Lost at CEA

Courtney
Courtney Symons
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Local startups confused by Coral CEA application process

Kyle McInnes is no stranger to filling out paperwork for government funding.

Pretzil co-founder Kyle McInnes.

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.

 

CEA SIDE

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. 

Organizations: Rove Mobile, Ministry of Research and Innovation

Geographic location: Ontario, Ottawa

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Recent comments

  • David Reynolds
    October 21, 2013 - 13:25

    Coral CEA ... still as mysterious as ever. This group seems to thrive in secrecy. How can any organization receive $9.3 million of funding and provide no direct access to such support. Additionally, based on only supporting 50 companies to date at $30,000 they will living off of government funds for another 10 years or more. By the way, the company blog has not been update since last February and their tweets are 4 months old. There really needs to be an investigation on the firm!

  • Hartman
    November 28, 2012 - 12:07

    I with Andrew re: comment on lack of disclosure. This is exactly the type of situation that leads to a request for information under freedom/access to information. I don't under the rationale of Mr. Forbes refusing to disclose at least the names of the companies. His lack of forthcoming raises more suspicion. How legit are the companies that got the funding? Do they have any special ties that would give them favorable standing with CORAL CEA?

  • Andrew
    November 27, 2012 - 18:42

    Why does Coral CEA refuse to disclose the approximately 50 companies from Ontario they've funded? It would benefit everyone to know and exactly why those companies have been chosen. Something is a bit shady here, especially if part of their mandate is provide useful business insights. As an initiative supported by tax payers, they have to be more open.

  • Jim
    November 26, 2012 - 16:19

    I read recently how difficult it is for Canadian start-ups to get access to VC funding compared to their US counterparts. It is upsetting to learn that an organization entrusted with taxpayer’s money to help fledgling local companies compete has obviously strayed off-course and is now serving its own organization self-interests.

  • Omar
    November 26, 2012 - 12:45

    Notwithstanding the fishiness of the RAMP thing, the mere fact the Ontario Liberal government funded this bizarre experiment to the tune of $9.3M in 2009 should itself raise eyebrows. I question whether IBM, Nortel and Carleton U really put the in-kind support that was claimed at the time. What oversight does this CORAL CEA organization really have, if any? http://www.exchangemagazine.com/morningpost/2009/week41/Monday/100512.htm

  • BOB
    November 26, 2012 - 12:21

    In the article, the claim is made that the grants don't require the $5000 "RAMP" fee. Thus there must be companies that have received grants that didn't pay the fee. In fact, the other company, OPIN, is mentioned as having received $30000 without having paid $5000, and only complained after they paid for a "RAMP". The company Blacksumac seems to be complaining that they were rejected. Seems like the complaints are little more than sour grapes from those that weren't given a handout. Tough luck - welcome to the real world.

  • anonytron
    November 26, 2012 - 12:04

    At least Ottawa Business Journal is doing it's job and uncovering some of this stuff. We are completely surrounded by scam artists passing themselves off as entrepreneurs, milking tax payers for their scams. Coral CEA is a company which has an 'in' and is selling their access to governement insiders for $5000. It's simple, but most of us are too lazy/stupid to pick up on it.

  • Omar
    November 26, 2012 - 10:33

    Another boondoggle uncovered ... this one with roots at the Ontario Liberal government's Next Generation of Jobs Fund (NGOJF). Look it up on Google. Boondoggles beget more boondoggles.

  • Mike
    Mike
    November 26, 2012 - 10:13

    I have a feeling that we're going to see a story emerge on W5 or Marketplace about Coral CEA. This whole $5,000 RAMP sounds fishy at best. It seems like a clear case of conflict of interest for a funding organization to require what amounts to a cash payment in order to apply for funds. Even if it is only the impression that they are generating, it is still wrong. I would love to see the list of "expert entrepreneurs" and investigate their connection to Mr. Forbes. I would also love to see how many of the 64 applicants paid the $5,000 and how many of the 12 that received funding paid up.