42
The latest on the financing of innovation in Canada Presented in partnership with:

The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

  • Upload
    others

  • View
    2

  • Download
    0

Embed Size (px)

Citation preview

Page 1: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

The latest on the financing of innovation in Canada

Presented in partnership with:

Page 2: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Panel

• Michael Conway, President & CEO FEI Canada (Moderator)

• Sujeet Kini, Chief Accounting Officer, Open Text

• Peter McCusker, Innovation Funding Strategist, Alma CG

• Maria Negulescu, Vice President Operations, North America, Alma CG

Page 3: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

26 Years

Experience

$13.4B In innovation funding over

the last 5 years

Global Revenue

$363M

500+ active clients in Canada

Funding of Innovation & Cost Consulting

Alma CG is a global leader in the funding of innovation

and operational cost consulting

> 1 300 employees around the world

> Operations in all OECD countries

> Global funding strategies since 1986

> Canadian presence since 1998

Page 4: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Government Funding of Innovation in Canada

Table of Contents

• Key numbers on Government Funding of Innovation

– Canada within the global landscape

• Where does it stand and how did it get to this point?

– Five year historical overview

• Where is it going?

– Looking forward

• What types of funding are available?

• How do you find them?

– Self-analysis for eligibility

• Conclusion – Next Steps?

Page 5: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Key Numbers

General Funding • > 4,000 programs

• > $25 Billion

• Federal and Provincial

• Loans, grants, tax credits, industrial/regional benefits for:

– Business Development – Capital Investments – HR & Training – Innovation – Etc.

Funding of Innovation • > 1,200 programs

• Federal > $7B to support R&D

• Provincial > $1.75B to support R&D

• Scientific Research & Experimental Development (SR&ED) Tax Credits:

– Federal > $3.6B – Provincial > $1B

Government Funding for Canadian businesses

Page 6: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Source: Booz & Company

Global Innovation Landscape • Total R&D expenditures by resident companies around the world

• Total R&D expenditures by resident and foreign companies in the country

• Total R&D expenditures by resident companies in their own country

$ Billions

Page 7: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Global Innovation Funding Landscape

Canada remains among the most generous jurisdictions in the world

for indirect funding of innovation yet trails in direct funding programs

• 2008 figures

• Federal funding only

Page 8: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview 2

00

9

Landmark changes to

indirect funding

2009 Details

20

10

Jenkins Panel

On Government Funding of Innovation

More on Jenkins Panel

20

11

Jenkins Report

On Government Funding of Innovation

More on Jenkins Report

Main Recommendation…

1. Better administration of SR&ED

2. Less $ for indirect funding programs

3. More $ for direct funding programs

Page 9: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview 2

01

2

Reduced tax credits for SR&ED

Chart

$1.1B in direct funding + $500M of VC

funding Details | Details

Revised “Policy on eligibility of work for SR&ED investment

tax credits” Details

20

13

Financial impact of 2012 on SR&ED

takes effect Charts QC ON BC Atl

> $500M in direct funding Details

Revised form for SR&ED claims

Effective Jan 1, 2014 Details

Page 10: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Were you aware of the changes to the SR&ED Application Policy (Dec 2012) and Claim Form (Oct 2013)?

1. Yes and Yes

2. No and No

3. Yes and No

4. No and Yes

Polling Question

Page 11: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview 2

01

4

Financial impact of 2012 on SR&ED

takes effect Charts

$1.5B for new Canada First Research

Excellence Fund Details

> $725M in Direct Funding

Details Fr

om

20

09

to

20

14

Improved administration of

SR&ED

Less $ for indirect funding

More $ for

direct funding

Page 12: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Looking forward

SR&ED Tax Credit Program:

Still most generous program in the tax act for funding of R&D

Improved administration maintains credibility

Better balance between direct and indirect funding of Innovation

More direct funding opportunities

Business development, Capital Investments, HR & Training, Innovation, etc.

More Government programs to drive innovation and entrepreneurship, and support advanced research

Canada remains among the most generous jurisdictions in the world for indirect

funding of innovation and government is making efforts to invest more in direct

funding programs

Page 13: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Government Funding of Innovation

Indirect Funding

Tax Refund

Tax Reduction

Direct Funding

Funding

Repayable

Funding

Non Repayable

Funding

Both

Procurement Program

Page 14: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Indirect Funding of Innovation

Tax Refund

Tax Reduction

• Tax Refund: Refundable tax credits

• Tax Reduction: Non-refundable tax

credits

• Example: SR&ED Tax Credit

• TI < $500K = refundable

• TI > $800K = tax credit

• TI $500-800K = partially

refundable

• Entitlement based on meeting

eligibility criteria – some programs

require eligibility certificate prior to

claiming

Page 15: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Direct Funding of Innovation

Procurement Programs

Funding – Repayable

Funding – Non Repayable

Funding Both

Funding

• Repayable: loan guarantees, low

interest loans, interest-free loans

• Non repayable: grants

• Both: hybrid whereby repayment is

contingent on success of the

project – loan converts to grant if

project unsuccessful

• Application process:

• Meeting program criteria does not

guarantee funding

• Competing for fixed amount of

budget envelope

Page 16: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Direct Funding of Innovation

Procurement Programs

Funding – Repayable

Funding – Non Repayable

Funding Both

Government participates in

product development process

• Purchases product in pre-

commercialization phase

• IP must be protected

• TRL7-9 (Technical Readiness

Level): functional prototype in

operational environment, or better

• Calls for tender based on specific

categories of products (i.e.

environment, health, safety &

security, technologies)

Page 17: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Government Funding of Innovation

Indirect + Direct = More $$

Case Study: Quebec Manufacturer with $12K IRAP grant for project with McGill

IRAP only IRAP + SRED

Discussions with McGill 120h @ $30/h $3,600

Development of new system

Engineering: 360h @ $30/h (1 Tech + 2 Eng.) Tests & Mods: 400h @ $20/h (5 Tech.)

$18,800

SR&ED Incl. on expenses other than above labor $11,271

IRAP $12,000 Lowers SR&ED eligible expenses $12,000

TOTAL $12,000 $23,271

Page 19: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Idea

Self-Analysis of Funding Opportunities

Discovery

Concept

Business Case

Engineering & Prototype

Testing & Validation

Plant Scale up

Product Launch

Commercialization

Step 1 Cross-reference your product

development/innovation

management system with direct

and indirect funding categories

Example of Product

Development/Innovation

Management System in the

manufacturing sector

Page 20: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Step 1 Cross-reference your product development/innovation management system with direct and indirect funding categories

Ide

a

Dis

cove

ry

Co

nce

pt

Bu

sin

ess

Cas

e

Engi

ne

erin

g &

P

roto

typ

e

Test

ing

& V

alid

atio

n

Pla

nt

Scal

e-U

p

Pro

du

ct L

aun

ch

Co

mm

erc

ializ

atio

n

Indirect Funding

SR&ED

Other Tax Credits

Direct Funding

Procurement

Funding – Repayable

Funding – Non Repayable

Page 21: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Self-Analysis of Funding Opportunities

Step 2: Indirect Funding Review your indirect funding strategy for compliance with the latest Application Policies and government expectations

SR&ED

o December 2012 Application Policy

o T661(13F) Claim Form Effective Jan 1, 2014

Other Tax Credits?

Page 22: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Self-Analysis of Funding Opportunities

Does your Business Plan include projects for?

Business Development

Capital Investments

HR & Training

Innovation

Step 3: Direct Funding Update your Business Plan and identify projects within the following categories:

Page 23: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Self-Analysis of Funding Opportunities

Are you spending money on these types of projects?

Business Development

Productivity programs including plant re-engineering, lean manufacturing, and improved management information systems (i.e. ERP, IT Systems, etc.)

Implementing digital computer technology

New market development; retaining and expanding existing markets and developing export marketing strategies

Development of export marketing strategies

Trade shows or foreign customer/dealer shows

Development of e-commerce enabled website

Upgrading of website

Page 24: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Self-Analysis of Funding Opportunities

Are you spending money on these types of projects?

Capital Investments Purchases of new or upgraded equipment and technology to

increase productivity

Capital costs including renovations or specialized equipment/furnishings necessary for the project

HR & Training Hiring and training new employees

Skill enhancements costs

Page 25: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Self-Analysis of Funding Opportunities

Are you spending money on these types of projects?

Innovation New products

Patent searches and/or filings

Research projects with Universities and/or Centers of Excellence

Consultants, project managers and sub-contractor fees

Consultant’s studies (i.e. planning and strategy, technology evaluation, feasibility study/assessments for new products, processes or markets)

Page 26: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Conclusion – Next Steps?

A sound Innovation Strategy includes both Direct and Indirect Funding

1. Programs are in constant evolution

2. SR&ED remains the most generous program in the tax act for indirect funding of R&D however strategies must be adapted to the latest changes to avoid unnecessary risks.

3. Update your business plan and appoint resources – either internal or external – to identify, plan for and track sources of direct funding.

The money is there… don’t leave it on the table.

Page 27: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Global leader in the funding of innovation

and operational cost consulting

• Full service innovation funding strategies

• Full service claim management

• Innovation funding consulting

• Training, Peer Reviews, Audit Support

Peter McCusker [email protected]

T 1-866-931-0166 x138

Maria Negulescu [email protected]

T 1-905-760-7858 x507

Thank you!

Page 28: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Details and Charts

Page 29: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview 2

00

9

Improvements to admin of SR&ED:

50% of Federal indirect funding for R&D per year.

Revised T661 form: 1,400 words to establish eligibility of project.

25% more auditors added

Back 2

01

0

Jenkins Panel:

Appointment of independent expert panel to review Federal programs that support R&D and provide recommendations on how to maximize the benefit from the $7B spend. Back

Page 30: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview 2

01

1 Jenkins Report – Main Recommendations:

1. Create Industrial Research and Innovation Council;

2. Redirect $ from SR&ED to direct funding programs;

3. Federal government should be early adopter of innovative Canadian technologies;

4. NRC should be divided into centers of excellence linked to universities and industry;

5. BDC should become an active early-stage investor in Canadian technology businesses and collaborate with angel investors from the private sector; and

6. Federal government should develop closer links with the provinces to align science and technology policies. Back

Page 31: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview Fe

der

al B

ud

get 2

01

2

On Creating Value-Added Jobs Through Innovation: The Government is committed to a new approach to supporting innovation that focuses resources on private sector needs.

On Support for Research, Education and Training: The Government is committed to providing additional resources to support advanced research at universities and other leading research institutions.

On Creating Value-Added Jobs Through Innovation: The Government is committed to a new approach to supporting innovation in Canada. Economic Action Plan 2012 announces $1.1 billion over five years to directly support research and development and $500 million for venture capital. Back

Page 32: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Impact of 2012 Budget on SR&ED

Pre-2013 Jan 1, 2013 Jan 1, 2014

Enhanced tax credit rate for

small CCPC TI < 800K & up to 3M$ of expenditure

35% 35% 35%

Basic Tax Credit rate for

other entities 20% 20% 15%

Capital Expenditure Equip purchased or leased for SR&ED eligible eligible non eligible

Proxy rate for overhead 65% 60% 55%

Arm’s length sub-contractor 100% 80% 80%

Back

Page 33: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Impact of 2012 Federal Budget on SR&ED

Federal and Provincial combined recovery rates

Back

Pre-2013 Jan 1, 2013 Jan 1, 2014

Quebec

Salary Expenditures 47.0-82.1% 46.0-80.4% 38.1-78.6%

Consumed Material 20.0-35.0% 20.0-35.0% 15.0-35.0%

Sub-Contractors 27.0-47.0% 23.0-40.2% 19.4-40.2%

Capital Expenditures 20.0-35% 20.0-35% 0.0%

Ontario

Salary Expenditures 38.9-72.8% 37.8-70.6% 29.2-68.4%

Consumed Material 23.6-44.1% 23.6-44.1% 18.8-44.1%

Sub-Contractors 23.6-44.1% 18.9-35.3% 15.1-35.3%

Capital Expenditures 23.6-40.4% 23.6-40.4% 0.0%

Page 34: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Impact of 2012 Federal Budget on SR&ED

Pre-2013 Jan 1, 2013 Jan 1, 2014

BC

Salary Expenditures 46.2-68.5% 44.8-66.4% 36.4-64.3%

Consumed Material 28.0-41.5% 28.0-41.5% 23.5-41.5%

Sub-Contractors 28.0-41.5% 22.4-33.2% 23.5-33.2%

Capital Expenditures 28.0-41.5% 28.0-41.5% 0.0%

Atlantic

Salary Expenditures 52.8-73.8% 51.2-71.6% 43.0-69.4%

Consumed Material 32.0-44.8% 32.0-44.8% 27.8-44.8%

Sub-Contractors 32.0-44.8% 25.6-35.8% 22.2-35.8%

Capital Expenditures 32.0-44.8% 32.0-44.8% 0.0%

Federal and Provincial combined recovery rates

Back

Page 35: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview Fe

der

al B

ud

get 2

01

2

Budget Highlights – Direct Funding:

• $400 million to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector.

• $100 million to the Business Development Bank of Canada to support its venture capital activities.

• $110 million per year to the National Research Council to double support to companies through the Industrial Research Assistance Program (IRAP).

• $14 million over two years to double the Industrial Research and Development Internship program.

Back

Page 36: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview Fe

der

al B

ud

get 2

01

2

Budget Highlights – Direct Funding:

• $12 million per year to make the Business-Led Networks of Centres of Excellence program permanent.

• $105 million over two years to support forestry innovation and market development.

• $95 million over three years, starting in 2013–14, and $40 million per year thereafter to make the Canadian Innovation Commercialization Program permanent and to add a military procurement component.

• $67 million in 2012–13 as the National Research Council refocuses on business-led, industry-relevant research.

Back

Page 37: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview D

ecem

ber

20

12

Revised policy on eligibility of work for SR&ED tax credits

1) Was there a scientific or technological uncertainty – an uncertainty that could not be removed by standard practice?

2) Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?

3) Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypotheses?

4) Did the process result in a scientific or technological advancement?

5) Was a record of the hypotheses tested and the results kept as the work progressed?

More clear emphasis on scientific or technological uncertainties, the scientific method, and documentation Back

Page 38: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview Fe

der

al B

ud

get 2

01

3

Federal Budget Highlights: Financial impact of 2012 budget takes effect

$15 million over two years: resources to review of SR&ED claims

$5 million over two years to the CRA to conduct more direct outreach activities with first-time SR&ED program claimants

$121 million over two years to the National Research Council (NRC) to help the growth of innovative businesses in Canada;

$37 million per year through granting councils, in support of research partnerships with industry to create and deploy new technologies, products and services into the marketplace

$325 million over eight years to Sustainable Development Technology Canada (SDTC) in support of the development of new clean technologies, and drive innovation;

Back

Page 39: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview O

cto

ber

20

13

Revised Claim Form for SR&ED (T661-13F) Effective January 1st 2014, regardless of fiscal year-end.

New five point description of the project to present eligibility.

The order of the questions changed to reflect the way SR&ED is defined in the “Eligibility of Work for SR&ED Investment Tax Credits Policy” from December 2012.

Scientific research (pure or applied research projects) and experimental development projects are now treated equally.

Back

Page 40: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview Fe

der

al B

ud

get 2

01

4

Federal Budget Highlights:

Financial impact of 2012 budget takes effect

New Canada First Research Excellence Fund $1.5 billion in funding over the next decade to help Canadian post-secondary institutions excel globally in research areas that create long-term economic advantages for Canada.

• $50 million in 2015–2016

• $100 million in 2016–2017

• $150 million in 2017– 2018

• $200 million annually by 2018-2019 and beyond

Page 41: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview Fe

der

al B

ud

get 2

01

4

Federal Budget Highlights:

$8 million over two years to Mitacs to expand its support for industrial research and training of postdoctoral fellows.

$10 million over two years in support of social innovation research projects at colleges and polytechnics.

$222 million over five years, starting in 2015–16, to the TRIUMF physics laboratory to support the facility’s world-leading research and international partnership activities.

$3 million over three years to the Canadian Digital Media Network for the creation of the Open Data Institute, through the Federal Economic Development Agency for Southern Ontario.

Page 42: The latest on the financing of innovation in Canada Webinar Alma CG-… · More Government programs to drive innovation and entrepreneurship, and support advanced research ... SR&ED

Five Year Historical Overview Fe

der

al B

ud

get 2

01

4

Federal Budget Highlights:

New funding of $46 million per year for the granting councils to support advanced research and scientific discoveries, including the indirect costs of research.

Providing an additional $500 million over two years to the Automotive Innovation Fund, to support significant new strategic research and development projects and long-term investments in the Canadian automotive sector.