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As scaling businesses and startups across Canada continue to rev up development and source funding, venture capital deals, particularly Seed and Pre-Seed rounds, have slowed. Investors have tightened their pocketbooks to brace against an anticipated hostile market. With the cost of research and development (R&D) showing no signs of decreasing, especially with current inflation rates remaining at decades long highs, finding funding for your projects and initiatives is essential. Canada’s Scientific Research and Development (SR&ED) program is a vital resource that allows Canadian businesses to reduce the financial burden associated with R&D through tax credits. Since being implemented, SR&ED has become the federal government’s largest source of support for business-led R&D projects, with $3+ billion claimed annually.
For those looking to support their R&D initiatives this year, SR&ED is a valuable source of non-dilutive funding, with the one draw-back being the annual funding timeline. This means companies are left spending on eligible R&D work and waiting many months for reimbursement. At Easly, we’re proud to provide financial support to leading minds in innovation throughout Canada. With readily accessible financing for companies of all sizes, getting an advance on your SR&ED refund is straightforward. Our support allows you to retain your equity, accelerate research and development, and have peace of mind while you focus on operations. Below, we’ll take a closer look at what’s behind the slowdown in venture capital funding, why equity funding can be risky for owners, and why you should consider SR&ED as an alternative. Read on to learn more!
Venture Capitalists Take a Risk-Off Approach
When seeking private funding, businesses have several avenues to explore, with one of the most well-known options being venture capitalist (VC). While seeking outside aid can certainly seem appealing and offer additional benefits like mentorship and access to an extensive network of connections, venture capital isn’t without its share of risks. In most cases, VCs will require you to relinquish a share of your equity to secure funding, leaving you with less overall ownership and more ground to make up in the long run. The competition can be particularly fierce to grab their attention. What this often means for entrepreneurs and businesses looking for financing is a drawn-out due diligence process, unfavourable valuations, and less stability that is, as we mentioned above, often subject to availability dependent on market circumstances.
As with other industries, venture capital is certainly not immune to current economic challenges. Many investors have tightened the reigns on their lending, with fewer businesses receiving funding and often requiring a rigorous courting process. The pain has particularly been felt by early-stage tech startups seeking Seed and Pre-Seed Rounds, as they tend to be riskier investments for VCs. Data provided by briefed.in shows that Seed and Pre-Seed deal volume fell by 37% and 55%, respectively, from 2021 to 2022. When analyzing the data quarterly, it’s apparent that deal volume dropped off a cliff in Q3 of 2022 with no signs yet of changing. With fewer VC investment opportunities, vetted alternatives are essential for Canadian businesses, making alternatives like Easly’s SR&ED financing a stable and reliable option to explore in 2023.
Taking a Look at SR&ED
SR&ED, or the Scientific Research and Experimental Development program, is a Canadian tax incentive program designed to alleviate the financial burden of conducting research and development in Canada. Under the program guidelines, businesses that qualify for SR&ED can earn tax credits to either reduce tax liability or receive a refund, depending on a few variables (learn more here).
This resource can be a significant help for businesses needing to move their project to the next stage of development or even to get things moving as a startup. The difficulty with SR&ED is that the refund is only paid out once per year after it is claimed, and receiving the refund can take months from when it’s claimed. This waiting period can leave you stranded during the most important part of your R&D process and strain your cash position if you don’t have an intermediary solution.
Easly is Here to Help
R&D can’t wait for your capital on hand to match where you are in development. Whether you’re creating the latest clean tech initiatives, innovating in the biotech or pharmaceutical sector, AgSci, or other fields, having the right funding at the right time is essential. SR&ED refund financing offers businesses access to non-dilutive capital at an affordable cost, protecting your equity and allowing you to proceed with development in as little as two weeks following your application.
Easly takes pride in supporting Canadian-grown R&D initiatives, allowing companies to use future tax refunds and grant disbursements to secure funding throughout the year. Once you’re approved for financing, you can receive your capital in as little as 48 hrs, eliminating the stress caused by waiting for government payouts. To date, we have:
- Deployed over $125 million to Canadian businesses
- Facilitated individual claims ranging from $50,000 to over $2,000,000.
When you partner with Easly, you gain access to secure capital you can trust with an approachable application and approval process designed to help you get what you need when it matters most.
Learn more about leveraging your SR&ED tax incentive with Easly by contacting our team today!
