Seed / Follow-On

At this stage, the innovation would have graduated to a level in which the focus is on “the product” and “the vehicle” in which to drive it. The vehicle is a small business or “startup” which serves to market the value of the innovation to serve a viable solution to a previously–identified problem. The entrepreneur(s) is(are) usually the inventor(s), but this is not a requirement and is sometimes discouraged. The decision would depend on many factors such as the intense focus and time requirement to develop the business endeavour. For example, the inventor could be a research professor who would not have the capability to throw him/herself into a business that requires intense focus. In this case, the inventor may acquire a seasoned entrepreneur to lead the endeavour who believes in the value of the innovation and has the energy and passion to scale a startup and the associated innovation. The UILO can help with this process (see Commercialization Services), drawing from its extensive expertise in industry and creating companies. The funds sought are more substantial, usually dilutive to the company position, and require more time and effort to acquire. At this stage, the due diligence from either government sources (ie. NRC) or the private sector (ie. Angels) is more intense.

NRC - IRAP / BCIP

The National Research Council (NRC) supports the needs of small and medium sized firms (“SMEs) engaged in innovative or technology-driven activities. It assists firms to develop, adapt, and adopt technologies and incorporate them into competitive products and services. Their business model serves the continuum of innovation in the following areas: business advice, networking, intellectual property, market assessments, strategic planning, partnership development, and funding programs.

IRAP: The Industrial Research Assistance Program funds projects that benefit Canada socio-economically. The eligible For-Profit company is revenue-generating and consists of <500 employees. They fund up to $1M per annum for regular applied R&D projects and up to $300K per annum for youth internships. The scope of activities include: Feasibility Studies; Lean Manufacturing; Licensing and Commercialization Strategies; Patent Filings; Market Research, and Competitive Intelligence Studies.

BCIP: Build in Canada Innovation Program. This program assists in the bridging of the pre-commercialization gap. It offers an opportunity for real-world evaluations of pre-commercial goods and services. By doing so, it improves the efficiency and effectiveness of government operations. There are 5 streams – ENVIRONMENT / HEALTH / SAFETY AND SECURITY / ENABLING TECHNOLOGIES / PROTECTING THE SOLDIER. The BCIP is presently holding an open call. The funds available are between $500K and $1M and stipulate that the proposal must fit into the prescribed streams, have at least 80% Canadian content, show IP ownership and rights, and the associated product must not previously have been sold commercially. The BCIP program narrows in on usable innovations (ie “MRL 7-9”). The criteria used to evaluate the proposal is based on the value of the innovation, the test plan, the readiness of the innovation (ie “The MRL”), and the commercialization capacity.

Family - Friends – Founders (The “3Fs”)

This is the “boot-strapping” stage in which the entrepreneurs self-fund and supplement by acquiring funds from trusted family and friends.

Angel Groups

“Angels” are high net-worth individuals who actively fund early-stage companies. They usually invest in a portfolio of companies to increase the odds of success (ie “Return-on-Investment”). They invest alone or together with other investors (ie. “Angel Networks”). Usually, the process to “pitch” your idea to the investor is a thorough operation in which an intermediary (ie. A “Managing Director”) initially screens the introductions,presentation pitch decks, and investor summary sheets. If the entrepreneur passes this stage–gate, they are then invited to give a brief presentation to the Angel(s). Be well prepared for any questions and be up-front as to your expectations and current state of the company and the innovation. Don’t expect a “signing” to happen immediately. The process may take up to 12 months, during which the investors ask for more due diligence documents to assist in their decision whether or not to fund your comapny. If they do not fund, they will provide some great feedback that will help you re-tool your strategy or think of other avenues to pursue. Once they agree to fund your startup concept, they will negotiate with you using a “Term Sheet”, which lists and describes the terms of the contractual relationship.

Some Angels are “hands-off”, while others are “hands-on” with respect to business matters. They may ask for a Board position within the Company so that they have some control in the direction of the product development. It is often advantageous to acquire such a member, as they can provide the entrepreneur with contact sources, more funding avenues to tap into, and essential advice along the way. Angels do not stay in the company for an extended period, as their modus operandi is an early exit with a return multiple of 2-5X. The next round of funding (ie. “financing”) is usually the trigger for an exit, although some Angels “follow” into the next round.

Crowdfunding

This type of funding originated in the Art World, where it gained in popularity with musicians and artists. After ArtistShare[tm] came onto the scene in 2003, the platform exploded with the likes of IndieGoGo[TM] and KickStarter[TM]. The premise is the acquisition of funds or equity via an online platform in which the entrepreneur pitches their idea in hopes of using the proceeds to develop their product or service. Many variants exist in sectors such as FinTech, Agriculture, Customer-based Products, Science Technology, Real Estate, and Angel Investment. There are benefits and risks to the opportunity, such as – Managing the Investor Pool, IP Protection, Donor exhaustion, Substantial funds raised to develop the product, Government Regulations.