With investment dollars getting harder and harder to access in Canada for startups, non-dilutive funding is the clear path to growth. A recent report from the Canadian Venture Capital Association (CVCA) shows that dollars invested in the first half of 2025 are down 26% year over year, with the biggest hits to pre-seed, seed and early stage companies. 

It’s bleak out there for startups raising money, so the Canadian government funding ecosystem is the obvious direction to turn to. Grants, tax credits, loans, etc., are more attractive to startups in Canada because they preserve equity, extend runway, and allow startups to build credibility. 

We are seeing more and more startups build incredible businesses without raising VC funds, while relying more on government funding programs like SR&ED, IRAP and OCI funding to grow. 

This blog will explore federal, provincial, and sectoral funding in Canada with insights based on stage, industry and strategic timing for startups and scale-ups looking to grow. 

Canadian Government Funding – Federal

Between SR&ED, Mitacs and NRC IRAP, there is nearly $5 billion annually allocated in Canadian Government funding to companies building right here in this great country. There are constantly evolving streams of funding both federally and provincially, depending on sector, size, stage and technology. 

SR&ED (Scientific Research & Experimental Development)

SR&ED (or “Shred”) is by far the largest government funding program for startups and scale-ups in Canada. The April 2024 – March 2024 Federal Budget for SR&ED was $4.5 billion in allowed Investment Tax Credits. This Canadian government funding program is the backbone of innovation in Canada.

How it Works: 

The SR&ED program is built to fund innovation and acts as a cash refund for Canadian businesses that are doing technically challenging work. It is a tax credit, accessed via the CRA with your business corporate taxes, and can be refundable for CCPCs (Canadian Controlled Private Corporations), otherwise, it reduces taxes owed. More on this here. 

Funding Amount: 

When combined with the provincial top-ups, SR&ED funding can refund startups and scale-ups for up to ⅔ of their R&D expenses. Salaries, materials or contractor expenses involved in innovation are eligible to be reimbursed through SR&ED. Try this SR&ED Calculator to understand how much SR&ED funding you could get. 

Who it’s For: 

SR&ED is ideal for companies that do technically challenging work (typically software development, manufacturing, pharmaceuticals, engineering, etc.). Despite the name, SR&ED isn’t just for conventional R&D that happens in a lab. SR&ED funds all technical innovation where there is problem-solving in an iterative manner, where lessons are learned and processes, standards or designs are created or improved. More on SR&ED eligibility here. 

Stage fit: 

SR&ED is for any stage company. SR&ED is one of the few programs that Canadian businesses can (and should) explore accessing regardless of industry, size, or stage. 

If you have questions about how to take advantage of SR&ED, reach out to us today at contact@growwise.ai, or book a meeting with us here: https://growwise.ai/intro/.

NRC IRAP (National Research Council, Industrial Research Assistance Program)

The National Research Council’s IRAP is one of Canada’s most important funding programs for innovative SMEs. 

How it Works: Unlike SR&ED, which is a tax credit, IRAP provides grants directly to businesses to offset the cost of R&D projects. Typically, 50% of project costs are given upfront, and 50% on a monthly basis to cover expenses. Businesses must apply before the start of their projects. The first step with IRAP is connecting directly with the IRAP team to be assigned an IRAP Industrial Technology Advisor (ITA).

Funding amount: IRAP typically covers up to 80% of labour costs and 50% of contractor costs for approved projects. Funding can range from small contributions under $50,000 for early projects to multi-million-dollar support for larger scale-up initiatives.

Who it’s for: IRAP is designed for Canadian SMEs (under 500 employees) that are developing new products, processes, or services through R&D. Companies must demonstrate both technical merit and market potential. 

Stage fit:

• Early-stage: proof-of-concept projects, prototypes, feasibility studies
• Growth-stage: product development, commercialization, and scaling to global markets

IRAP funding is highly flexible, can cover a wide range of technical salaries and expenses, and provides advisory support through ITAs, not just money.

Mitacs – Accelerate & Research Internships

Mitacs is a federally and provincially funded organization that connects businesses with post-secondary researchers. Instead of traditional grants, Mitacs structures its funding around research internships/co-ops that are partially funded by the Mitacs program. 

Funding amount: Through Mitacs Accelerate, businesses must contribute $7,500 per four-month internship, which is matched by Mitacs to create a $15,000 research project. 

Who it’s for: Canadian businesses of all sizes, but particularly attractive for startups and scale-ups that want to tap into university expertise and talent without taking on the full cost. Industries range from AI and software to life sciences, clean technology, and advanced manufacturing. The nature of the work must be technical, requiring university-level research expertise. 

Stage fit:

• Early-stage: proof-of-concept or prototyping with academic researchers
• Scale-up: more complex applied R&D, process improvement, etc.

Mitacs supports young companies in stretching their R&D dollars, while also building relationships with academic researchers and training potential future hires. This is an accessible way to expand your team and research capabilities without the high costs.