C HAPTER 7: C REATING I NVESTMENT O PPORTUNITIES T HROUGH T HE SDTC
• Managing Risk: SDTC shares developmental and financial risk and acts as a common information source for its partners. By involving the complete range of innovation players early in the process and throughout development, the probability of product success is substantially higher. The lower levels of risk can prompt potential investors to reduce overall financing costs. SDTC does not take equity and, therefore, does not dilute the commercial arrangement; nor does it seek to own intellectual property, but does require dissemination of the results. • Providing Funding Continuity: SDTC manages a $350 million investment fund that leverages matched funding from private investors, governments and research institutions. • Providing Follow-Through Support: SDTC maintains contact with all high potential developers, even if they initially fail to get funding support. Not all projects will be an immediate success and it may take a few attempts to “get it right”. Typically, after an initial failure, entrepreneurs are faced with having to figure out what went wrong, make the corrections and launch another attempt at support. In most cases, there is very little constructive feedback and no mechanism for connecting developers with the right technical advisors. SDTC, however, continues to help proponents strengthen their capabilities. Once it has funded a project, SDTC stays in the picture, helping entrepreneurs promote their high quality, risk-reduced opportunities to the financial sector. This provides investors with pre-qualified deal flow, while reducing the time to market for innovators. SDTC focuses on the oil and gas, power production, transportation, forestry, agriculture, building/construction and the energy utilization sectors. These sectors are vital to Canada’s economy, but have historically faced greater difficulty obtaining funding as they typically require longer time to market and are more capital-intensive. Consequently, the VC community to date has invested very little in these areas (2.6 per cent vs. 59 per cent for IT and 18 per cent for biotechnology). Therefore, these technologies often face difficulty in attracting funding, despite the fact that they are increasingly attractive targets for investors because of their inherent stability and the essential role they will play in Canada’s future prosperity. To date, SDTC has reviewed over 500 consortia funding applications, representing more than 2000 companies and institutions. These consortia applied for $876 million in funding, which, when leveraged with matched funding, represents a total of $2.8 billion in project costs. Of these, eight projects (totaling $6.61 million) have been approved for funding, and another 24 are currently under review. The applicants’ calculations indicate that the total emission reduction potential of implementing all the technologies is 165 MT of greenhouse gases per year (approximately 65 per cent of Canada’s annual reduction target); the approved projects represent 11.2 MT. While this data helps to quantify the pre-VC gap, it also demonstrates that there is significant untapped capacity and demand for funding sustainable development innovation in Canada. But this potential will remain untapped - and the opportunity lost - if the gaps in the innovation chain are not closed.
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