New program provides up to $1M to startups receiving angel or VC funding

Last week, FedDev Ontario (the Federal Economic Development Agency for Southern Ontario) announced its Investing in Business Innovation program, through which startups can receive up to a $1 million repayable contribution (a loan, in other words) if they have received a term sheet from a recognized angel investor or VC.

The government is allocating up to $190 million to the program over the next four years, and the same program will also provide funding to angel investment networks for outreach and promotion and to organizations representing angel networks for investment attraction activities.

Startups—defined here as businesses with fewer than 50 employees—can receive funding for:

• Labour, capital and operating expenditures
• Materials and supplies
• Consulting and/or professional fees (limited to market rate)
• Minor and non-capital acquisitions (e.g., software)

Angels or VCs must be funding at least two-thirds of the eligible project costs, and FedDev will contribute the remaining third, up to $1 million. Companies can only receive funding for one project, and it must be completed before March 31, 2014.

Startups must also show that they are "using business mentoring, counselling, or related services"—which would include the services provided by TechAlliance in London and by other members of the Ontario Network of Excellence (ONE).

In addition to being "accredited investors" by OSC rules, qualifying angels must be members of an angel investor network that is registered with the National Angel Capital Organization or other "reputable industry association." Eligible VCs must be registered with the CVCA. The investor must also be willing to provide FedDev with a report of the due diligence it undertook on the company. The funding isn't automatic—each applicant will be evaluated by FedDev.

Southern Ontario is defined on the FedDev website, and runs from Windsor past Ottawa and as far north as Haliburton. All of Southwestern Ontario is included.

FedDev hopes to start making funding decisions within the next three months. It says that repayment terms will be based on several factors, but will begin "as soon as possible" with the full contribution returned "as early as practical." No other details about terms were announced.