Alberta SR&ED is here!

April 24, 2008 by

The Alberta budget was released on April 22, 2008 and introduced the long awaited provincial Scientific Research and Experimental Development (SR&ED) refundable tax credit.  The program will initially provide $60 million towards building knowledge-based industry, growing over time as businesses undertake more research and development.

 

This refundable credit is worth 10% of eligible expenditures on research and development starting on January 1, 2009.  Eligible expenditures up to $4 million will receive a maximum annual credit of $400,000.

The Alberta SR&ED investment tax credit is refundable for all companies. This will be of special benefit to start-up and early stage companies, because they will still be able to receive the credit even though they may not be earning enough income to pay income taxes.

TransAlta, Alstom plan Alberta carbon capture project

April 7, 2008 by

I’ve heard recently that there are several projects underway in neighboring Saskatchewan aiming  to utilize carbon capturing technology.  This is the first I’ve heard thus far in Alberta…

Here’s a link to the full article on MSN… Here.
KD

Format changes

March 29, 2008 by

You might have noticed some format changes to the Startups Forum.

That’s ’cause we have switched ‘blog providers. When we started the forum, we weren’t quite sure of the exact shape it would take. We wanted a place where entrepreneurs, investors, and coaches could exchange comments and ideas about what’s happening on the Calgary Tech Startup scene. In particular, we wanted the forum to be a collection of resources that’d help take some of the bumps out of the startup road.

Once we had a few posts under our belt, we realize we’d chosen the wrong feature set. We weren’t stressed: this happens all the time … with blog hosts, sales VPs, rottweilers in your apartment, and jeans that don’t really fit … but we needed to make an adjustment.

So we have migrated to a new blogging host. We brought all the old material with us, and we are settled into our new toolset. But part of the consequence of the move is that the authorship of some of our historical posts is a bit less clear. As we moved the old posts over, we re-posted them, but did so from our admin account. Each original author has a properly conspicuous by-line, but the posts all look as though they had come from a single account … the account we used to do the transfer. But from this point on, everything should look good.

Thanks, BTW, to CTI’s Jesse Hollis. He engineered the entire move, and executed the whole thing without a single bump. The guy’s massively competent: if it were up to the rest of us, we’d still be figuring out how to log in, and nothing would have happened.

One other thing: the blogging service we’re using is much more powerful, but it’s also pretty popular … which means it’s subject to a lot of blogspam and cross-postings. We’ll do our best to keep these under control and weed them out. If you post a comment and it doesn’t show up, that’s ’cause we have introduced an editorial approval step that will delay things a bit, but help keep annoying blurbs about Nigerian business opportunities and body-part enhancement out of the way. Or mostly out of the way, anyway.

So, now, on with the forum.

–Kelly

Start Up Money Tricks #3: Debt First

March 27, 2008 by

You can build wealth faster and feel more in control of your business if you don’t give away equity too soon. Too many entrepreneurs fail to use up all their non-equity sources of financing. They move to equity financing too quickly. This inevitably leads to dilution fever [!] with all its side effects (momentum hiccups, eye off the ball blindness, and I’m not in charge anymore headaches).

 

Todays topic is about conventional debt like bank debt, private borrowing, and other loans.

 

Here goes. BEFORE you go for conventional debt you should make sure that you have used up all your non-equity sources of capital first. Any lender will want to know that you have enough skin in the game before they will even consider lending you money.

 

To look good to a lender you must already have:

 

  1. Cashed in some RSPs for equity injections.
  2. Taken out home equity by way of mortgage for equity injections.
  3. Taken money out of savings for equity injections.
  4. Use the proceeds from a trimmed lifestyle (e.g. downsizing fancy vehicles, recreation property, expensive vacations, your salary, etc.) for equity injections.
  5. Completed all the possible grant applications that you can find. Search carefully. There are many good programs out there such as those that sponsor entrepreneurial women, just to cite one example.
  6. Placed all your previous lottery winnings into the company [!].

 

Once you have done the aforementioned penance, you can confidently move to the next step using up non-equity room for business financing:

 

1. Personal Lines of Credit. Most entrepreneurs and their business partners/spouses/close relatives/supporters/supportive friends with average Alberta incomes can obtain a personal bank line of credit in the $10,000 to $25,000 range. Be sure you have the capacity to pay the monthly charge. You can see how readily one can collect $100,000 or even double that.

2. Personal Loans. Friends and family will often lend money to their favorite entrepreneur [!]. Though I must give you the usual warnings about getting too involved with families and loans (it can often be a disaster), if you get a bit creative you can make it work. For example, why not make the loans convertible to equity upon some future event, or why not make the loan convertible to product or services (if the product or service is something tangible and valuable to the lender)?

3. Forgiveable Loans. There are numerous programs out there such as the well know community futures programs that may possibly provide loans/grants to specific kinds of businesses (check carefully — there is some flexibility out there).

4. Bank Loans. Banks will be quite rigorous and formulaic with you. They will want to see evidence of sales growth and they will carefull analyze all the conventional bank financial ratios (see your Accounting 101 text book for the basics) and your repayment ability. But shop carefully. Character and personal integrity can still tip you over the line and into the much desired YES message. Go to the smaller banks first. Go to credit unions. Go to insurance company/mortgage banks. Save the big banks for your last round of bank loans. They will be very tough on you and you don’t want to have shopped them first as word sort of gets around (confidentiality rules notwithstanding) that you are out shopping for a loan. Capital loans are often accompied by business lines of credit too, in some combination.

5. Equipment Leases. There are good lenders out there including leasing companies and banks who will be interested in signing a lease with you. This is much easier on cash flow than buying capital equipment outright. Most leasing companies will also lease back equipment you are building or fabricating, provided they area convinced you know what you are doing.

6. Private Lenders. There are numerous companies that will provide loans and convertible debt. Though their conditions and due diligence may seem onerous, it is still possible to find good lenders who will provide you with some kind of a loan or business line of credit. These are usually sourced from your networking skills.

7. Factoring Receivables. There are conventional sources of factoring or receivables loans such as the major banks. But there are also many U.S. base large banks and financial institutions that will factor Canadian receivables using quite modest criteria. Shop carefully and perhaps be pleasantly surprised.

 

In my opinion you CAN find many good options for financing your business BEFORE you start giving away equity. Personally, I love the idea of staying in control and using carefully structured, responsibly planned, DEBT!

 

Henry Kutarna

Alberta Deal Generator

 

Startup Money Tricks #2: Work the Grant Structure

March 26, 2008 by

Every year there are billions of dollars provided as an incentive for companies in the startup phase and on an ongoing basis.  The rules are complex and confusing which means that many companies (roughly 80%) do not claim grants, funding and refundable investment tax credits that they are entitled to.  Here are some programs that you should consider . . . (some perseverance and tenacity is required!) 

1.      NRC Industrial Research Assistance Program (NRC-IRAP)

2.      Scientific Research and Experimental Development Program (SR&ED)

3.      Natural Sciences and Engineering Research of Canada (NSERC)

4.      National Research Council (NRC)

5.      Alberta Advanced Education and Technology

The NRC Industrial Research Assistance Program (NRC-IRAP) 

This program provides a range of both technical and business oriented advisory services along with potential financial support to growth-oriented Canadian small – and medium-sized enterprises (fewer than 500 employees). Working directly with these clients, NRC-IRAP supports innovative research and development and commercialization of new products and services including: 

  • Technology Expertise and Advisory Services
  • Financial Assistance for R&D activities
  • Networking
  • Partnerships

For Information on IRAP, call 1-877-994-4727

Scientific Research and Experimental Development Program (SR&ED)

The Scientific Research and Experimental Development (SR&ED) program is a federal tax incentive program to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada that will lead to new, improved, or technologically advanced products or processes. The SR&ED program is the largest single source of federal government support for industrial research and development.

Claimants can apply for SR&ED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead, and SR&ED contracts.

Under the Federal program, Canadian Controlled Private Corporations (CCPC’s) receive a refundable Investment Tax Credit (ITC) of 35% on $2 million of expenditures and 20% on expenditures over the $2 million benchmark. Canadian Public Corporations earn a 20% non-refundable ITC on qualified expenditures which can be used to reduce taxes payable.  Proprietorship, partnership or certain trusts earn a 20% partially refundable ITC to reduce taxes payable.

The Alberta government is set to introduce a provincial SR&ED program with a refundable 10% investment credit on all eligible expenditures.  Details will be provided in the provincial budget to be passed down in April 2008 (or thereabouts).

For more information visit www.g9Consulting.com 

Natural Sciences and Engineering Research Council of Canada (NSERC) 

Under the Collaborative Research and Development (CRD) Grants program direct project costs are shared by the industrial partner(s) and NSERC in an amount equal to, or greater than, the amount requested from NSERC.

Projects may range from one year to five years in duration, but most awards are for two or three years. CRD projects are monitored closely. Annual progress reports are normally required from the grantee. The industrial partner will be asked to provide comments on the project’s progress.

For more information call 613-995-1111 or email rpp@nserc.ca

 The National Research Council (NRC)

The NRC functions under the auspices of the National Academy of Sciences (NAS), the National Academy of Engineering (NAE), and the Institute of Medicine (IOM). The four organizations are collectively referred to as the National Academies.

The core services involve collecting, analyzing, and sharing information and knowledge. The independence of the institution, combined with its unique ability to convene experts, allows it to be responsive to a host of requests.

Free Scientific Information is available from this organization that publishes more than 200 reports and related publications each year, the institution is one of the largest providers of free scientific and technical information in the world.  Most of it is now on the Web at www.nap.edu.   

NRC also conducts collaborative and fee-for-service research in facilities and offices across Canada.

Western Economic Diversification Canada (WD)

 WD offers numerous funding and assistance programs through the Western Diversification Program.  Through the Loan and Investment Program, WD contributes to a loan loss reserve, which offsets a portion of the risk financial institutions experience when lending to small businesses. http://www.wd.gc.ca/259_ENG_ASP.asp 

Alberta Advanced Education and Technology (AAET)

Alberta Advanced Education and Technology provides leadership and strategic investments in research and science and technology initiatives that are undertaken in the following priority areas: energy, ICT, nanotechnology, and the life sciences.Research equipment in these areas can be applied for via the Alberta Science and Research Investments Program (ASRIP) or the Small Equipment Grants Program (SEGP).

Alberta Advanced Education and Technology manages a number of programs that provide various forms of research funding.

The Ingenuity Industry Associates program addresses the increasing research personnel needs of Alberta industry. Through this program, Alberta companies are able to recruit recent Master’s and PhD graduates to conduct research that benefits the organization.

Check out these programs, and share your experience if you have had success with others not mentioned here!

Startup Money Tricks #1: Cash on the Table

March 10, 2008 by
We’re going to be doing a finance series over the next few weeks titled “Startup Money Tricks“.

This is based on an observation from my tenure as EIR at Calgary technologies: at least 80% of startups have ignored significant untapped sources of cash when they start to look for equity financing.

Here are 10 reasons to look at as much alternative financing as you can before you go for venture money:

  1. Tactical Advantage: The more your company is worth when you start to talk to angels and venture capitalists, the better you do in negotiations. Every cent of cash you can bring in before negotiations improves your bargaining position.
  2. Better Investors: Sad but true: the unusual investor who will give you large amounts of cash early isn’t always the best partner for you. Of course, good investors will be a superb asset to you, and will bring much more than money to the table. But, with some conspicuous exceptions, the more you can validate the fundamental hypothesis at the core of your business, the better investors you’ll be able to attract. Many companies who attract very early investors live to regret it: the investors often wind up with board seats they’ve bought for a pittance, and they throw their weight around in ill-considered ways that create all kinds of problems. Often, early investors are poor investors because they don’t have the same skills that other, more-conservative investors exercise. The term “cram” was coined almost exclusively to describe how later investors have to deal with these rapid shareholders. Of course, your scheme might be SO interesting that you can interest a visionary, experienced investor in your idea at an early stage. But, by virtue of their very experience, they’ll “hose you”: see number 1.
  3. Sign of Competence: If you’ve been careful and ingenious in the ways you’ve financed the early stages of your venture, you signal to potential investors that you are, as my great-granny would put it, “Canny lads and lasses”. But if your potential partners see you have left promising sources of cash untapped, they’ll look at you with those squinty VC-eyes, and you’ll know you’re toast. Gives me shivers just thinking about it.
  4. Conservation of Management Time: The hunt for equity financing is often a huge time suck. If you want Angel or VC financing, you’re going to turn your management team into a road show: you’ll be going from city to city with your laptop and projector in hand to find money. And, once you do find it, you’ll be put through the time-consuming and expensive dual wringers of negotiation and due diligence. It’s not at all uncommon to see newly-funded companies who have lost their market advantage because they didn’t have the necessary execution power during the months they needed to get equity financing.
  5. Clarity of Concept Non-equity financing is often much easier to get, but it don’t, as they say, come easy. Just as you’ll need a business plan, some financial projections, and a presentation to talk to Angels and VCs, you’ll probably need them to secure most other forms of financing … you’ll even need them for some grants and government loans. There’s no faster way to turn a VC off than to put green, half-formed concepts and childish, badly-written documents on the desk. Look at the prep work for early, non-equity forms of financing as proving grounds in which you will refine your concept and message in front of less-particular but still-sophisticated audiences.
  6. Stealth: Not everybody has to worry about this one: VC money and Angel money can be noisy money. The VCs and the Angels aren’t noisy themselves: but the very act of trotting about with PPTs and business plans puts a buzz on the street. Buzz doesn’t always work to your advantage. While you can raise equity cash quietly, word eventually gets out about which companies want to raise money for which ideas. Other forms of financing can be much, much more private and more discrete.
  7. Focus and Control: As you move more deeply into equity partnerships with financiers, more people will influence how your company makes decisions. Anyone who has had a startup will tell you that the pre-investor stage is sweet, because you get to focus solely on the customer problem you’re trying to solve. When you can put the entire company in a Mini Cooper and go for Ethiopian at lunch, the firm can behave in a focused, obsessed manner that you’ll grow to miss. (Of course, you may not be able to afford the Ethiopian food when you get there…). Once the authority and control mechanisms of your company are spread throughout a larger group, you’ll spend more time dealing with that group and less with your problem domain … no matter HOW good the large group is.
  8. Network Growth: If you have a good idea, your network grows as you work on it. Inevitably, during this growth you’ll meet well-connected people who understand your problem set. If you’re lucky, this will lead to quiet introductions to VCs or angels who can see and appreciate what you’re doing … which means you don’t have to put on a road show, distract your management team, and make a whole bunch of indiscrete noise to attract investors. Usually a pretty good idea.
  9. *The “Bootstrap Gambit”: Absolutely the best time to negotiate for funding is when you don’t need it. You’ll get better partners, give away less, and raise more money if you can somehow get your company to the point where customers are giving you money and your basic hypothesis is proven. The best investor pitches contain the sentence “We have a conservative business plan that would allow us to do very well, but we think we can dominate the market almost overnight with your money and connections.”
  10. You’re An Idiot If You Don’t: If non-equity money is relatively easy to get, doesn’t vastly increase your risk, extends your operational capabilities, puts you in a better position in front of VCs, and lets you afford the odd Ethiopian lunch, why wouldn’t you do it?

Next entry: working the government grant structure in Canada.

The Eagle Has Landed

March 5, 2008 by
I crossed the classic entrepreneur’s divide earlier today. I had been steadily cleaning out my office over the past couple of weeks, knowing the day was drawing near when I would walk out the door, maybe for good. Then, it was announced our work group had been re-organized, a new boss had been hired (about 10 years my junior), our reporting structure had changed, and I knew it was my time to go.

I scraped up all the vacation I had owing to me — six calendar weeks — and with the blessing of my current boss, will spend the time pursuing my life-long dream of a start up. As I said to him “I just can’t shake this feeling that I want to change the world.“ I was somewhat flattered when he seemed a little disappointed, and not really all that surprised when he didn’t try and stop me, either. I think we both knew it had been in the works for a long, long time.

It gives me six weeks to get some traction on prototype development, and maybe even get started on the fund-raising process that I formally started at the Financing Your Vision seminar a little while back. To this point, I have been attempting to keep both my full-time job and the start up plates in the air at the same time. However, it felt as if each day that went by when the start up ideas weren’t moving ahead quickly, was a day when opportunities were slipping away.

I was surprised to find myself feeling a little melancholy — which is not what I expected, at all. I felt I contributed a lot over the course of my eight years with my current employer. As the last couple of hours ticked away, my ego allowed me to believe someone would rush through the door and say they couldn’t live without me. But that visit never came. I sent out a note to my co-workers, put a ‘gone fishin’ sign under my office number, filled out the vacation request, and just walked out the door. If this current chapter of my career really is over, it was a really weird, last day.

At the end of the six weeks, I’ll be at another fork in the road; given one final opportunity to decide which way to go. Return to the Dilbert world of beige cubicles, performance evaluations and office politics, or follow the yellow brick road. However, like a corny commercial that is running on TV at the moment; “Sometimes to move ahead, you have to leave something behind.“ That’s exactly how it felt today. But tomorrow, it’s on to the business of creating value, building brand and becoming the new, new thing.

March 4, 2008 | Unregistered CommenterButzi

The Challenges of Designing Electronics for the Aviation Industry

March 4, 2008 by
You are probably wondering how a tiny electronics firm from Calgary got involved in designing first class passenger seat systems for the aircraft industry. The short: Timing and luck! Her is a brief history. Back in 1998 I was working with Innovage Microsystems in Calgary who had designed a clip-on microprocessor tester that was used to test the microprocessors while running. A small company, “Boeing” had expressed an interest in the product for testing the multiple processors on their aircraft. In working with Boeing, Innovage learned that a seat manufacturer was building first class lie-flat sleeper seats and had no way of testing the finished seats or the seat electronics. When the controller manufacturer said there was no way to test the seats, Innovage jumped at the opportunity and brought me in as a consultant to design a “test interface box (TIB)”. Within two years, the TIB was installed and flying!

Designing for the airline industry present a whole lot of unique challenges. Software must be carefully monitored using version control and meet DO178-B safety standards. The FAA established DO178-B as the accepted means of certifying all new aviation software. The targeted DO178 certification level is either A, B, C, D, or E. Correspondingly, these DO178-B levels describe the consequences of a potential failure of the software: catastrophic, hazardous-severe, major, minor, or no-effect. The cost to test and certify safety critical software is directly proportional to the level of safety criticality. This can quickly drive you design cost sky high.

Hardware presents similar challenges and must meet the requirements set out by the FAA DO160 specifications. This standard defines a series of minimum standard environmental test conditions and applicable test procedures for airborne equipment. The purpose of these tests is to determine the performance characteristics of airborne equipment in environmental conditions representative of those which may be encountered in airborne operation of the equipment. Temperature, humidity, vibration, lightning and EMI are just a few of the test parameters. Manufacturing must also meet rigorous standards with every part; every resistor, capacitor or screw must be traceable back to the manufacturer.

In the final seat design, wire routing and serviceability of components must also be carefully considered. When an aircraft lands, there is only a 4-hour window to fix or replace faulty components. Electronic systems now have Built-In-Test capability that identifies component failures. This information is passed along to the ground while the aircraft is still in the air so that the maintenance crews have the parts and equipment ready to repair the systems as soon as the aircraft lands.

One of the many challenges of designing systems for aircraft was highlighted during a demonstration of a seat and suite to one of the airline representatives. The suite had been designed for installation on the Airbus A380. The demo was for the installation of the suite on the Boeing 777. The suite included a small closet that opened into the aisle. The airline representative asked if the hinges on the closet door could be switched to the other side to allow for easier access. I thought that this should not be a big issue however it was quickly pointed out that the way the closet door swung into the aisle may impede the exit of passengers in an emergency. The change would have to be carefully reviewed with respect to the location of emergency exits on the different aircraft! This meant new drawings, new approvals and associated costs.

I hope this article has enlightened you on a few of the challenges in designing system for the aviation industry. At least you should have a better understanding why a screwdriver can cost $300!

November 1, 2007 | Unregistered CommenterKen Stewart-Smith

The future of TV

March 4, 2008 by
Now I’m sure most of you have heard of Joost…the IPTV company making waves over the last several months…but here is something that will make IPTV a true contender to step up and compete with conventional TV. Its called Miro and it goes into its 1.0 public release TODAY! ~KD

http://blogs.business2.com/netly/2007/11/the-future-of-t.html

November 13, 2007 | Unregistered Commenterkraftdinner

Win a MacBook with CIRA!

March 4, 2008 by
The Canadian Internet Registration Authority (CIRA) wants to hear about how you’re using your .CA domain name and is giving away Apple MacBooks to the five best stories. What do you use your dot-ca domain name for? Your blog, your business, your photos? Complete the contest entry form before this Friday, February 8th and you could win one of five MacBooks. More importantly if you’re a business, your story and website will appear as part of a national campaign to celebrate the registration of the Millionth .CA domain name.

Check out the complete details here:

http://www.techvibes.com/blog/do-you-own-a-ca-domain-name/

KD

February 6, 2008 | Unregistered Commenterkraftdinner