New data sheds light on Canada’s business funding landscape

$5.8B in government funding and $900M in venture capital distributed in first half of 2014

Scroll down to view Infographic

New data released today by The Funding Portal shows just how critical government funding is for Canadian businesses seeking capital for R&D and expansion. In the first half of 2014, governments delivered $5.86B to organizations across a range of industries. Over the same period, venture capital (VC) deals amounted to $897M, according to previously reported findings from Canada’s Venture Capital and Private Equity Association.

“Canada’s government funding marketplace has been almost impenetrable and companies have tended to overlook what amounts to billions of dollars of available funding,” said Funding Portal CEO Teri Kirk. “In fact, Canada has the second-highest level of business incentives among OECD countries but, until now, data about this source of funds has not been readily accessible.”

TheFundingIndexTM offers the first clear picture of how industrial incentives are distributed by region and industry sector. Compiled through a wide array of sources, the data measures direct incentives paid by federal, provincial and municipal governments through more than 4,500 programs.

Based on the first six months of 2014, incentives are projected to grow by approximately 4% over 2013. On a quarterly basis, incentives of $2.62B in Q2 2014 were 19% lower than in Q1.

“The quarterly drop is more about timing than actual cuts, due to a bit of a freeze during the Ontario election period,” said Kirk.

REGIONAL HIGHLIGHTS

Organizations in Ontario attracted the highest levels of government funding in the first half of 2014, for a total of $2.59B (44% of the total amount disbursed). Quebec was the next largest recipient of funding with $1.03B (18%), followed by Alberta with $526M (9%), and B.C. with $493M (8%). The Atlantic Provinces combined attracted $714M (12%).

This data reflects similar distribution patterns to VC investment in the first half of the year. Businesses in Ontario attracted $331M in VC financing between January and June 2014 (37% of total VC investment in Canada).

SECTORIAL HIGHLIGHTS

“The arts and culture sector always attracts large amounts of government funding. In fact, it secured the highest level of funding in the first half of 2014 — $2.07B,” said Kirk. “The academic and research sector also fared well, with total disbursements of $1.04B.”

The manufacturing sector ranked third with $991M secured (17%), followed by health technology and life sciences with $530M (9%).

The data and related services to help businesses to secure funding are available at thefundingportal.com. The portal will publish results for Q3 2014 in mid-February 2015.

tfpqindex

FundingAwards – Who got Funded – Week of Nov. 10

Overall Disbursements: Funding from federal and provincial governments drops to $41.6M this week, compared to $210.2M last week.

Top Sector: Arts, Culture & Community is the top sector this week, attracting $15.3M, 37% of the total amount disbursed.

Top Region: Manitoba is the top province this week, attracting 37% of the total amount disbursed.

Top Recipients in Ontario:

  • Industry: U-Be-Livin-Smart, an Ontario-based health food processing company, receives $990,000 in federal funding through the AgriInnovation Program to purchase and install food processing equipment for the commercialization of the company’s patented nutrient-dense muffins, vitamins and other related products.
  • Hospitals, Universities, Research Centres & Industry Associations: Niagara College receives $4.2 million from the Government of Ontario to help build a permanent, high-tech manufacturing facility, the Advanced Manufacturing Innovation Centre.
  • Charities, Non-Profits & Public Sector: The United Way of Durham Region receives $1.3 million in federal funding to implement Housing First, a proven, evidence-based approach to end homelessness.

Funding Disbursed by Industry Sector:

sectors17

Funding Disbursed by Province:

pros17

Active Funding Programs this Week:

  • Aboriginal Languages Initiative
  • AgriInnovation
  • AgriRisk
  • Business Development Program
  • Canada Arts Presentation Fund
  • Canada Book Fund
  • Canadian Initiative for the Economic Diversification of Communities Reliant on Chrysotile
  • Crime Prevention Action Fund
  • Hosting Program
  • Housing First
  • Industrial Research Assistance Program (NRC-IRAP)
  • Investing in Business Innovation
  • Investing in Regional Diversification
  • Quebec Economic Development Program
  • Recreational Fisheries Conservation Partnerships Program
  • Skills Link
  • Small Communities Fund.

To receive daily reports on which organizations received funding in Canada, subscribe to The Funding Portal’s FundingAwards™ service.

Canadian Private Financing and M&A News Roundup – Week of Nov. 10

  • Agriculture
    • Winnipeg-based Farmers Edge secured an undisclosed amount in Series B financing from Kleiner Perkins Caufield & Bayers. The company provides advanced agronomic solutions to drive profitability with a proven track record in precision agriculture.
    • Fredericton-based Resson Aerospace raised $3M in VC financing from Rho Canada Ventures, Build Ventures, BDC Capital, New Brunswick Innovation Foundation and private investors. The company launched its solution for large-scale agricultural companies in 2013, and quickly built relationships with some of largest producers in the world.
  • Healthtech
    • Toronto-based League secured $4M in seed financing from Real Ventures, Foundation Capital, and OMERS Ventures. The company is building a digital health and wellness platform.
    • Toronto-based Encycle Therapeutics secured $2.5M in Venture Capital. The biotech company exploits a unique platform technology that enables the rapid synthesis of drug-like macrocycles or membrane-permeable nacellins.
  • Tech
    • Saint John-based SiteFlo secured $500K in debt financing. The company offers a software solution that helps technical personnel exhibit compliance with continuous improvement project workflow and other manufacturing processes, leading to both performance improvements and reproducibility of products and services in technical work environments.
    • Toronto-based Quandi closed a $5.4M Series A round led by August Capital. The company’s data platform aims to make all the numerical data in the world available on a single website.
    • Quebec-based Execution Labs secured $5.3M in Series A financing from White Star Capital, Real Ventures, BDC VC and Corus Entertainment. The hybrid game incubator helps independent game developers produce and commercialize games.
    • Investissement Québec acquired a $5M equity stake in Montreal-based Hibernum Créations. The company develops games for mobile, social and web platforms, as well as creating art and assets for AAA publishers.
    • Toronto-based Rent frock Repeat raised $1.5M in a financing round led by Canadian angel investors Coralie Lalonde and Caroline Somers. Founded in 2010, Rent frock Repeat helps women attending a special event overcome the pressure and inconvenience of shopping by helping them save time, money, wardrobe space by offering a first-of-its-kind designer dress rental service in Canada.
    • Toronto-based IntelliResponse was acquired by [24]7 for an undisclosed all cash sum.

FundingSources – Must Reads

This week’s Must Reads from Funding Agencies and Industry Associations

  • CME: FedDev Ontario is partnering with Canadian Manufacturers & Exporters (CME) to help southern Ontario’s manufacturers adopt advanced technologies, enhance productivity and expand global competitiveness. CME will receive up to $20 million for the CME to deliver a new program called SMART Advanced Technologies for Global Growth. The CME program will be launched on Dec. 1, 2014, and will provide funding for southern Ontario manufacturers who are exporting, planning to export, or selling into a supply chain, to conduct technology assessments and adopt advanced technologies.
  • Futurpreneur: Futurpreneur Canada (formerly the Canadian Youth Business Foundation) announced that this year’s Global Entrepreneurship Week will surpass all previous years’ celebrations, with a record 475 events taking place across Canada from Nov.17-23, 2014.
  • Manitoba: Starting and running a business in the Town of Beausejour and Rural Municipality of Brokenhead just became easier thanks to BizPaL, an online business permit and licence service that saves time on paperwork and helps entrepreneurs start up faster.

QP Briefing: GE Peterborough plant wins pipeline contract, 250 jobs to be added

By John Valorzi

Industrial giant GE Canada has won a major contract for the Energy East Pipeline project, new business expected to create 250 jobs and that came after a plant upgrade partly financed by the Ontario government.

The Mississauga-based company said Thursday that TransCanada Corp. had awarded the company’s motor factory in Peterborough a contract to build customized electrical motors for the Calgary company’s proposed Energy East Pipeline project.

The contract is expected to create 250 jobs at GE and its local suppliers in Ontario over the next two years.

“TransCanada’s Energy East project will generate jobs in Peterborough, and with our local suppliers,” said the company’s president and CEO Elyse Allan, in a statement.

“Today’s announcement recognizes GE’s investment in advanced manufacturing and our employee’s expertise in building high quality motors to support Canada’s oil and gas sector.”

Calgary-based TransCanada is this country’s dominant shipper of natural gas, but it is converting and expanding its national pipeline to carry oil across the country and feed new markets from expanded oil sands production.

The pipeline – which still awaits National Energy Board approval – will carry 1.1 million barrels of crude from northern Alberta to Eastern Canada daily, through Ontario and Quebec into Saint John. From there it will be refined and also exported by tanker to Asia and other foreign markets.

The proposed 4,400-kilometre line will have many pumping stations along the route and require powerful motors to run that equipment.

Allan noted the company has invested $65 million into the Peterborough plant – including provincial subsidies – to make it more competitive and tap into new national and global markets.

The executive noted that without the modernization, the electric motors now being built for TransCanada in Peterborough would have previously been made by GE in South America.

Upgrading Ontario’s advanced manufacturing and technology sector is a big part of the Liberal government’s 10-year plan to modernize the economy, expand exports to Asia and make the province’s industrial companies more competitive so they can win more business on global markets.

In the July budget, the government unveiled a $2.5-billion Jobs and Prosperity Fund to subsidize new investments and productivity-enhancing equipment. The Liberals have long touted their “partnerships” with business – although some public-private partnerships ended up in scandal and financial losses.

“This investment by GE is a great example of the opportunities that Ontario’s highly skilled workforce and strong advanced manufacturing sector attract,” said Brad Duguid, provincial minister of economic development, employment and infrastructure.

“Our government’s priority is to continue fostering an innovative business climate to ensure that companies, like GE, can continue attracting investments and creating good paying jobs.”

Alex Pourbaix, president of development at TransCanada, said the energy company’s partnership with GE is positive for the economy.

“GE’s knowledge and expertise in energy technology will enable TransCanada to safely and reliably move a secure supply of oil from Western to Eastern Canada, creating jobs and economic growth along the way, including right here in Peterborough,” he said.

GE Canada employs about 7,500 people and makes everything from motors and generators to health equipment, wind power systems and other products. It is also heavily involved in corporate financing and leasing.

The company is part of General Electric Co., the Connecticut-based conglomerate co-founded in the late-19th century by inventor Thomas Edisonand which now employs 300,000 people around the world and generates nearly $150 billion in annual revenue.

Subscribe to a free two-week trial of Queen’s Park Briefing to access daily articles, including:

Teralys Capital launches new fund of funds under federal VC Action Plan

The Teralys Capital Innovation Fund, a private sector-led fund of funds, has closed $279 million in financing from the federal government and the Government of Quebec, Finance Canada announced Monday.

The new Fund is the second fund of funds established under the federal government’s Venture Capital Action Plan (VCAP).

VCAP was initially announced in January 2013 as a $400-million initiative to stimulate private sector investment in early-stage risk capital, and to create private-led, large-scale VC funds. Under the VCAP, the government will support up to four private sector-led funds of funds with private sector investors and interested provinces.

In total, $186 million of the funds were provided by institutional and corporate investors, in addition to $46.5 million each from the Governments of Canada and Quebec. Both governments have agreed to make a combined capital commitment of $1 for every $2 committed by private sector investors to the new Fund, up to $62.5 million each.

The new Fund will focus on investment opportunities in the life sciences sector, and will invest primarily in Canada-focused early-stage and mid-stage VC funds, as well as directly in Canadian companies.

“Innovation and support to entrepreneurs drive all our actions at Teralys Capital,” said Jacques Bernier, Teralys Capital managing partner. “The Fund intends to seek top-tier financial returns by structuring investments in private venture capital funds specialized in innovation. On a long-term basis, these investments will support a profitable and globally competitive venture capital industry, and will allow skilled managers to emerge and to attract the funds required to accelerate the growth of our best local businesses.”

The Fund anticipates a second closing in 2015, and will seek additional investors to reach its target size. The Fund’s initial partners include:

  • BDC Capital Inc.,
  • Caisse de dépôt et placement du Québec,
  • Desjardins,
  • Fondaction CSN,
  • Fonds de Solidarité FTQ,
  • Investissement Québec,
  • Knight Therapeutics Inc.,
  • National Bank, and
  • OpenText Corporation.

The announcement of the launch of the new fund of funds was welcomed by the Canadian Venture Capital and Private Equity Association (CVCA).

“The CVCA welcomes further investment by the Canadian government and the Government of Quebec to increase venture capital funding,” said Mike Woollatt, CEO of the CVCA. “Government involvement in venture capital in Canada is essential for our economy, a smart investment for Government, and a necessary lifeline for innovation.”