Almost two weeks ago, the Government of Canada introduced new emergency measures specifically meant to support the tech and innovation sector amid COVID-19. This included funding of $250 million to Industrial Research Assistance Program (IRAP), $20 million to Futurpreneur Canada, and $962 million in new capital to Regional Development Agencies (RDAs).
RDAs “are the front line for economic development in Canada and help to address key economic challenges.”
Prime Minister Justin Trudeau highlighted at the time that the funding is meant to address gaps left by the federal emergency loan programs and the wage subsidies.
Following a recent conversation with Minister of Innovation Navdeep Bains about IRAP, BetaKit also sat down (virtually) with Minister of Economic Development Mélanie Joly, who is responsible for the RDAs.
The minister shared details on the latest commitment to RDAs and her thoughts on the steps the federal government has taken to support Canada’s tech and innovation sector.
Joly told BetaKit that details on how the $962 million will be disbursed by the RDAs is expected “very soon.” Though she was not able to provide exact timing, the minister noted, “I’ll be coming up very quickly with the details.”
“Basically, if you don’t have access to the wage subsidy, if you can’t get access to the Canadian Emergency Bank Account (CEBA) $40,000 [loans], and basically you’re falling through the cracks, come to see us at FedDev,” Joly stated.
It should be noted that during the interview Minister Joly often referenced FedDev, the RDA for southern Ontario, when asked generally about the agencies. BetaKit has confirmed, however, that the $962 million will be distributed amongst all the RDAs and Community Futures Development Corporations nationwide, not just FedDev.
RDAs are federal agencies under Innovation, Science and Economic Development Canada (ISED). The six RDAs across Canada span Atlantic Canada, Ontario, Western Canada, and the northern regions as well.
Of the new capital commitment to RDAs, $675 million is being allocated to the agencies with $287 million for Community Futures Network. Community Futures Network is a group of federal agencies placed across Canada that provide small business services in rural communities. The network’s funding is distributed through RDAs.
When the $962 million was announced on April 17, Joly said the investment is essentially doubling the budget of the RDAs. The federal 2018 budget allocated around $911 million to RDAs: $400 million over five years on an accrual basis, and $511 million over five years on a cash basis.
Joly noted that prior to the pandemic the development agency program had an annual budget of $1.3 billion, including support to the community futures organizations across the country.
While she would not provide exact details on how the funding will be disbursed, the minister said the $962 million will “provide measures such as loans” to small and medium-sized enterprises (SMEs) that aren’t able to access the existing federal emergency liquidity measures as well as traditional funding from financial institutions.
“Sometimes certain institutions are not willing to take the risk, but we will because this is what we need to do.”
“Sometimes certain institutions are not willing to take the risk, but we will because this is what we need to do to support our most innovative companies,” Joly stated to BetaKit. “[These companies] were already thriving before this pandemic, we had like the best year since the internet bubble last year, and we definitely know that we need to invest in them because they’ll be part of our economic recovery.”
ISED’s website notes RDAs “are the front line for economic development in Canada and help to address key economic challenges by providing regionally tailored programs, services, knowledge and expertise.”
It adds that the agencies are closely monitoring challenges presented by COVID-19, encouraging SMBs to reach out if they have been affected. At time of publication, no further details on the new funding are provided on either the federal RDA site or individual agency websites.
Joly told BetaKit the federal government worked to get more funding for the RDAs following conversations with a number of organizations including tech CEOs, chambers of commerce, the National Angel Capital Organization (NACO), and MaRS CEO Yung Wu.
Groups including the Canadian Digital Media Network wrote open letters to Joly and other ministers calling for increased funding, calling RDAs essential in helping Canada’s startup ecosystem with recovery.
“It is the first time that the RDAs will be playing a role in stabilizing the economy. Usually, RDAs are there in times of stimulus, and in times of to stimulate demand by making direct investments in communities across the country,” said Joly. “RDAs will be playing a role, eventually, I’m convinced, in the context of the recovery.”
Recognizing the recent closure of Toronto incubator OneEleven, Joly pointed to the role RDAs play in supporting incubators. Without providing details on how incubators might be able to access the additional funding she noted, “getting more funding through our incubators was key to make sure we keep that ecosystem very strong.”
Joly added the government will also be looking to partner with other organizations that can help support areas where RDAs are less present. When pressed, the minister said this will include working with “third parties” such as economic development agencies “to make sure that we’re much more present in the Toronto area, and the Montreal area, and big cities.”
Notably, FedDev covers southern Ontario including Toronto, with FedNor covering northern Ontario. Canada Economic Development for Quebec Regions’s (CED’s) mandate is province-wide.
The economic development minister also highlighted other programs the federal government has introduced for the innovation sector, including IRAP and the recently announced rent relief program.
Some tech CEOs have already expressed to BetaKit hopes that the rent program will be beneficial for their startups. However, one survey found only one in five Canadian small businesses expect their landlord to sign on to the Canadian Emergency Commercial Rent Assistance program.
“We’ve heard some gaps and for the wage subsidy or for the CEBA account, and we moved quickly to try to mend them,” said Joly, noting that the change in the wage subsidy criteria was particularly for startups and companies in a high growth phase.
When asked whether the Government of Canada has plans to make changes to programs like SR&ED or introduce additional emergency measures for the sector, Joly told BetaKit “we will see how this new support lands.”
“We will continue to engage with leaders and startup communities all across the country,” she added. “Because that’s how we’ve been dealing with stakeholders and people since the beginning of the pandemic; getting out funding, seeing how it’s landing, tweaking, coming back, seeing how things are happening, and then making sure that it is always and always better.”
“There was no playbook for this pandemic,” she said. “We started from scratch and we went as quick as possible, knowing that we would be … basically building the plane as we fly it.”