Over $400M for early stage funding in federal budget

Ottawa is earmarking $400 million dollars in this year’s federal budget specifically to boost startups and also spending $67 million to shift the National Research Council’s focus to more business-led innovation.

In the budget delivered today in the House of Commons by FinanceMinister Jim Flaherty, $400 million is being set aside “to helpincrease private sector investments in early-stage risk capital, and tosupport the creation of large-scare venture capital funds led by theprivate sector,” according to the official Budgetin Brief document. The funding follows a chorusof loud, high-profile calls for more early-stage capital, particularlyafter a large dip in venture capital disbursements in the first half of2011 and a drop in new VC fundraising thereafter.

The federal budget’s $400 millionfor early-stage funding gets an ‘A’ grade from Startup Canada founderVictoria Lennox.

“This ($400 million) is an indication that the government recognizesthat in order for the economy to grow, it has to invest in startups,”said Victoria Lennox, founder and executive-director of Startup Canada,a non-profit foundation launched recently to explore whattypes of support are needed by Canadian startup firms.

“This is a very good budget, especially for innovation andentrepreneurs. We’ll have to give it an ‘A’,” she added.

Besides the startup funding, Ottawa is also pumping $100 million intothe Business Development Bank of Canada to support its venture capitalactivities. That means almost half a billion dollars aregoing towardsearly-stage business funding.

“That’s a good chunk of change,” said Jim Roche, president and CEO ofthe ultra high-speed research network CANARIE. “There’s no questionthat one of the challenges many Canadian companies have experienced inthe last few years is difficulty accessing VC funds. So to see thefederal government make an investment in stimulating the VC industryalong these lines makes a lot of sense to me.”

Considering that the feds are still forecasting a budget shortfall forthe next three years, Flaherty unveiled a surprising amount of fundingfor research and development (R&D), innovation andcommercialization programs to help the tech and SMB sectors, Roche said.

CANARIE extended for two years
“Overall the research, education and development community should bepleased. There could always be more (funding), but given the objectivesto achieve fiscal balance, it could have been a lot worse.”

There was good news for CANARIE specifically. The programhas beenextended for another two years after its current five-year mandateexpires on March 31. It will receive $40 million over the next two-yearperiod. Although its term was extended by just two years instead of thenormal five (a first in CANARIE’s 18-year history) and its per-annumfunding will fall to $20 million a year from $24 million, Roche said he’s”delighted” that CANARIE will continue.

“Over the last five-year mandate we were running (on) $24 million ayear so that’s a slight decrease. But in today’s fiscal environment wewere expecting that. So it’s pretty much in line with what we wereexpecting,” Roche said.

Flaherty’s fiscal plan aims to balance the budget and return thegovernment’s books to black ink by 2015-16 when he is forecasting a$3.4-billion surplus.

Christine WongChristineWong is a Staff Writer at ITBusiness.ca. Follow her on Twitter,and join in the conversation on the IT BusinessFacebook Page.

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Christine Wong
Christine Wonghttp://www.itbusiness.ca
Christine Wong has been an on-air reporter for a national daily show on Rogers TV and at High Tech TV, a weekly news magazine on CTV's Ottawa affiliate. She was also an associate producer at Report On Business Television (now called BNN) and CBC's The Hour With George Stroumboulopoulos. As an associate producer at Slice TV, she helped launch two national daily talk shows, The Mom Show and Three Takes. Recently, she was a Staff Writer at ITBusiness.ca and is now a freelance contributor.

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