Government investment in early-stage companies is of particular importance at a time when there is a growing concern that many Canadian startups that rely on angel investors may be losing access to funding due to global uncertainty and border restrictions.
In a recent article by The Record, reporter James Jackson noted that “Angel groups across Canada are calling on the government to create incentives to get Canadian capital off the sidelines and invested into homegrown companies and talent.”
Jackson cited Iain Klugman, CEO of Communitech, Jess Joss, CEO of Equation Angels (comprised of KW’s Golden Triangle Angel Network, Burlington’s Angel One group, and London’s Southwestern Ontario Angels), and Amber French, principal at Archangel Network of Funds and Managing Partner of Catalyst Capital. According to Klugman, “It’s time for the government to put into place some incentives.” He suggested, “One option would be an angel tax credit worth up to 50% of the investment.”
Another option to help start-up companies would be to increase their access to government subsidies. Following news regarding the extension of the Canada Emergency Wage Subsidy (CEWS) program, the Minister of Innovation, Science and Industry, Navdeep Bains, announced his openness to extending the National Research Council of Canada’s specialized COVID-19 Innovation Assistance Program (IAP) as part of the Industrial Research Assistance Program (IRAP), in a recent interview with BetaKit.
On April 17, 2020, Prime Minister Justin Trudeau announced an additional $250M in funding through the NRC-IRAP IAP to support innovative, early-stage companies that are unable to access existing COVID-19 business support measures. This additional funding provided a wage subsidy of up to 12 weeks to eligible employers; however, that initial call for applications is now closed.
Similar to the passed bill in July to extend the 75% emergency wage subsidy, extending IRAP IAP would insulate Canadian businesses from the devastating economic effects caused by the COVID-19 outbreak. In reference to restarting the economy, Minister Bains said, “We need a strong, robust innovation ecosystem, and we need to make sure those companies are positioned to succeed.”
Bain continued by saying that “We want to make sure that the wage subsidy and the timeline associated with that also mirrors the timeline associated with the IRAP program.” The minister noted that IAP leveraged the pre-existing IRAP program and focused on pre-revenue companies and high-growth firms that were not previously eligible for emergency funding.