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Government money – Go or no go?

Startups need money. The need begins with a few hundred dollars at the beginning when you first start. Then it turns in to a few thousands when you rent your first office. The amount you look gets larger with time, so does the complexity to find it.

Globalme has been growing steadily. We experienced 50%+ growth in 2009 and 2010, and 2011 is on the same track. A dilemma we had early in the 2008, when we were much smaller, was to see if we could get some money to speed up the growth. Our options seemed to be limited with bank money. I applied to my bank (which was Wamu at the time which became Chase) and got approved for up to 100K business credit. This was pretty much like having a credit card with 100K limit, but the finance rate for getting cash was much lower. We never used that money since our operations didn’t really have the need for it. But it was nice to have it available nevertheless.

IRAP and SR&ED

Earlier last year, I investigated what other options may be available since we have a better looking balance sheet now and a longer history in business. I should make it clear that I have not had interest in an outside investment such as a VC (Not that they are waiting to give us money, but even they did, I would be very hesitant). So I started checking alternatives (which are typically much lower in value but higher in flexibility) and found out about the Canada National Research Council. NRC has some programs, such as the famous IRAP, where the council provides financial and advisory assistance to small and medium size businesses.

After searching the popular (and accessible) grants and programs, I found two that may work for Globalme:

  • Scientific Research and Experimental Development (SR&ED) – SR&ED is a tax incentive program. SR&ED program gives claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada.
  • Industrial Research Assistance Program (IRAP) – IRAP is a bit more than just money. It does have financial incentive programs, but it also provides advisory and networking services (which may especially be useful for early Startups).

Can a normal person/business actually get these?

This has always been my worry – these programs are great on the paper, but do real people can really get to this money? or how hard is it? It is great that I can get 35% of my taxes back, but do I need to spend thousands of dollars and hire consultants to do that?

The answer is, I don’t know. Yet. Growing up in Turkey, I am sceptical about government incentives and grants by nature. The bureaucracy is  hard for most Startups and entrepreneurs to handle. We are (and have to be) very fast in our daily decisions and actions. Working for a grant requires patience and long, deep breathing.

But I decided that I will give this a try, and fight for my fair share of the money. After all, I believe I am a good citizen. I pay my taxes, provide employment and invest in research & development for long term success. Lets see if that will pay back.

Follow my SR&ED and IRAP journey

This will be a series. I will blog as Globalme moves along the SRED and IRAP path. Successful or not, I am sure it will be a good learning experience, and our experience will perhaps help others repeat our good moves and avoid the mistakes that we will make.

If you want to get notified, subscribe to my RSS feed using the link below my photo. And, wish me luck!

 

 

Categories: Startups.

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