the latest on the financing of innovation in canada webinar alma cg-final3.pdfglobal revenue $363m...
TRANSCRIPT
The latest on the financing of innovation in Canada
Presented in partnership with:
Panel
• Michael Conway, President & CEO FEI Canada (Moderator)
• Sujeet Kini, Vice President and Controller, Open Text
• Peter McCusker, Innovation Funding Strategist, Alma CG
• Maria Negulescu, Vice President Operations, North America, Alma CG
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26Years
Experience
$13.4BIn 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
• Global reach spanning 16 countries
• Global funding strategies since 1986
• Canadian presence since 1998
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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 funding opportunities
• Conclusion – Next Steps?
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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
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Global Innovation Funding Landscape
Canada has historically been among the most generous jurisdictions
in the world for indirect funding of innovation yet trails in direct funding programs
• 2008 figures
• Federal funding only
Source: OECD Science, Technology and Industry Scoreboard 2013 - © OECD 2008 7
Five Year Historical Overview2
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
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Five Year Historical Overview2
01
2 Reduced tax credits for SR&ED
Chart
$1.1B in direct funding + $500M of VC
fundingDetails | Details
Revised “Policy on eligibility of work for SR&ED investment
tax credits”Details
20
13 Financial impact of
2012 on SR&EDtakes effect
Charts QC ON BC Atl
> $500M in direct fundingDetails
Revised form for SR&ED claims
Effective Jan 1, 2014Details
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Polling Question
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Were you aware of the changes to the SR&ED Application Policy (Dec 2012) and Claim Form (Oct 2013)?
Yes and Yes
37.2%
No and No
34.9%
Yes and No
25.6%
No and Yes
2.3%
Five Year Historical Overview2
01
4 Financial impact of 2012 on SR&ED
takes effectCharts
$1.5B for new Canada First Research
Excellence FundDetails
> $725M in Direct Funding
DetailsFr
om
20
09
to
20
14 Improved administration of
SR&ED
Less $ for indirect funding
More $ for direct funding
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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
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Global Innovation Funding LandscapeCanada remains among the most generous jurisdictions in the world
for indirect funding of innovation and is improving in direct funding programs
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% o
f G
DP
Indirect government supportthrough R&D tax incentives
Direct government funding ofBERD
• 2011 figures
• Federal funding only
Source: OECD Science, Technology and Industry Scoreboard 2013 - © OECD 2013 13
Government Funding of Innovation
Indirect Funding
Tax Refund
Tax Reduction
Direct Funding
Funding
Repayable
Funding
Non Repayable
Funding
Both
Procurement
Program
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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
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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
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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)
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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
Development of new system:Engineering: 360h @ $30/h (1 Tech + 2 Eng.)Tests & Mods: 400h @ $20/h (5 Tech.)
SR&ED tax credits after expense adjustment $11,271
$12,000 $12,000
TOTAL $12,000 $23,271
Programs can be combined Deduct grants from expenses when calculating tax credits
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Polling Question
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What has your experience been with direct funding?
Never applied
63.9%
Applied, did not receive funding and don't understand why
1.4%
Applied, did not receive funding and understand why
6.9%
Applied, received funding and actively looking for more
26.4%
Applied, received funding and getting more than I can spend
1.4%
Idea
Self-Analysis of Funding Opportunities
Discovery
Concept
Business Case
Engineering & Prototype
Testing & Validation
Plant Scale Up
Product Launch
Commercialization
Step 1Cross-reference your product
development/innovation
management system with direct
and indirect funding categories
Example of Product
Development/Innovation
Management System in the
manufacturing sector
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Step 1Cross-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 &
Pro
toty
pe
Test
ing
& V
alid
atio
n
Pla
nt
Scal
e-U
p
Pro
du
ctLa
un
ch
Co
mm
erc
ializ
atio
n
Indirect Funding
SR&ED
Other Tax Credits
Direct Funding
Procurement
Funding – Repayable
Funding – Non Repayable
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Self-Analysis of Funding Opportunities
Step 2: Indirect FundingReview your indirect funding strategy for compliance with the latest Application Policies and government expectations
SR&ED
December 2012 Application Policy
T661(13F) Claim Form Effective Jan 1, 2014
Other Tax Credits?
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Self-Analysis of Funding Opportunities
Does your business plan include projects for?
Business Development
Capital Investments
HR & Training
Innovation
Step 3: Direct FundingUpdate your Business Plan and identify projects within the following categories:
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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
Trade shows or foreign customer/dealer shows
Development of e-commerce enabled website
Upgrading of website
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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
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Self-Analysis of Funding Opportunities
Are you spending money on these types of projects?
Innovation New products or processes
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)
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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.
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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 [email protected]
T 1-866-931-0166 x138
Maria [email protected]
T 1-905-760-7858 x507
Thank you!
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Government LinksIndirect Funding - Federal:
Scientific Research and Experimental development Program:http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html
SR&ED – First Time Claimanthttp://www.cra-arc.gc.ca/txcrdt/sred-rsde/ftcs-eng.html
SR&ED – Self Evaluation Learning Tool:http://www.cra-arc.gc.ca/txcrdt/sred-rsde/slt-eng.html
SR&ED – New T661 Formhttp://www.cra-arc.gc.ca/txcrdt/sred-rsde/whtsnw/msg-t661-clm-prprr-eng.html
SR&ED – New T661 Form - Guidelineshttp://www.cra-arc.gc.ca/E/pub/tg/t4088/README.html
Indirect Funding – Some Provincial links:
Ontario Interactive Digital Mediahttp://www.omdc.on.ca/interactive/Tax_Credits/OIDMTC.htm
British Columbia Interactive Digital Mediahttp://www2.gov.bc.ca/gov/topic.page?id=73F4621AC32B404D985AF4D6BC0C94B8
Manitoba Interactive Digital Mediahttp://www.gov.mb.ca/jec/busdev/sibd/idm_taxcredit.html
Quebec E-Business tax creditshttp://www.investquebec.com/quebec/en/financial-products/smbs-and-large-corporations/tax-credits/development-of-e-business.html
Nova Scotia – Interactive Digital Media tax creditshttp://www.novascotia.ca/finance/en/home/taxation/tax101/businesstax/corporateincometax/digitalmediataxcredit.aspx
Government Links
Direct Funding links:
Industrial Research Assistance Program (IRAP)http://www.nrc-cnrc.gc.ca/eng/irap/index.html
Sustainable Development Technology Canada (SDTC)http://www.sdtc.ca/index.php?page=home&hl=en_CA
Built In Canada Program (Procurement program)https://buyandsell.gc.ca/initiatives-and-programs/build-in-canada-innovation-program-bcip
Fed Dev – Ontario – business loanshttp://www.feddevontario.gc.ca/eic/site/723.nsf/eng/home
Fed Dev – Manitoba – business loanshttp://www.infrastructure.mb.ca/home.html
Research Resources (projects and students)http://www.mitacs.ca/
Ontario - Youth Employment Fund (rest of provinces will get under this program soon)http://www.ontario.ca/jobs-and-employment/employment-programs-people-under-30
Details and Charts
Five Year Historical Overview2
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
Back2
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
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Five Year Historical Overview2
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
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Five Year Historical OverviewFe
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 $500 million for venture capital. Back
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Impact of 2012 Budget on SR&ED
Pre-2013 Jan 1, 2013 Jan 1, 2014
Enhanced tax credit rate for
small CCPCTI < 800K & up to 3M$ of expenditure
35% 35% 35%
Basic Tax Credit rate for
other entities20% 20% 15%
Capital ExpenditureEquip 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
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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%
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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
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Five Year Historical OverviewFe
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
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Five Year Historical OverviewFe
der
al B
ud
get2
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
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Five Year Historical OverviewD
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 documentationBack
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Five Year Historical OverviewFe
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
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Five Year Historical OverviewO
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
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Five Year Historical OverviewFe
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
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Five Year Historical OverviewFe
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.
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Five Year Historical OverviewFe
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.
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