Canadian cannabis companies tap government funding programs

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(Photo by Maksym Kapliuk/stock.adobe.com)

(This is the first installment in a series about government funding available for Canadian cannabis businesses.)

More Canadian cannabis companies are tapping government funding sources to finance research and other projects as private-sector capital has become harder to come by.

MJBizDaily found that more than 3 million Canadian dollars ($2.2 million) worth of federal funding was provided to almost two dozen companies over the past year, according to the government’s Grants and Contributions portal.

Since 2018, the year Canada legalized recreational marijuana, roughly CA$32.8 million worth of funding has been provided to dozens of cannabis businesses by federal government organizations through business-support programs.

For this analysis, MJBizDaily included only funding sent to for-profit corporations.

The funding does not include government money earmarked for pandemic-related programs.

Over the past five years, the federal contributions have ranged from CA$7,380 to Ricci Cannabis to commercialize a “wine style” nonalcoholic cannabis beverage – provided via the National Research Council of Canada’s Industrial Research Assistance Program – to CA$5.4 million to Pbg Biopharma made available through the government’s Regional Economic Growth through Innovation program.

Most of the funding was for research-related activities, but some was used for general business expansion.

For instance, in 2020, Western Economic Diversification Canada – a federal economic development body – awarded the now-defunct Tantalus Labs CA$2.9 million to expand its greenhouse to increase cannabis production.

That funding was secured through the Regional Economic Growth through Innovation program.

Executives told MJBizDaily the government money was essential to execute targeted research and development projects but generally shouldn’t be counted on to fund day-to-day business costs.

“If we didn’t have the grant money, we would not be as far as we are right now … we would be struggling,” Canna Stream Solutions co-founder and CEO Usukuma Ekuere told MJBizDaily in a phone interview.

Canna Stream Solutions has received a number of grants since 2021, totaling close to CA$500,000.

Formed in 2020 in the midst of the COVID-19 pandemic, the Alberta-based business looks to “upcycle” marijuana waste – that is, convert cannabis slated for destruction into something more useful.

Ekuere said youth-employment grants have helped the company build its research capability.

The Industrial Research Assistance Program (IRAP) – a federal innovation assistance program for small and medium-sized businesses – helped Canna Stream hire researchers.

“As a young company, we couldn’t afford to just hire people,” Ekuere said.

National Research Council funding

The National Research Council Canada (NRC) – the nation’s primary research agency – helps small and medium-sized businesses increase their innovation capacity and take concepts to market.

An NRC spokesperson told MJBizDaily via email that cannabis companies might be eligible for the IRAP funding if they have the appropriate Health Canada-issued license.

The number of cannabis-related projects and approved IRAP funding has grown steadily in recent years.

In the fiscal year ended March 2023, 42 cannabis-related projects received contributions totaling CA$4.3 million, up from the previous year's 17 projects and CA$1.5 million.

Since 2018, 107 projects have received CA$11.1 million in contributions from the NRC.

One of the companies that has received contributions is Nova Scotia-based licensed cannabis producer Aqualitas.

So far this year, Aqualitas has been approved for two NRC programs, a youth-employment contribution for CA$30,000 and an R&D contribution through the IRAP for CA$173,000.

Myrna Gillis, co-founder and CEO, said Aqualitas also benefited from a provincial incubator called Invest Nova Scotia, formerly known as Innovacorp.

Gillis said a CA$5,000 grant from then-Innovacorp helped Aqualitas produce a professional pitch video to get them in front of Arcview Capital, which facilitates capital for small businesses.

“That small investment allowed us to differentiate ourselves from competitors and got us in front of an audience we otherwise wouldn’t have," she said.

"While the amount of money was very modest, it proved to be instrumental for us."

Gillis said Aqualitas hopes to commercialize the production of its aquaponic, cannabis-specific plant nutrition, which the company already uses in its production.

Her advice to other small and medium-sized businesses is to stay up to date on provincial and federal government programs.

“Whatever you do, make sure you have an innovative idea," Gillis said. "Don’t go to it (grants) for a way to supplement operating or capital expenses, because it’s probably not going to fit the bill."

Gillis recommends that businesses “pre-vet” themselves so they "don’t spend a lot of time trying to fit a square peg in a round hole, if it doesn’t meet the criteria. If you do (pre-vet yourself), you should have good success.

“Every little bit helps,” she said.

Other programs

Tanner Stewart, co-founder and CEO of licensed producer Stewart Farms in New Brunswick, said one of the most useful programs for any cannabis company is Scientific Research and Experimental Development (SR&ED) tax incentives.

The SR&ED is a federal program that is intended to encourage businesses to conduct research and development.

“The thing about SR&ED is you’re not going to get it (the funding) back until after the end of your fiscal year when the money has been spent on research through the previous fiscal year,” Stewart said.

“It all comes down to the strength of your thesis and ensuring you’re researching something new - something that is not already out there."

He said his company has received around CA$700,000 over the past three fiscal years.

A helpful provincial program has been the Post-Secondary Education, Training and Labour program, or PETL.

For any cannabis company looking for government funding, Stewart said, “my No. 1 piece of advice is to be aware of all of the funding programs that are available at all levels of government, whether it’s for research or marketing."

“And," he continued, "understand that these government programs are there and they’re designed to support companies. The people who manage these programs are paid to give that money to the right companies.

“So, go after it. It’s all there to support up-and-coming companies.”

Matt Lamers can be reached at matt.lamers@mjbizdaily.com.