Thursday, February 01, 2018

Canada's New SBIR Based Program to Stimulate Domestic Technology Startups

         By Chuck Black

Nine years ago, an independent investment bank reported that Canada had "no dedicated programs" to support the growth of innovative, aerospace focused small business start-ups comparable to any one of a half dozen very successful and ongoing US and European Union (EU) programs.

Given that, this blog was one of the early Canadian news organizations to come out in favour of the creation of a domestic version of the popular US Small Business Innovation Research (SBIR) program, one of those half dozen useful programs which, as outlined in the July 19th, 2009 post, "Canadian Space Agency Provides "No Dedicated Programs" to Support Small Aerospace Firms," were first noted in a 2009 report published by Stamford, CT based investment bank Near Earth LLC.

And, in one of those stories which the traditional media mostly seems to miss, the Federal government has announced that it will invest $100Mln CDN in a new innovation program "designed to stimulate domestic technology startups and small and medium-sized entrepreneurs." 

As outlined in the January 29th, 2018 Nearshore Americas post, "Canada Unveils New Program to Stimulate Technology Startups," the new program, called Innovative Solutions Canada, "is modeled on the US Small Business Innovation Research (SBIR) program and is a major component of the Government of Canada’s efforts to help small businesses."

Funds for the program will come from the 20 departments and agencies participating. Each will be required to set aside 1% of their research and development expenditures for this initiative.

The US program has been around since 1982 and currently requires the 11 federal agencies involved, all of which possess external research and development budgets of more than $100Mln US ($1.23Mln CDN), to allocate a substantially heftier 2.8 percent of their budgets to grants or contracts with small businesses undertaking projects.

The original announcement, as outlined in the December 14th, 2018 Innovation, Science and Economic Development (ISED) Canada press release, "Government uses procurement to help small businesses grow and create jobs," is designed to use government procurement policies "to fuel innovation and create middle-class jobs."

Of course, the SBIR based program is also and more specifically targeted at solving innovation focused problems for the government, and when it comes to this, the Canadian program still has a ways to go when compared to its US parent.

The current list of open opportunities as per December 19th, 2017 listing on the Innovative Solutions Canada website (the most recent posted) lists only six problems requiring innovative technologies to solve. They include:
Funding per project generally hovers around $100 - $150K for phase one funding and $500K - $1Mln for phase two funding.

As outlined in the January 2nd, 2015 Entrepreneur post, "Why the SBIR Program Is Worth Funding," private capital markets "are often reluctant to fund companies that undertake early-stage technological innovation."

According to the post, SBIR grants:
...mitigate these market failures by providing small business owners with a source of capital that does not depend on private-market allocation. 
Analysis by both academics and policymakers shows that the scheme works. 
Numerous studies show that the SBIR programs make possible innovations that would not have been developed in the absence of government intercession.
And this is in the US with its much larger financial markets. Canada suffers many of the same problems and has fewer overall private sector funds to support innovative start-ups.

The Canadian program is still new and not well known outside of government. But given the success of its American big brother, the Federal government would be well served setting it loose to find, and solve, many more innovation challenges.
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

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