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New government program for COVID-19-affected startups capped at $847 weekly per employee

Innovation Minister Navdeep Bains at Hibar Systems in Richmond Hill, Ont. in April 2019. The company received $2 million in funding from the National Research Council’s Industrial Research Assistance Program.
Innovation Minister Navdeep Bains at Hibar Systems in Richmond Hill, Ont. in April 2019. The company received $2 million in funding from the National Research Council’s Industrial Research Assistance Program. National Research Council | Twitter
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A new federal assistance program for tech startups will offer the same level of funding as the $73-billion Canada Emergency Wage Subsidy (CEWS)—but unlike that program, not every company that’s eligible will receive funding.

Applications for the $250-million Industrial Research Assistance Program (IRAP) Innovation Assistance Program, which will pay $847 per employee per week, opened on Wednesday morning. Innovation Minister Navdeep Bains told The Logic last week the program was designed to help tech firms shut out of other COVID-19 support programs. 

Talking Point

Applications for the $250-million Industrial Research Assistance Program (IRAP) Innovation Assistance Program opened on Wednesday morning. But not all eligible firms will receive money, and those that do will be capped at $847 per employee per week.

Ottawa announced the new program in response to innovation-economy executives and tech lobby groups’ concerns that startups and high-growth firms weren’t eligible for the CEWS. To qualify for that subsidy, companies need to show their revenues declined by 15 per cent in March and 30 per cent in April and May compared to last year or to the average of January and February of 2020. The program pays for 75 per cent of the first $58,700 of an employee’s salary, or $847 a week—the same amount as the new IRAP funding. That’s 51 per cent of the average weekly base pay of Vancouver– or Toronto-based software engineers, who make $86,000 annually, according to Glassdoor. 

Companies applying for the IRAP funding can also receive support from the CEWS, but can’t subsidize the same employee under both schemes. To be eligible for the new IRAP funding, a firm must have been incorporated in Canada by no later than March 1; must lack the financial resources to sustain operations during COVID-19; and must be unable to qualify for CEWS funding for at least some of its employees. However, unlike the CEWS, simply meeting those criteria is no guarantee of funding.

 “While NRC IRAP welcomes all applications for its Innovation Assistance Program, only applicants who meet all of the criteria will be considered for funding,” said Matt Ellis, a spokesperson for the National Research Council of Canada (NRC), which administers the IRAP. “Eligibility does not guarantee funding; funding decisions will be made on a priority basis, following an evaluation of applicants’ economic situation and growth potential.”

On a Friday conference call with the Council of Canadian Innovators (CCI), NRC president Iain Stewart said that the agency won’t use the typical IRAP process for this program. “A lot of the things you would normally deal with in an IRAP application, we in fact won’t be looking at here … like the technology project [or] the cost of the labour and the overhead.” The NRC will evaluate whether a firm is research- or technology-oriented, as well as whether it has high growth potential.

On the same call, Bains said the government was looking to help as many firms as possible. “Rest assured, if you are a company that meets the criteria … particularly if you have highly skilled innovators working in your business, we will do everything we can to make sure that we’re there for you,” he said.

There is no cap on the number of eligible employees, but companies must have fewer than 500 staff to qualify. Bains told The Logic Friday he has no plans to make the program available to larger companies. “The current eligibility criteria [are] focused on small- and medium-sized enterprises, so that does apply to firms of 500 employees or less,” said Bains. 

Unlike the CEWS, companies can get money for contractors under IRAP’s program, so long as those workers are issued the correct tax documents. “Eligible Canadian SMEs can apply to receive support from the NRC IRAP Innovation Assistance Program to help subsidize wages for their T4 employees and T4a contractors,” said Ellis. The lack of subsidy for contractors was a major concern of business groups and technology industry associations. 

The new money will be available to pre-revenue startups and companies that haven’t previously used the IRAP. “We’re looking at companies that are focusing on new technology, or companies’ payroll, which is significantly connected to research and development,” Bains said on the CCI call. The government said more than 1,000 firms are expected to benefit over the next three months. The NRC will process and respond to the first applications by May 11, and begin making payments to firms thereafter. 

On the CCI call, Bains said the applications will be assessed by IRAP industrial technology advisors (ITAs), who under normal circumstances evaluate prospective recipients and provide ongoing guidance to companies. Existing clients will likely receive their funding sooner, he acknowledged, “because there’s already an understanding of the company [and] a fair amount of due diligence that’s already done.” 

Hamid Arabzadeh, CEO of Ranovus, an Ottawa-based data-centre hardware firm, said ITAs “have a very good rolodex of companies and their track record.” IRAP tracks the progress of recipient companies for five years after a project concludes, and considers factors like the size of their patent portfolio, he said. “They’re tough in terms of choosing the projects, but once they understand what you’re trying to do and how [it’s] differentiated globally, they’re willing to put [in] money for you to take extra risk.”

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