Fewer federal innovation programs still offer substantial funding, say senior government officials

Mark Lowey
June 26, 2019

The number of Canadian innovation programs has been significantly downsized but there is still plenty of funding for entrepreneurs, businesses, individual academics and academic groups, senior federal officials told a Calgary conference of innovators and investors in June.

Ottawa has consolidated its 98 innovation programs into 38, where it made sense, explained Robert Smith, executive director of the Innovations Solutions Canada (ISC) program at Innovation, Science and Economic Development Canada. Some programs, including the high-in-demand Build in Canada Innovation Program, were consolidated into ISC, which became operational in December 2017, he told a panel session on government funding at the Alberta Innovates Inventure$ conference.

ISC now has two funding streams aimed at innovators, one for early-stage R&D challenges, and another for late-state R&D testing, Smith said. In the Challenge stream, 20 participating federal departments are spending more than $100 million per year. Over the last year, 44 Challenges were issued, he said.

In the first phase of a Challenge, companies can receive $150,000 for up to six months to produce a proof of concept. Those Phase 1 companies then compete for Phase 2, which offers up to $1 million over two years to build a new technology or product that the federal government wants to purchase. Funding is provided through contracts and grants, Smith said.

At the end of Phase 2, companies with a product that isn’t yet ready for commercialization are moved to the testing stream (the previous Build in Canada Innovation Program). Depending on test results, the government may buy the company’s non-military product prototype for up to $500,000, or pay just over $1 million for a military product prototype, Smith said.

Bryan Helfenbaum, executive director, advanced hydrocarbons at Alberta Innovates, told another Calgary conference that there was a “breathtaking” amount of public funding for innovation provided by the federal and Alberta governments in 2018 and 2017. However, “in 2019 we’ve seen a drop (in funding),” he noted. “Not a surprise at all. We’ve had an election in Alberta and we have a coming election at the federal level,” he told delegates at the Canada Oil Sands Innovation Alliance's Innovation Summit in June.

Defence Department broadens call to innovators

Innovation is also a driver in Canada’s 2017 defence policy, “Strong, secure, engaged”, which commits to increased collaboration “with academia and other experts to strengthen the foundation of evidenced-based policy-making” and accelerate the Department of National Defence’s access to innovation.

“We want to put a lot more emphasis on a proactive partnership. I’m trying to increase our partnership with industry,” Isabel Desmartis, CEO and ADM, science and technology, at Defence Research and Development Canada, told the Inventure$ conference.

In April 2018 DRDC launched Innovation for Defence Excellence and Security (IDEaS), a $1.6-billion, 20-year innovation program. The first call for competitive proposals resulted in $26.6 million being awarded for 160 contracts; a second call has since been issued.

“We’re not just targeting the traditional defence industry,” Desmartis noted. “We’re targeting any innovators that have good ideas that can help us resolve our challenges.” The department’s priorities include artificial intelligence, data analytics, and technology to “green” military bases and reduce operational greenhouse gas emissions, she said.

More women, Indigenous entrepreneurs needed

Jim Saunders, ADM for Western Economic Diversification Canada’s (WD) Alberta region, told Inventure$ that WD’s funding for innovation is focused on scaling companies, increasing productivity, commercializing new technologies and boosting inclusion in science, technology and innovation.

In Canada, only 16% of small businesses are owned by women. Saunders pointed to a study by McKinsey & Company which concluded that if women owned 50% of small businesses – reflecting the actual gender makeup of Canada’s population – it could increase the nation’s GDP by $150 billion. Canada also needs at least 5% of Indigenous peoples operating SMEs, again reflecting their population across the country, he said.

WD works directly with SMEs through the agency’s Business Scale-up and Productivity program, which provides interest-free, unsecured loans of about $1 million to help companies commercialize technologies or scale up to improve productivity.

“There’s got to be demand in the market for whatever the innovation is, whether it’s just an incremental change or a truly disruptive one,” Saunders said.

WD also works extensively with the non-profit sector, including post-secondary institutions and industry associations, through the agency’s Regional Ecosystem program, to address system needs of the region’s innovation ecosystem.

Innovations Solution Canada’s Smith noted that a new funding stream, “Stream 5: National Ecosystems,” from the Strategic Innovation Fund will put more emphasis on supporting Canadian ecosystems rather than individual company projects. Stream 5 funding leverages private sector co-investment to foster business-led collaboration between multiple organizations, including SMEs, academic and research institutions, large corporations, incubators and accelerators.

Proposals funded under Stream 5 will aim to create a high-impact approach to technology development, commercialization, business development, scale up, and market growth. “This will hopefully have a strong effect on driving a pan-Canadian ecosystem,” Smith said.

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