The local entrepreneur and co-founder of app development firm Pretzil has successfully applied for federal grants from the Industrial Research Assistance Program, better known as IRAP, as well as for Scientific Research and Experimental Development tax credits.
He decided to try his luck with Coral CEA, a provincially funded economic development organization founded in 2010 to provide money to early-stage companies across Ontario.
But Mr. McInnes says he was confused by the fact that Coral CEA also offers consulting services, including a risk assessment mitigation plan, or RAMP. It costs $5,000 and provides a detailed analysis of risks a company might face and suggestions on how to better deal with them.
“It was difficult to understand how to apply (for funding), and whether or not (it was mandatory) to purchase the program,” said Mr. McInnes.
He said that he and other local startups he’s talked to were left with the impression that their odds of landing a Coral CEA grant would be greatly enhanced if they purchased the organization’s RAMP.
Coral CEA’s executive director Brian Forbes said it’s made very clear to applying companies that purchasing a RAMP does not mean they’ll automatically receive funding. But it often boosts the odds, he said, because the process helps companies improve their business model.
“It’ll increase your chances of getting funded,” Mr. Forbes said. “We’ve had several examples where the message has been better, cleaner, crisper (after a RAMP).”
Despite the $5,000 fee, Coral CEA doesn’t turn a profit on the program, he said. The organization brings in expert entrepreneurs to identify risks for each company, a process that can take weeks and involve travel. However, Mr. Forbes said the exercise increases the company’s chances of success.
He added that he feels everyone going through the RAMP process receives exactly what they are paying for – and funding isn’t part of the deal.
MORE THAN MONEY
Local open source software company OPIN received $30,000 in funding from Coral CEA last year, which allowed the new company to keep its lights on and hire its first employee, said CEO Chris Smith.
Recently, he went back for a second round of funding and a Coral CEA employee suggested that OPIN apply for a RAMP. Although it wasn’t explicitly stated, Mr. Smith said he was given the impression that the purchase was required to be considered for additional funding.
In the end, Mr. Smith paid for a RAMP but did not receive the grant.
“We received $30,000 (the first time around) and (then) we gave them $5,000,” he said. “In the end, it’s hard to be upset with that. But (for some companies), if they spend $5,000 assuming that the funding will be guaranteed, they may find themselves out a pile of cash.”
Mr. Forbes said, however, that grants aren’t the only way Coral CEA adds value.
“Our mandate is not just to give out money,” he said. “It’s to create sustainability.”
To do that, the organization focuses on building an ecosystem around market segments such as health care, IT, finance and social media. Participating companies share their technology with others in the ecosystem, increasing the chances that it will be used for applications in different sectors.
HARD SELL FOR HARDWARE
Blacksumac is a new Ottawa-based startup by Magmic Games founder John Criswick and Russell Ure, the former president of Rove Mobile. Blacksumac aims to provide real-time access to environmental information with low-energy wireless sensors.
To get a jump start, the company approached Coral CEA for funding. Blacksumac filled out an application, revised it upon suggestions from Coral CEA, and found a way to offer some technology to the ecosystem, or “sandbox,” without threatening its plans to pursue patents for its intellectual property. That took time, Mr. Ure said.
The application was rejected with an e-mail from Coral CEA explaining that the agency didn’t have enough expertise in hardware to help Blacksumac.
“Given the amazing hardware design talent available within Ottawa, why would any local funding agency with a mandate to distribute startup acceleration funds be in a position to overlook (hardware)?” Mr. Ure said.
He added that although Blacksumac understands Coral CEA’s limited funds, the encouragement the startup received to submit an application led the company to believe its business focus was within the funding mandate.
Mr. Forbes responded that although anyone is welcome to apply, the organization wants to use its money as productively as possible.
In its most recent quarter, Coral CEA saw 64 applications and was only able to fund 12.
“Not only are we adding money, but we’re adding value here that helps increase return on that money,” he said.
That value includes mentorship, access to the ecosystem and expertise from its network, he added.
SIDEBAR: CORAL CEA: WHAT IS IT?
Coral CEA supports companies that want to develop communication-enabled applications – software applications that allow different technologies to communicate with each other to save time and increase efficiency.
In 2010, the organization received $9.3 million from the provincial Ministry of Research and Innovation.
Since its inception, Coral CEA has funded approximately 50 companies from Ontario
The organization requires applying firms to choose an “ask price” for funding, up to a maximum of $30,000.
Coral CEA executive director Brian Forbes declined to provide a complete list of local companies that have received funding from the organization.