INNOVATION DEMONSTRATION FUND (IDF) PROGRAM GUIDELINES
What’s New?
The 2009 Ontario Budget announced more than $715 million in investments to support key partnerships in innovation, including $50 million over four years to enhance the Innovation Demonstration Fund.
The Fund’s replenishment will empower MRI to continue to partner with innovative companies to develop emerging technologies, with a preference towards environmental, alternative energy, bio-products, hydrogen and other globally significant technologies.
What is the IDF?
The Innovation Demonstration Fund (IDF) is a discretionary, non-entitlement funding program administered by the Ministry of Research and Innovation that focuses on the commercialization and initial technical demonstration of globally competitive, innovative Green technologies, processes and/or products.
The objective of the IDF is to help companies in their efforts to commercialize innovative technologies in Ontario by mitigating the risk of projects with significant pilot-scale technical hurdles. The IDF is not aimed at routine engineering, upgrading, or improvements to existing processes, designs or products.
What Initiatives will IDF Consider Supporting?
Subject to funding limits, and the discretionary nature of the program, IDF will consider support to proponents developing and commercializing innovative new and emerging technologies that are shown to be among the most competitive and advanced in North America.
The IDF is focused on , environmental, alternative energy, bio-products, hydrogen and other globally significant technologies at the pilot stage of development. By focusing on pilot-scale technological hurdles, the IDF is addressing the financing gap which is apparent in the commercialization of new technologies. It is expected that companies are able to demonstrate that their concept has been proven and validated and are addressing the scale-up issues necessary on the route to full-scale commercial activities.
What Amount of Support Would IDF Provide?
IDF will provide financial support covering up to 50 percent of eligible costs for approved Eligible Projects that have as their goal commercialization. The funding potentially available under IDF ranges from a minimum of $100,000 to a maximum of $4,000,000 per project.
Who May Apply?
Ontario Companies with Eligible Projects that will be undertaken in Ontario, and where the project will result in full scale commercialization in Ontario.
Applicants must demonstrate how:
- The proposed technology demonstration at the pilot stage will provide a competitive advantage for Ontario or other significant benefits.
- The proposed technology has been tested and proven to be viable, and can provide sufficient data to warrant a pilot scale project.
- Following a successful pilot, the technology product or process will be moved into the global market.
- The technology, product or process is best in class and will lead to a globally competitive business and market opportunity.
The legal structure of the venture, the requirement for further assurances such as guarantees from related parties, and the parties with whom a contractual relationship would be expected would be part of the conditions of any funding approval.
How to Apply?
Before you proceed with assembling detailed information to prepare a Proposal to the IDF, we suggest you make a quick visit to ProGrid. This site provides access to a free and completely confidential Self Assessment process that lets you test a concept or idea for a potential submission to IDF. The Self Assessment will ask you to answer questions which represent a number of the critical aspects for success in applying for support from the IDF. These questions are highly similar to some of the questions that will be asked during the process of considering proposals to the IDF. Once you have completed your Self Assessment, you will be presented with a report which summarizes your inputs. A careful look at the report may help you in your process of deciding to apply to the IDF.
Applicants are required to complete the Application Form and provide a comprehensive business plan. Applicants are encouraged to contact program officials to discuss their application. Guidelines for the business plan are set out in the Business Plan Guide.
Proposals can be submitted on an ongoing basis. The program is a discretionary, competitive program and only the best proposals will receive conditional letters of offer, subject to limits on both project and overall program funding. This means that even if a proposal meets all of the program’s objectives and criteria, there is no guarantee that funding will be awarded, as there may be projects that more effectively meet the program’s objectives and criteria. All applicants whose projects are approved will be so notified in writing.
All communications between the Applicant or its agent and the Government of Ontario in respect of the Application shall be conducted solely with the designated officials of the Ministry of Research and Innovation, Commercialization Branch.
What Types of Costs are Eligible?
Certain costs integral to implementing the project are potentially eligible for funding. Eligible costs are those that are incurred and paid by the applicant after the date of the Application, that, in the opinion of the ministry, are necessary and directly relate to the project and incurred in Ontario. These eligible costs could include:
- Start-up costs associated with the development and design of pilot-scale prototypes;
- Equipment purchase, installation and retrofitting costs;
- Direct labour costs for personnel involved in the project;
- Maintenance costs;
- Costs associated with training of skilled resources; and
- Monitoring and evaluation costs.
Costs which are not eligible include the following:
- Land;
- Business case preparation, success fees, third party government relations consulting services;
- Vehicles and off site equipment;
- General working capital requirements not directly attributable to the approved Project including debt service costs, Federal or Provincial income taxes, surtaxes or special expenses; and
- Remuneration to Shareholders.
Costs are actual cash outlays that must be documented through invoices and receipts and are subject to verification by an independent audit. Normally only costs incurred after application approval will be considered eligible. The Ministry will have the sole discretion to determine the eligibility of specific cost components for funding.
Applicants should be aware that the Province will not reimburse Eligible Costs incurred or costs associated with the application if the application for funding is not accepted.
If applicants have any questions as to what qualifies as Eligible Costs it is recommended that they contact Ministry staff for clarification.
If approved, the Province will reimburse 50% of the Eligible Costs up to a maximum amount. The Applicant is required to fund the other 50% of Project Costs.
How are Projects Assessed?
Projects funded through the IDF must demonstrate new and innovative technologies, processes or products with high potential for commercialization.. The IDF focus is on environmental, alternative energy, bio-products, hydrogen and other globally significant technologies. Rigorous due diligence will be undertaken by the Ministry or its agents to assess the applicant’s business case. Projects will also be assessed on the following, which include but are not limited to:
- Global competitiveness of the technology, product or process to be piloted;
- Demonstration of technical feasibility;
- Feasibility of the business plan to demonstrate market success of the project within a reasonable timeframe;
- The technological, managerial and financial plan to achieve the stated objectives of the project;
- Impact on societal needs and challenges in the areas of:
- Environmental benefits;
- Waste minimization;
- Alternative energy development;
- Potential to provide economic benefit and contribute to Ontario's competitive advantage in global markets;
- Feasibility of the plan to ensure commercialization of the technology beyond the pilot phase from Ontario;
- Feasibility of the plan to increase public, consumer and investor awareness and acceptance of the technology.
What is the Evaluation Process?
The Ministry will conduct an initial review of the applications and will seek technical review from external experts as well as a financial due diligence review by an independent Third Party reviewer. The Ministry of Research and Innovation is committed to making timely decisions on all Full Applications once submitted.
The evaluation process will be as follows:
- Initial review by the Ministry;
- Evaluation by interministerial review team
- Technical review by external experts;
- Financial due diligence review by external experts; and
- Evaluation of reviews by the Ministry and subsequent funding decisions for successful applicants.
Only those proposals that are approved will receive conditional letters of offer. Decisions will be final and binding.
Type of Funding
The types of Financial Assistance shall be at the sole discretion of the Ministry and will take the form of one of the following funding vehicles, the precise terms to be determined by the Ministry:
- Secured Forgivable Loan;
- Secured Repayable Loans;
- Secured Incentive Term Loans [may be principal deferred and interest free for a period of time – interest would be repayable on a pro rata basis depending on performance targets (terms to be determined by the Ministry)];
- Royalty Agreements; or
- Equity participation.
As applicable, the support may be forgiven at the end of a term to be determined by the Ministry if the performance targets determined by the Ministry have been achieved. If the performance targets have not been achieved the principal and interest on the loan will be repayable on a pro rata basis. Performance targets, to be determined by the Ministry, will vary from project to project and are to be negotiated with the successful applicant.
The Ministry shall determine the funding mechanism and the precise terms relating thereto including the degree of forgiveness in any loan structure and taking into account various factors which include but are not limited to:
- The extent to which the Ontario contribution maximizes the likelihood of success for the project;
- Stage of the company (i.e. start-up, small or medium sized enterprise, large company);
- The extent to which the Project meets the goals of the IDF;
- Ministry investment required to complete the project; and
- Likelihood of project and business success.
Applicants should be aware that loan agreements, royalty arrangements and equity participation will contain customary provisions found in commercial agreements for that type of funding arrangement. All documentation must be in form and substance satisfactory to the Ministry.
Forgivable Loans, Loans, and Royalty Arrangements will require that security in favour of Ontario be provided by the Applicant. The Agreements will contain provisions including, but not limited to the following:
- Repayment
- Conditions to disbursement
- Reporting Requirements
- Representations and Warranties
- Positive Covenants including assurance of Ontario-based commercialization activity beyond pilot project phase if pilot project is successful
- In the case of an equity structure, typical provisions required by venture capital funders
- Negative Covenants including;
- distributions to shareholders
- additional indebtedness
- loans or guarantees to third parties
- asset sales or other dispositions
- encumbrances
- creation of subsidiaries
- transactions with affiliates
- changes in the business, management or ownership
- acquisitions
- capital expenditures
- reorganizations
- Insurance, indemnities in favour of the Ministry
- Provisions relating to non-arm’s length transactions
- Events of Default and Remedies for Default
For further assistance regarding the Innovation Demonstration Fund (IDF), please contact the Ministry of Research and Innovation.
Contact
Innovation Demonstration Fund (IDF)
Ministry of Research and Innovation
Commercialization Branch
11th Floor, 56 Wellesley Street West
Toronto, ON M7A 2E7
Tel: (416) 326-0841 Fax: (416) 314-0680
Email: idf@ontario.ca
