startups and upcoming Canadian federal fix to R&D

Wednesday, October 10, 2012

In 2009, as discussed in this post, simplification of paperwork for sred was a good news for startups. But now, will the upcoming changes be as good.

Here is a list of things that are might be good:

“We are at the dislocation point between an old economic order and a new one that may last for decades, if not centuries,” Mr. Jenkins wrote in a recent paper for the Institute for Research on Public Policy. “Innovation is the wealth creator in this new order.”
A report Friday from the University of Toronto’s Mowat Centre for Policy Innovation urged Ottawa to dramatically cut R&D tax breaks and plow the cash back into targeted grants for businesses, a model embraced by innovation leaders Germany, Sweden and South Korea.
As Mr. Jenkins has certainly discovered, the only way to succeed is a much more targeted and strategic approach to spending all that money. That will likely mean favouring the few at the expense of the many, with perhaps more emphasis on grants, along with tighter controls on tax credits.

Here is a list of things that aren't exiting for early stage start-ups:

In an interview Friday, federal Science Minister Gary Goodyear acknowledged he’s looking at a major restructuring of the tax-credit regime and other programs. But he wouldn’t commit to a timetable.
Ottawa wants to build world-beating companies, but it’s giving away millions to $10,000 R&D projects.
R&D requires critical mass, but SR&ED has no minimum threshold. Maybe it should. And Ottawa must do a better job of identifying real R&D.

GETTING IT RIGHT

Five keys to getting innovation right:

1. Put innovation spending under the control of one federal minister and one agency. (OK)

2. Make programs simpler, transparent and accountable. (OK)

3. Shift balance from tax breaks to direct grants. (Scary)

4. Put more money into “late-stage” venture capital. (Good but not now)

5. Use big government purchases to spur home-grown innovation. (Scary)

So overall, it doesn't look good for early stage startups.

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