Before getting into why Canada shall be on every entrepreneur’s radar, meaning of “start up” shall be agreed upon for the sake of this post. The use of the term “start-up” has indeed seen an incredible increase in the past few years but there still is no clear consensus on what it specifically means. Same can be argued for “innovation”. Nonetheless, there are common characteristics that almost all agree on, and believe that a start up needs to have: high risk, and very high growth potential. With this in mind, Canada is on the express lane to becoming a start-up powerhouse.
Canada is the “Silicon Valley of the North”
There are many reasons Canada is dubbed the “Silicon Valley of the North”. Among them the most important are:
Economic Security and Business Health
Canada sits among the top 10 of the world’s freest economies, preceding both the UK and the US. The Index of Economic Freedom, on which Canada is ranked number 9 in 2020, takes cultural aspects such as property rights, freedom from corruption, government spending, fiscal freedom, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and investment freedom into account when determining a country’s ranking. This kind of economic environment makes a big impact on business culture and is one reason why Canada ranks high as a start-up favorite destination.
Costs & Funding
Two essential factors that greatly contribute to increasing the viability of start-ups is the ability to lower start-up costs and increasing its chances of securing funding. Canadian businesses often have the opportunity to apply for government (and other) grants, loans, and financing as a start-up. With different financing options available to start-ups, Canada offers fantastic support for business and commerce. Some of the grants are regional or industry-specific, while others offer general business support. Among the most notable of these opportunities are:
Scientific Research and Experimental Development Program (SR&ED): This program offers tax credits or refunds from 15 percent to over 45 percent to encourage businesses to conduct research and development in Canada that will lead to new, improved, or technologically-advanced products or processes. SR&ED allows start-ups to finance most of their R&D costs through this federal tax credit.
Industrial Research Assistance Program (IRAP): IRAP contributes up to 80 percent to a maximum of $500,000 toward internal and external business R&D costs. Eligible costs include employee salaries, materials and laboratory expenses, and consulting fees.
Canada is a global pioneer in designing business-friendly tax policy. With effective corporate tax rates even lower than the US, and numerous R&D incentives like the SR&ED, Canada remains one of the most sought destinations for small and big businesses alike.
According to a Deep Centre recent study on the Canadian tech industry that evaluated Canada’s business accelerator and business incubator ecosystem, the top 20 Canadian accelerators and incubators have helped attract more than $1.7 billion in follow-on investment and helped facilitate the creation of more than 10,000 new jobs. Therefore it is fair to conclude that Canadian economic system is ripe for start-up success.