How friendly was the Budget to Canada's Innovation Economy?

It was quite the scene in Ottawa yesterday (see prior post “Blogging the budget” January 26-09). Knowing that the Opposition parties might bring down the government over the budget added an unusual level of excitement to a City that rarely sees an increase in its collective “heartbeat”.

The Hy’s restaurant in Ottawa has long served as the meeting place for the government of the day. Former PM Jean Chretien was a regular while he was in office. Last night was not any different. NDP leader Jack Layton was wandering around the bar, which was a strange sight indeed. More than a few of the real hitters were out and about. While Canada’s best lobbyists were holding court at perhaps a half dozen different tables. Most everyone seemed pleased with how the day had gone; except for Mr. Layton, of course, who had already told voters two weeks ago that he’d be voting against the budget.

For Canada’s technology, biotech, lifescience, Angel and venture capital community, however, there will probably be a lot of long faces this morning. Try as the Canadian Venture Capital & Private Equity Association (CVCA) might, there appears to be nothing in the budget that will directly support the smart-up and VC sectors. There is much written about “innovation”, and groups such as NRC and centres of higher learning saw some new capital or programs to suit them, but the four ideas put forward by the CVCA several weeks ago didn’t appear (see prior post “CVCA letters to Messers Flaherty, Clement and Ignatief” December 26-08). Even the infamous “section 116” issue didn’t merit a mention, despite the fact that lawyers will tell you the 2008 budget fix didn’t do the trick.

Here is an excerpt from the CVCA press release from last evening:

“Unfortunately, the budget has failed to address the current shortage of venture capital financing, which presents a significant challenge to near-term job creation and to Canada’s future prosperity in the important knowledge-based economy.”

Canada’s venture capital sector fosters emerging companies in the life sciences, high-tech, biotech and clean tech industries. Canadian companies backed by venture capital generate sales of $18.3 billion and directly and indirectly employ almost 148,000 Canadians. But venture capital investment and fundraising levels have been declining for years and are now reaching critical lows. In the fourth quarter of 2008, venture capital investment was down 40% from the same period in 2007.

It was a missed opportunity, but perhaps the issues facing the Canadian economy swamp the crisis that the start-up and VC industry are currently living through.

For those of you who haven’t taken the time to spin through the budget document, here is the summary of excerpts that might be directly relevant to anyone in the Innovation Economy:

– Clean Energy Fund: “$1 billion over five years to support clean energy technologies. This includes $150 million over five years for research, and $850 million over five years for the development and demonstration of promising technologies, including large-scale carbon capture and storage projects. This support is expected to generate a total investment in clean technologies of at least $2.5 billion over the next five years.”

– 100% write-off for new computer hardware and software: “We will also provide a temporary, 100-per cent CCA depreciation rate for eligible computer hardware and software acquired over the next two years.

– “Increasing the amount of income eligible for the small-business tax rate, $400,000 to $500,000.”

– “Providing $110 million over three years to the Canadian Space Agency to support the development of advanced robotics and
other space technologies.”

– “$200 million over two years, starting in 2009–10, to the National Research Council’s Industrial Research Assistance Program
to enable it to temporarily expand its initiatives for small and medium-sized enterprises. This includes $170 million to double the program’s contributions to companies, and $30 million to help companies hire over 1,000 new postsecondary graduates, including graduates from business schools, to implement more effective business processes and strategies, and develop new innovative
products and services that companies can bring to the marketplace.”

– Green Infrastructure Fund: “Targeted investments in green infrastructure can improve the quality of the environment and will lead to a more sustainable economy over the longer term. Green infrastructure includes infrastructure that supports a focus on the creation of sustainable energy. Sustainable energy infrastructure, such as modern energy transmission lines, will contribute
to improved air quality and lower carbon emissions. Budget 2009 provides $1 billion over five years for a Green Infrastructure
Fund. Funding will be allocated based on merit to support green infrastructure projects on a cost-shared basis.”

– The Canada Foundation for Innovation is a not-for-profit corporation that supports the modernization of research infrastructure at Canadian universities, colleges, research hospitals and other not-for-profit research institutions across Canada. To date, the Government’s contributions, along with other partners, have supported more than 6,000 projects at 120 research institutions across Canada that are creating world-leading research capacity in Canada and developing, attracting and retaining top
research talent. Consistent with its Science and Technology Strategy, the Government is committed to continue providing support for leading-edge research infrastructure through the Canada Foundation for Innovation. The Foundation will develop a strategic plan to guide its activities and future competitions beyond 2010. The plan will be developed in collaboration with the Minister of Industry. In order to accelerate investments in leading-edge facilities and equipment, Budget 2009 provides $150 million to increase the funding available for meritorious projects in the 2009 Leading Edge and New Initiatives Funds Competition. In addition, Budget 2009 provides $600 million for future activities of the Foundation, including the launch of one or more new competitions by December 2010 in support of areas of priority identified by the Minister of Industry in consultation with the Canada Foundation for Innovation, and guided by the Foundation’s strategic plan.”

– “The Institute for Quantum Computing is a research institute based at the University of Waterloo campus in Waterloo, Ontario. Its objective is to create a unique environment for physicists, mathematicians, engineers, and computer scientists to advance the fields of quantum information and quantum computation. Budget 2009 will provide $50 million to the Institute to support the construction and establishment of a new world-class research facility that will contribute to achieving the goals of the Government’s science and technology strategy.”

– “Budget 2009 provides Canada Health Infoway with $500 million to support the goal of having 50 per cent of Canadians with an electronic health record by 2010. In addition, this funding will be used to speed up the implementation of electronic medical record systems for physicians and integrated points of service for hospitals, pharmacies, community care facilities and patients. An electronic medical record system allows doctors and other health care providers to chart patient health information using
a computer, thereby avoiding duplication of testing and helping to ensure patient safety and effective treatment. This $500-million investment will not only enhance the safety, quality and efficiency of the health care system, but will also result in a significant positive contribution to Canada’s economy, including the creation of thousands of sustainable, knowledge-based jobs throughout Canada.”

– “The Government is committed to closing the broadband gap in Canada by encouraging the private development of rural broadband infrastructure. Budget 2009 provides $225 million over three years to Industry Canada to develop and implement a strategy on extending broadband coverage to all currently unserved communities beginning in 2009–10.”

MRM
(disclosure – I’m on the board of the CVCA)