Innovation Demonstration Fund (IDF) Program Guidelines

What is the IDF?

The Innovation Demonstration Fund (IDF) is a discretionary, non-entitlement funding program administered by the Ministry of Economic Development and Innovation. The program focuses on emerging technologies, with a preference towards environmental, alternative energy, bio-products, hydrogen and other globally significant technologies. The purpose of the IDF is to support Pilot Demonstrations that will lead to the commercialization of processes and/or products in Ontario that are globally competitive, innovative Green technologies.

The objective of the IDF is to help companies mitigate the risk of Pilot Demonstration Projects in Ontario facing significant technical hurdles. By focusing on Pilot Demonstration hurdles, the IDF addresses the financing gap which exists between R&D and the commercialization of new technologies. The program is not aimed at routine engineering, upgrading, marketing, business development or improvements to existing technologies, processes, products or designs.

What Initiatives will IDF Consider Supporting?

Subject to funding limits and the discretionary nature of the program, IDF will consider funding support to proponents developing innovative new and emerging technologies that will lead to commercializing “Green” products and/or processes that are shown to be among the most competitive and advanced in North America. 

Companies are required to demonstrate that their concept has been proven and fully validated and addressing the scale-up issues necessary for a Pilot Demonstration Project that, upon successful completion, will lead to full-scale commercial activities in Ontario.

What Amount of Support Would IDF Provide?

IDF will provide financial support covering up to 50 percent of eligible costs for approved Eligible Pilot Demonstration Projects that will lead to commercialization in Ontario.  The funding potentially available under IDF ranges from a minimum of $100,000 CAD to a maximum of $4,000,000 CAD per project.  

The Applicant is expected to have additional sources of financing for the remaining 50 percent of Eligible Project Costs. Total government funding, including IDF, cannot exceed 66 percent of the Total Eligible Project Costs*.

*In-kind funding is not considered a source of financing.

Who May Apply?

Ontario Companies with Eligible Pilot Demonstration Projects that will be undertaken in Ontario.  
Applicants must demonstrate how:

• The proposed Pilot Demonstration Project will provide a competitive advantage for Ontario or other significant benefits (environmental, economical, social, etc.);
• The proposed technology has been tested and proven to be viable, and can provide sufficient data to warrant a Pilot Demonstration Project;
• Upon successful completion, the technology, product or process will be commercialized in Ontario as well as moved into the global market; and 
• The technology, product or process is best in class and will lead to a globally competitive business and market opportunity.

How to Apply?

Before you proceed with assembling detailed information to submit a Business Plan to the IDF program, 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 the 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.  The required format for the Business Plan is set out in the Business Plan Guide.

The IDF program has a continuous intake process. Proposals may be submitted on an ongoing basis.  The program is a discretionary, competitive program and only the best approved 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 with a Letter of Offer.

The Ministry of Economic Development and Innovation is committed to making timely decisions on all complete Applications once submitted. Applicants will be notified in writing if their Application is complete within 5 business days of receipt of the Business Plan. The Ministry will use its best efforts to notify Applicants of a decision within 60 business days from receiving the complete Application.

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 Economic Development and Innovation, Commercialization Branch, and are kept confidential.

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 Effective Date of the Complete Application that, in the opinion of the Ministry, are necessary and directly relate to the project and are incurred in Ontario.  These eligible costs could include:

• Start-up costs associated with the development and design of Pilot Demonstration 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, but are not limited to:

• Land;
• Business case preparation, success fees, third party government relations consulting services;
• Existing business activities;
• Operating expenses that are not directly related to the approved Pilot Demonstration Project;
• Other expenses not directly related to the Pilot Demonstration Project (such as the salaries of senior management, the purchase of office supplies and commercial space décor or renovations);
• Vehicles and off site equipment;
• Marketing and public awareness;
• Meals, travel and hospitality
• General working capital requirements not directly attributable to the approved Pilot Demonstration Project including debt service costs, Federal or Provincial income taxes, surtaxes or special expenses;
• Remuneration to Shareholders and Board of Directors not directly associated with the Pilot Demonstration Project; and
• Any expense incurred by the Borrower that Ontario or the Federal government or other public agency has paid or committed to pay under another agreement or program.

Costs are actual cash outlays that must be documented through invoices and receipts, in Canadian dollars, and are subject to verification by an independent audit.  Only costs incurred after the Effective Date of the Complete Application 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 the Applicant for costs associated with the development of the Business Plan and any additional documentation, if funding is not approved.

If Applicants have any questions as to what qualifies as Eligible Costs it is recommended that they contact IDF staff for clarification.

If approved, the Province will reimburse up to 50 percent of the Eligible Costs up to a maximum amount of $4,000,000. Contributions from other Ontario programs (e.g., the Investment Accelerator Fund and the Emerging Technologies Fund) will be considered provincial funds for the purposes of calculating the maximum eligible contribution from the IDF. The Applicant is required to fund the other 50 percent of Eligible Project Costs. Total public funding cannot exceed 66 percent of the Total Eligible 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 in Ontario.  Rigorous due diligence will be undertaken by the Ministry or its agents to assess the Applicant’s Business Plan. 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 Business Plan to ensure commercialization of the technology beyond the Pilot Demonstration phase in Ontario, including ownership or unrestricted access to intellectual property; 
• Feasibility of the Business Plan to increase domestic and global consumer and investor awareness and acceptance of the technology; and
• Financial capacity to undertake the Pilot Demonstration Project, including the ability to provide adequate security for the loan from the Province.

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.

What is the Evaluation Process?

The Ministry will conduct an initial review of the applications and, if deemed complete and eligible by the Ministry, will seek a technical review from external experts as well as a financial due diligence review by an independent Third Party reviewer The Ministry of Economic Development and Innovation is committed to making timely decisions on all Full and Complete Applications once submitted.

The evaluation process will be as follows:

• Initial review by the Ministry; and
• Questions seeking clarification on issues raised by the initial review.

If the Business Plan meets the necessary program eligibility criteria, it will be;

• Evaluated by an interministerial review team (usually involving 6 Ontario ministries); and
• Reviewed for Technical Feasibility by external Third Party experts.

If the interministerial and technical reviews are favourable, a financial due diligence review by Third Party external experts will be performed. An evaluation of the reviews by the Ministry will be undertaken and subsequent funding decisions will be made.

Only those Business Plans that are approved will receive conditional Letters of Offer. All 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):

1. Secured Forgivable Loan;
2. Secured Repayable Loan;
3. Secured Incentive Term Loan (which may be principal deferred and interest free for a period of time, at which point interest would be repayable on a pro rata basis depending on performance targets);
4. Royalty Agreements; or
5. Equity participation.

If 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 Pilot Demonstration Project;
• Stage of the company (i.e. start-up, small or medium-sized enterprise, large company);
• The extent to which the Pilot Demonstration Project meets the goals of the IDF program;
• Ministry investment required to complete the Pilot Demonstration Project; and
• Likelihood of 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) program, please contact the Ministry of Economic Development and Innovation.

CONTACT

Innovation Demonstration Fund (IDF)
Commercialization Branch
Ministry of Economic Development and Innovation
11th Floor, 56 Wellesley Street West
Toronto, ON M7A 2E7
Tel: (416) 326-8458 Fax: (416) 314-0680
Email: idf@ontario.ca

Glossary

Pilot Demonstration is defined as the state of a technology, process, design, product or system between the small laboratory model size (bench scale) and a full-size commercial system. Technologies or processes in this stage have a number of scale-up, process, equipment design, and/or technical risks that need to be overcome in a real-world environment prior to their full commercialization.

 “Green”, “Environmental” or “Clean” technologies may be defined as the application of the environmental science and green chemistry to conserve the natural environment and resources, and to curb the negative impacts of human involvement. Examples include, but are not limited to, recycling, water purification, air purification, sewage treatment, environmental remediation, solid waste management, renewable energy, energy conservation, and alternative or clean power.