding programs, such as SR&ED, and the financing of SR&ED accruals to generate internal cashflow.

Canada’s fastest-growing tech firms include:

1.  Accedian Networks (St. Larent, Que.; 50,136%)

2. RTI Cryogenics Inc. (Cambridge, Ont.; 46,278%)

3. Avigilon (Vancouver; 38,796%)

4. NexJ Systems Inc. (Toronto; 29,161%)

5. Real Matters (Markham, Ont.; 28,265%)

6. Arise Technologies Corp. (Waterloo, Ont.; 10,017%)

7. Clevest Solutions Inc. (Richmond, B.C.; 7,976%)

8. Dominion Voting Systems Corp. (Toronto; 3,539%)

9. Acquisio (Saint-Lambert, Que.; 2,622%)

10. GuestLogix Inc. (Toronto; 2,322%)