Are you missing out on Funding? Here is a list of innovative Startup & Small Business Funding Options in Ontario
Kickstarter and venture capital firms haven’t taken over the start-up and small business market, quite yet.
According to Entrepreneur Magazine, only 1% of startup funding comes from VC firms. And less than 3% of these businesses are crowdfunded. Meanwhile, more than 80% of these startups are doing it the hard way and are self-funded.
People are still putting their own money (and sometimes houses) on the line to start their own businesses.
But does it have to be that way? Not necessarily.
Some entrepreneurs get tunnel vision. They lock into their business and put all of their time and money into it. They’re so busy, they miss the opportunity to look into what sort of entrepreneur or startup funding they may qualify for.
And that could be leaving money on the table. To make sure you’re making the most of all local resources, here are some ways you can get some very valuable help funding your startup.
Why the Big Banks Likely Won’t Help
It’s a tough area because the Big Six banks don’t really look kindly upon certain startups and small business because revenues aren’t enough to justify a line of credit.
In their eyes, most startups don’t have enough long-term traction, improvements, or proven revenue over five years. Also many startups are in the creative economy and don’t have a lot of capital assets. You don’t have a building, you don’t have equipment, so you can’t get a traditional loan. Unless, of course, you’re willing to sign off on your house.
There is, however, The Business Development Bank of Canada (BDC), which is one of the bigger banks.
BDC is a great place to go as a startup and a small business because they take on loans for start-ups and small businesses, and they have programs for these types of initiatives.
Futurpreneur
There’s also the Futurpreneur program. People under the age of 39 can secure 15,000 to 45,000 thousand dollars. Typically, they’ll take a look at the risk to your investments. The extension comes from the BDC when combining the 15,000 thousand and then the BDC extends the loan to 45,000 thousand. They also provide mentoring services along with the loan.
The Henry Bernick Entrepreneurship Centre — Georgian College
I know it’s not cash, but it’s really Business 101 if you’re getting started, or if you want a refresher.
HBEC offers a program in conjunction with ventureLAB out of Markham called Build. Build instructors teach you planning, strategy, sales, marketing, accounting, legal, everything that you need to know.
After the Build program, you are paired with a business mentor that will meet with you and look at helping you accelerate your business.
Mentors will help you review and investigate any funding options that you might qualify for.
Pitch Your Startup @ Excite
Try the Excite Pitch in Barrie. That happens bi-yearly. Typically there are 25- 50 entrepreneurship or startup pitches at Excite, in which case you might win $1000, or up to $2500. Take advantage of these pitches and hone your pitch presentation skills. Sometimes the connections with mentors and business leaders in the audience can be more valuable than cash.
The Starter Business Program (City of Barrie)
This comes with $5000 cash, if you qualify and are accepted into the program. Part of that $5000 grant is to get you started with your business idea. They offer you business 101 courses, and they offer you business mentorship as well. Learn more.
Georgian College Centre of Applied Research (CARI)
You can take an investment of $3000–5000 and turn it into something more like $20,000. Because you work with a university/ college professor, and their students, to help you achieve the results that you’re looking for with an applied research study.
It’s an interesting way to get your business off the ground. One that not nearly enough people are doing. Many business need to investigate the feasibility of a product or a service and this can be a great way to prove that out.
IRAP Hiring Grants & Accelerated Review Process
IRAP provides research funding and various hiring grants within this program. There’s a technical research program called an accelerated review process that companies can apply for to support an internal innovation challenge. Funding can range between $50,000 to $150,000 within this program.
The IRAP program is investing funding to making sure that innovation is a key strategy within small to mid-sized companies in Canada.
Ontario Centres of Excellence (OCE)
There’s also the Ontario Centres of Excellence with their head office located in downtown Toronto. Their provincial program offers startup companies funding and grants typically around helping start-ups reach commercialization and to support their acceleration.
There’s a great program called SmartStart. In this case, if you raised $30,000, the Ontario Government/ OCE would match it dollar for dollar, for $30,000. The last cohort was in September of this year. Watch out for more details in 2018.
Every year in May, there’s a conference called Discovery Days put on by the OCE. It’s a showcase of innovation that’s happening in Ontario. It is a must go to event if you are interested in future innovation and technology.
Fundraising — Shares vs. Convertible Debentures
There’s money raising that one can do as a startup. You can either sell shares right away, or you can look at a loan or a loan with extra features called a convertible debenture. Debentures have become a popular way of investing into start-ups and small business.
With fundraising, you’re really trying to get investors that believe in your idea, get some cash flow moving in your company, and to potentially qualify for another grant. It’s great to raise money and then also qualify for grants at the same time.
You can sell shares, which are, “Hey, I want to sell 10% of my company. I believe my company is worth X, and I’m willing to give away 10% in shares.” And then investors buy in and write a check for that amount. Typically, you’d have to be an incorporated company at that point in time. Your lawyer will provide expert advice during this process.
A convertible debenture is another example of ways that people can raise money. That is, if you don’t know what the value of your company is today, and you need X amount of dollars; then one can offer a debenture. That is, “Okay, I’m willing to take a loan from you at a certain interest rate. And as we mature the company, we set a valuation at a later date.”
At that point, the investor can exchange that loan in for shares. The strong case for investors is that they loan money, make interest and they also get first peek and a discount into converting into shares at a later date.
Does Kickstarter Work for Startups?
The Field of Dreams vision of “If you build it, they will come” is not reality. There needs to be some marketing and some strategy involved in Kickstarter.
But what I like about Kickstarter is if it goes well, you really can build the framework of your branding. It communicates the future of your startup. And it also provides product-market fit, and it says to the investors that the market is willing to pay money for what you’re selling.
That can really help you literally kickstart your fundraising in the future.
Angel Investors
There’s also angel investments. There are a lot of angel groups around in Canada. In Central Ontario, there’s the Georgian Angel Network.
Typically, they’re not willing to accept a cocktail napkin startup ideas. You’d like to have some momentum, a product-market fit, general traction in your industry and some level of revenue. That’s when the angel groups will start to look at you.
MaRS — Embedded Executive Program
Part of the Business Accelerator Program (BAP), is really smart and unique in that it gives you access to money and a seasoned executive on your staff.
It’s a $50,000 grant to literally hire a gray-haired, seasoned executive for your startup. And again, it really works when you have product-market fit and you have traction.
MaRS looks at more advanced innovation technology particularly:
- Artificial intelligence
- Software development
- Medical devices
- IoT
- BlockChain
SR&ED — (Tax Credit — Both Provincial and Federal)
If you’re hiring engineering talent, you can receive a benefit from the government that would help compensate for that engineering and R&D. The good side of the SR&ED program is that it works. Note: you will have to fully fund the labor and expenses prior to submitting the claims at the end of the year.
I recommend that you use a qualified expert to help in your submission. The best place to learn more would be to start a conversation with your accountant.
Community Futures Development Corp (CFDC)
These are typically not in major city centres. They’re typically in more rural areas. There’s one in Orillia and there’s also one in Collingwood.
They will take on some riskier loans to small business and startups. Their board makes the decisions on whom to loan money to with a focus on investing in business in the local area.
Did I Miss Anything?
This is a really great start, but not an exhaustive list of every program or lender. If you’ve launched your business with something different, let me know in the comments below!
