The Canadian government is committed to fostering successful startups. They want you, as a Founder, to succeed so you can create Canadian jobs, strengthen local communities, and boost our national economy.
That's why funding programs are available to support startups with cash flow, particularly in the early stages of growth. Two such programs are:
- IRAP (Industrial Research Assistance Program)
- SRED (Scientific Research and Experimental Development)
These programs may seem daunting and challenging at first, but are there to help you grow your business.
Lets take a closer look at how they work.
Startup Funding Options through IRAP and SRED
Both SRED and IRAP are designed to encourage innovation within Canadian companies, but they operate in slightly different ways:
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SRED offers tax credits for companies engaging in R&D activities that involve technological advancement and scientific research. This program is accessible to companies of all sizes and provides a significant financial return if you're pushing the boundaries of what's possible in your field.
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IRAP is focused on helping small and medium-sized enterprises (SMEs) accelerate their growth through innovation. It offers both financial support and expert advice, particularly for companies developing new products, services, or processes that involve significant technological risks.
Key Differences Between SRED and IRAP
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Eligibility and Focus: While SRED is broad, covering any company engaging in R&D, IRAP is more selective, focusing on SMEs with a strong potential for growth and innovation. SRED is more likely to benefit companies already investing heavily in R&D, whereas IRAP supports companies earlier in their innovation journey.
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Funding Type: SRED offers tax credits, which are either refundable or non-refundable, depending on the company’s size and structure. IRAP, on the other hand, provides direct financial contributions, often in the form of grants, to cover a portion of your R&D project costs.
How to Maximize Your Benefits
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Combine Both Programs: If your SaaS startup is engaged in significant R&D, you might be eligible for both SRED and IRAP. Use IRAP funding to kickstart your innovation project, and then leverage SRED to recover a portion of your R&D costs through tax credits.
IRAP & SRED Startup Funding Advice: So think of IRAP as helping you find Product Market Fit at your Startup. And Use SRED during Go-To-Market growth stages when you need a solid R&D investment to build core and stable features.
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Plan Your Projects Wisely: Start with a clear, well-documented plan for your R&D activities. For SRED, ensure your work involves a technological advancement and has a clear process for overcoming scientific or technical uncertainties. For IRAP, demonstrate your project's potential to create new jobs, increase revenues, and contribute to Canada's economy.
IRAP & SRED Startup Funding Advice: You'll increase your chances of success with IRAP if you start to focus on how your Startup will create more jobs, pump the local economy and build the Canadian economy. This is the purpose of the IRAP funding program. -
Engage Early with Advisors: For IRAP, building a relationship with an Industrial Technology Advisor (ITA) is crucial. Start engaging with an advisor early to increase your chances of receiving funding. They can guide you on how to structure your project to meet IRAP’s criteria.
IRAP & SRED Startup Funding Advice: It's a good idea to engage with your reps right from the start. This way you are familiar with timelines, requirements and calendar of events. Proper planning and execution is key in the process.
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Document Everything: Both SRED and IRAP require detailed documentation of your R&D activities. Maintain meticulous records of your experiments, trials, and project costs. This not only strengthens your claim but also prepares you for any audits.
IRAP & SRED Startup Funding Advice: Documentation can not be stressed enough. This is a government process and you need to ensure you have all the proper paperwork. So keep original receipts, document expenses and work with your accounting team closely.
Increase your Startup's chances for Success
Leveraging SRED and IRAP can be transformative for your SaaS startup, providing much-needed capital to drive innovation.
Keep in mind these processes for application, review and approval can take 6-12 months. So plan ahead and make sure you have the startup funds to do business as usual while your application is in process.
For more insights on how to grow your SaaS startup, reach out to our team at ShoutEx.
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