So here’s the story, starting a start up is hard. There are lots of things to think about, the bottom line is always one of them. How do you make money so that you can pay your team and have enough left to keep developing your business? Forget paying yourself for the moment, just focus on paying the talent that is moving your idea forward. Love it or hate it, this is business and it doesn’t change in the startup scene.
As of recent, I’m worried because there are serious changes being considered in relation to Canada’s Scientific Research and Experimental Development (SR&ED) tax credit. If you’re a Canadian start up, you should be as well. In the past and to date, SR&ED has allowed start ups to offset the cost of operations while running a great team with competitive salaries to retain talent. There is a growing concern that changes to the SR&ED program are in the works, this could have enormous implications on Canada's ability to commercialize its research and development investments. Doing what you love, making money, paying your team, developing ideas could get a whole lot harder for start ups in Canada.
As of recent, I’m worried because there are serious changes being considered in relation to Canada’s Scientific Research and Experimental Development (SR&ED) tax credit. If you’re a Canadian start up, you should be as well. In the past and to date, SR&ED has allowed start ups to offset the cost of operations while running a great team with competitive salaries to retain talent. There is a growing concern that changes to the SR&ED program are in the works, this could have enormous implications on Canada's ability to commercialize its research and development investments. Doing what you love, making money, paying your team, developing ideas could get a whole lot harder for start ups in Canada.
Changes to the SR&ED program advocated in the report of the Expert Panel Review of the Federal Support to Research and Development are particularly worrisome. This includes the proposal to shift away from a universal tax credit approach to one that relies more heavily on individual judgment and puts labour costs at the forefront of government sponsored R&D support. This could negatively impact those in high-tech.
It is obvious, the level of R&D support for high technology companies must be maintained and indeed enhanced if Canada is going to continue to participate in the high-tech industry. If you’re a Canadian startup, then SR&ED should already be in your financial toolbox. Reducing this credit or taking it away will severely affect the performance and traction that start ups have worked hard to gain. The SR&ED program is an invaluable competitive advantage for Canadian high-tech companies. If said changes are going to happen it is unlikely that the support levels for R&D will be offset with venture capital funds.
We need to be a united front on this. We need to safeguard the SR&ED program. Reducing refundability will evidently hurt each startup’s ability to raise capital; anyone can see the long term effects of this one. As it currently stands SR&ED is helping start ups survive in Canada rather than moving to the US to build and grow a company. Program changes highly reduce predictability for startups (an ecosystem that is already unpredictable by nature). The current clear eligibility criteria helps start ups plan and include SR&ED into their business model.
If possible changes are to be made, it is worthwhile to consult with startups and investors who are active in this space, as they are directly impacted by this program.
Canadian start ups, speak up. What are your thoughts? Let’s be proactive.
It is obvious, the level of R&D support for high technology companies must be maintained and indeed enhanced if Canada is going to continue to participate in the high-tech industry. If you’re a Canadian startup, then SR&ED should already be in your financial toolbox. Reducing this credit or taking it away will severely affect the performance and traction that start ups have worked hard to gain. The SR&ED program is an invaluable competitive advantage for Canadian high-tech companies. If said changes are going to happen it is unlikely that the support levels for R&D will be offset with venture capital funds.
We need to be a united front on this. We need to safeguard the SR&ED program. Reducing refundability will evidently hurt each startup’s ability to raise capital; anyone can see the long term effects of this one. As it currently stands SR&ED is helping start ups survive in Canada rather than moving to the US to build and grow a company. Program changes highly reduce predictability for startups (an ecosystem that is already unpredictable by nature). The current clear eligibility criteria helps start ups plan and include SR&ED into their business model.
If possible changes are to be made, it is worthwhile to consult with startups and investors who are active in this space, as they are directly impacted by this program.
Canadian start ups, speak up. What are your thoughts? Let’s be proactive.
