Improving Canada’s SR&ED Program for Startups


Today, during Ontario’s Civic Holiday, I finally got around to filling out Deloitte Technology Fast 50™ CEO Survey. There was an interesting question that sparked a thread that I’ve been thinking about lately:

“Specifically, do you think the SR&ED tax credit program is pretty good as is, or needs improvement? If it needs big changes, what would be the first change you would make?”

For those of you who don’t know what the SR&ED program is, go learn more because it can save your business tons of cash over time and help you finance your business with non-dilutive government assistance.

For those of you running (or have previously run) early-stage stage startups, here are my thoughts: Currently SR&ED will refund a portion of a startup’s R&D costs based on expenses incurred during the previous year – some of those earliest expenses claimed were incurred 18 months prior to the claim. For startups, this is an eternity. Today, startups can grow and die violently before they get their first SR&ED claim, which could have helped them to pay one more employee, solve one more problem or help one more customer.

The Canadian government should consider modifying the SR&ED program to include a faster-reimbursement timeframe for startups (making less than $1,000,000 in revenue per year). For example, this could mean making claims quarterly and being reimbursed within 60-90 days – this would massively improve startup financing in the short-term. A modification, as requested, would help startups build value and growth potential more quickly and help the overall competitiveness of the Canadian technology sector.

Will anyone help to stand behind an initiative to get the Canadian government to improve the SR&ED program for startups? Join the conversation in the comments below.

Explaining the ‘lack of’ Venture Capital in Toronto


I figured it would be appropriate to write about the lack of a growing and robust venture capital community in Toronto since it cropped up in three places over the last 2 days  — once with several folks at Startup Drinks last night, today over coffee with Jeremy Laurin of OCE’s Investment Accelerator Fund and on Quora (the new social network launched by the ex-CTO of Facebook). On a side note, Quora is actually pretty snazzy with super-high-quality people.

Back to the main point of this thread — I’ve been talking about this situation for roughly 3.5 years now — first in the biotech/life science VC community in Toronto and now with the ICT community. I believe there is one problem at the root of both sectors — we need a kick-start in Canada.

What does that mean, a kick-start? Well, most people believe that there is a fundamental funding gap in Toronto’s venture community between pioneering research (in universities, by startups, etc…) and venture capital finance-able deals. That may be the case, but that is a different argument for a different day. I believe there is a more substantial funding gap that exists once a ‘successful Canadian company’ reaches the point of raising a round of capital greater than $15 million. The existing VCs in the community (generally) just can’t get those kinds of deals done. It’s not in our Canadian cards (given the average fund size, risk thresholds, etc…). Canadians need later-stage financing options (or Government money) to back those deals and to create a better later-stage ecosystem.

So, what happens instead? Great Canadian companies knock on the doors of VCs South of the border who are flushed with cash and willing to invest larger amounts in later rounds. For the record, I love US VCs. However, for the purpose of this discussion, or monologue rather, they have tended to bring companies close to home to minimize their geographical risk with the investment. Now, as companies continue to grow and are eventually sold, the successful founders and key employees of those companies often (not always) stay South of the border to further progress their careers — joining US companies, or launching other companies in those locales. Worse for Canada, those successful folks often reinvest in US VC funds or Angel invest in other local US companies rather than Canadian startups.

Envision that cycle reoccurring over and over for the last 30 years. The trend becomes large enough that a substantial amount of capital, and human capital for that matter, gets lost from the Canadian startup ecosystem.

Some say that there is a lack of venture capital in Toronto because there just aren’t great deals. I disagree. I think that there is a lot of talent in Toronto and in the surrounding areas, like Waterloo for example.

Now, the scenario I’ve described may not be the only reason for the lack of capital in Toronto (or Canada), but I feel that it is a significant part of the problem. What are your thoughts?

Please Help Support Camp Oochigeas


Thus far, 2010 has been a year of self-awareness for me. First, I kicked-off the year by deciding to track my workouts, number of books read, hours of sleep and how I’m feeling each day. So far it’s been a very rewarding and enlightening experience (let me know if you want a copy of my Google Doc I’m using to track everything). However, as Q1 is wrapping-up, I have already seen my workout pacing decrease as my day-to-day responsibilities increase. I didn’t like this one bit. To re-prioritize exercise within my lifestyle, I have committed to running a 10km race in 41 days. I have neither ran 10k nor raced in any event previously. Wish me luck.

Sporting Life 10k For Kids with Cancer
The Sporting Life 10k is scheduled for May 2, 2010 and is supporting Camp Oochigeas, a camp for children with cancer. With no government funding, Camp Oochigeas relies on the generosity of volunteers, donors, community participants and the Hospital for Sick Children to provide year-round programs for children affected by childhood cancer at their campsite in Muskoka and at no cost to their families. I am personally raising at least $250 (update: at least $500) for this charity — please support me in my fundraising efforts.

Gearing-up: Nike + iPod
To get in-gear for the 10k, I joined Nikeplus.com (my profile page) and consulted their “coach”. Unfortunately, Nikeplus only offers a 12-week program — not 42 days (as at yesterday) — so I figure I’ll follow the first 5.5 weeks of the program to get in-shape for the big run. Yesterday, I was assigned my first run from coach — I had to run 4.82km! Talk about being thrown into the deep-end. So, I ventured to the University of Toronto gym to run the indoor track with my Nike + iPod sensor and iPhone to track my progress.

Although I had to walk for a few periods of time, here are my net results for run #1:

  • Distance: 4.82km
  • Duration: 30:42
  • Pace: 6’22” /km
  • Fastest Kilometer: 5’42”
  • Calories Burned: 371

If you join Nikeplus, add me as a friend (username: jsookman).

More Details on the 10k Race
It is Canada’s easiest and one of the fastest downhill 10k’s (a good starter, I think…), and it runs right down the middle of Canada’s most famous street—Yonge Street! The start line is four blocks south of Sporting Life (at Yonge & Roselawn). From there, the course heads south on Yonge Street all the way to Richmond Street. It then turns west on Richmond, south on Peter/Blue Jays Way past Gretzky’s to Front St. The course then goes west along Front, south on Bathurst, west on Fort York Blvd. to finish! See the map below.

Course Map/Overview

Once again, please consider contributing to Camp Oochigeas. It is performing miracles for these children.

Financing Opportunities for Canadian Start-ups


I want to draw your attention to a blog post that I wrote on the BlackBerry Partners Fund website a few months ago. In times of recession, when cash is tight and purchase orders are scarce, understanding how and where to receive financing becomes of paramount important.

For additional details, please refer to the full article.

Here are some of the highlights:

If you are a mobile start up, please feel free to apply for Jump Start Financing at the BlackBerry Partners Fund, which can invest up to $500K USD into innovative start ups.

Banking on Global Warming


Many variables are contributing to the warmth of the world, at at the same time a whole of set of opportunities are arising as a result of the global warming bug.

Opportunities lay in:

  • Biotechnology applications for coal plants to “scrub” emissions before they are released
  • Cleaner oil refinery processing, to emit less carbon dioxide from oil sands particularly in Alberta, Canada
  • Carbon sequestration technologies to capture and store carbon dioxide deep within the Earth (still to be determined if this is a good idea)
  • Real estate and community planning of areas that are either going to become habitable and a lucrative shipping/trading centers (such as Nunavut, Canada described in this article)
  • Places will become flooded as ocean levels rise and entire cities are going to find themselves under 20 feet of water – technologies may be needed in advanced insulation from water, dam building, or something I can’t even imagine right now.
  • Cleantech: as an increasing number of emission laws come into place, there will be an escalating need for cleaner technologies to develop energy efficiently. This is not a new concept, merely a reinforcement of the need. I recently found out that Sustainable Development Technology Canada (SDTC) now has a $550 million not-for-profit foundation that bridges the gap in the innovation chain by fast-tracking groundbreaking clean technologies through development and demonstration in preparation for commercialization. There is certainly incentive for some businesses to consider developing their technologies in Canada, or perhaps, in partnership with Canadian businesses and educational institutions. Interested? Leave me your email in a comment and I’ll put you in touch with some people here in Canada!

The retreat of glaciers and arctic ice sheets are going to open up new shipping routes, key ports and new economic centers. One such gateway community is discussed an interview with a writer from The Atlantic, Gregg Easterbrook. I have to credit Paul Kedrosky for introducing me to this piece from his blog “Paul Kedrosky’s Infectious Greed“. The interview is as follows:

Early in this article you ask, “If the world warms, who will win? Who will lose?” But even the winners in this equation would seem to face grave risks. The Inuit of Canada may come to own valuable ports, for instance, but their traditional ways of feeding themselves and making a living will be decimated as the animals they hunt disappear. I suspect many people will consider the question and answer, “We will all lose.”

No, I don’t think so. In economics we don’t find many zero sum games and I don’t think this is a zero sum game. I think a lot of people and nations will come out ahead. The Inuit–the little semi-nation of Nunavut–is going to become significantly more valuable in a warming world. Right now Nunavut’s a frozen wasteland. I would love to be the guy with the Nunavut promotion account twenty years from now because I’m going to rechristen the place “the gateway to the hemispheres” and invite celebrities, and cruise ships will be stopping by, and the sign on the dock will say, “Welcome to Nunavut, Gateway to the Hemispheres!” We’ll see all kinds of wild economic activity up there. There will be change, yes. The traditional way of life will fade and be replaced with something else, maybe something zany, but change seems an inevitability of human experience. Really no society on earth, maybe the ones in the Amazon basin are the only exception, has been able to insulate itself from change. We can’t insulate ourselves from it and I doubt the Inuit will ever be able to do that, either.

On Technorati:

Wednesday: Canada’s Wireless Telecom Battle Begins


On Wednesday, March 14, 2007, the battle begins for Canadian wireless phone providers. Why? Because wireless number portability (WNP) finally kicks in after a VERY long waiting period. We are already seeing a flurry of activity in the plans of the wireless carriers, namely, Rogers Wireless, Bell Canada, Telus Corp, and Virgin Mobile Canada. Virgin and Telus are butting heads over who claims to have the “happiest clients” and are both prepared to go to court over it. Instead of paying lawyers millions of dollars … come up with an innovative plan, increase your marketing, or actually give subscribers what they want.

According to a 2005 report, PricewaterhouseCoopers expects 850,000 numbers to be moved from one carrier for another.

Implications? What can we expect?

  • These companies are going to spend more money on advertising and marketing
  • More cost-effective phone and data plans to be more competitive
  • For consumers, its good time to take advantage and get locked in to a ‘likely’ great rate while these companies are fighting over subscribers
  • Upcoming quarterly revenues/EPS may fall shorter than expectations due to increased costs and/or lost customers (who is going to be the big gainer?)

Also, another exciting event happens on Wednesday! Research In Motion (RIM) is finally releasing their latest BlackBerry 8800 into Rogers stores. Hmmm … I wonder if they are going to try for a big promotional event in correlation with WNP? My suggestion, go out and see what deals you can find. Who knows how long they’ll last?

Global Warming, Cleantech and Canada


The world is ranting about global warming, and it should be. There is a very real problem, and finally politicians are appearing to try to combat them. Is their rationale money, power, influence or an actual regard for the sustainability of Earth?

In recent news President Bush announced an Ethanol deal with Brazil, which will work to increase the development of ethanol; Brazil produces much of its ethanol from sugar cane. Also today, the European Union heads of state agreed on a long-term strategy on energy policy, which followed agreements made in February 2007, when they agreed to cut greenhouse emissions by 20% by 2020. In Canada, Prime Minister Stephen Harper says that Kyoto targets are unattainable, as the former Liberal government committed to a reduction of greenhouse gases to 6% below 1990 levels … Canada is currently 35% over that mark (Vancouver Sun). So … what is Canada going to do to address this issue? Maybe allocate an increase to the investments in startups that are focusing on environmental biotechnology or cleantech solutions? Wow, that sounds like a good idea!

There are currently a number of Canadian company developing cleantech technologies, but certainly not enough. Of those companies innovating that space, most are grossly underfunded as many don’t even have websites! As the Toronto Star tech reporter, Tyler Hamilton, mentions in his cleantech blog – Clean Break – Sustainable Development Technology Canada (SDTC) , a fund created to finance cleantech startups, invested only $43.4 million on 15 new projects in 2005. The Alberta government is currently experiencing massive surpluses in the order of billions, its about time to start financing cleantech and environmental biotech startups so that Canada can remain competitive in the energy, or “Clean Energy” space in the future. Getting an early foothold in the market just seems like a good idea to me …

Canadian technology happens to be some of the most innovative in the world, so says Len Brody, who’s keynote address I saw at the Canadian Venture Forum. Nice guy, I managed to get myself a signed copy of his book Innovation Nation: Canadian Leadership from Java to Jurassic Park. I haven’t had a chance to read it yet, but if your patriotic and want to find out a little more about Canadian business … maybe grab yourself a copy. In any case, if Canadian technology is so innovative, then INVEST IN IT. The lack of funding at the early stage, is crippling the growth and development of Canadian companies. CEOs are constantly chasing money, to stay cashflow positive and burn rates are minimized, which doesn’t allow these start-ups to effectively execute on their business plans.