Episode 18: Grants

Free money. What entrepreneur does not want free money? The kind of money that does not need to be paid back. The kind of money that does not water down the stake you hold in your own venture. Sounds great, doesn’t it? Of course, no source of funding comes without obligation or without work. In the case of grants, you have to do research to find sources that line up with your business mission, you have to put together a compelling application, and you may have reporting obligations too. But still. Free. Did we mention, free?

Transcript

Glenn Suart 0:00

Doug Ross 0:29

Welcome to Conversations on Startups, a podcast brought to you by Douglas Ross, author of the book, Spark Click Go: How to Bring Your Creative Business Idea to Life, and Glenn Suart, of Today’s Great Idea, a radio series featuring over 300 origin stories of businesses, brands and inventions that have changed the culture. Welcome to today’s conversation.

Glenn Suart 0:53

Today’s subject is going to be grants, we’re going to talk about the value of them, what to watch out for, and things like that. But Doug, I promised to tell you a story. Last episode, I remember, it’s an interesting story, because we were talking about, you know, creative ways of financing. And, this is a cool story about three brothers from Kelowna BC in Canada and they had a used furniture store that their dad ran and then they took over. And it was going very well until one day when the bank called their loan, and they didn’t have the money to pay for the loan. They weren’t sure what to do. And a friend of theirs suggested, Well, maybe why don’t you just hold an auction, sell your furniture type of thing, so that’s what they did. They rented the local scouts hall and they sold enough in one day to pay off the entire loan, which was fantastic. They had a great idea at that point that maybe we should just do this on the side, run some auctions and stuff, and they did that for a while and made a little extra money, selling used furniture, used equipment. And then about five years later, they tried their hand at selling some industrial equipment outdoors for one day in a little town in the middle of British Columbia near the Alberta border called Radium, BC. [Love, Radium] [It’s a fantastic place.] They did that and it was so successful in that one day that they thought about just getting in the auction business full time. And that’s what they’ve done. So [he] sadly sold the family furniture store. And today about almost 60 years later, the business that they started accidentally is now in 45 locations around the world, the largest seller of used industrial equipment in the world, billions of dollars in auction revenue every year. And it’s still… they invest in it. Any idea who I’m talking about?

Doug Ross 2:41

Well I’m not really up on auctioneers or auctioning companies in any space let alone the industrial tool space but… no, so I don’t know, I think you’ve stumped me again.

Glenn Suart 2:54

Well, there you go. It’s the Ritchie Brothers. So if you’re Ritchie Brothers auction… Canadian success story on a worldwide basis and here in Canada, especially in Alberta, where I’m located, Ritchie Brothers is very prevalent, because they sell a lot of equipments to oil and gas and stuff, so…

Doug Ross 3:10

And so would I see their name on cranes and things like that? Because when you say that it sounds familiar, [Yep] do they put their name on the actual equipment?

Glenn Suart 3:19

To be honest, I don’t know. I think they’re more… they’re the facilitator for the selling of used equipment, they don’t actually own it, at the end of the day. So, but still a really cool story because a creative way of financing turned into an even bigger business for them.

Ben 3:36

You’re listening to Conversations on Startups with Doug and Glenn, thanks for joining us.

Doug Ross 3:43

Well, I love that because that was our topic last time… was fundraising. And it also fits into a theme that we constantly come back to – hence it’s a theme – I guess that makes sense. But the idea of experimenting with something here, so yes, the stimulus for that was they needed to cover this loan. But the point is experimenting is important. It might lead you to something… in this case, a whole business model really, and a sector to conduct their business in. And so it’s a pivot. It’s an experiment that went well.

Glenn Suart 4:21

Very much so. And so, again, it’s another tool in your toolbox to help you finance your business. Now grants are specifically an area that I’ve got calls on before and I know you’ve got calls on because there’s a lot of money out there available typically from governments, and others, for… they want to give to very valid and viable ideas to help people move forward. And you’ve had some experience with that.

Doug Ross 4:48

I have, well I’m thinking of several tech companies that I’ve worked with that have taken advantage of government loans in Canada they’re called SR&ED credits. They’re not really loans, but their credits as it were. S R ampersand, E D… and people just pronounce it as ‘shred.’ But it’s not spelled like shred as in shred up some paper. This is a huge supporter of research and product development in Canada. There are equivalents of course in the US and in other countries as well. Some 20,000 companies have benefited from these credits since their inception and $3 billion in… in credits have been granted. So, yeah, I am familiar with that. And the companies that I’ve worked with have taken advantage of these credits that exist out there. And, you know, one interesting thing to be aware of here – we’re talking about this in the context of startups – that governments and other funders, like charities or philanthropy groups, maybe even some other private groups, give money. And why do they do that? You know, it’s a good question. Why are they giving money to companies that want to be profit-making organizations?

Glenn Suart 6:04

They know that sometimes it takes some effort to get past the goalposts and, you know, you think about it on a big context, Tesla, getting a lot of tax breaks and other things too… grants, to help grow their business. It happens in a variety of industries. And here in Canada, again, like canadabusiness.ca is a great website that’s run by the federal government, and it has listings and every program not just federally but provincially too.. that people can apply for. Now, a lot of times these grants won’t necessarily apply to your business, but they might be targeted in a certain way. So for example, to answer your question, they have a grants… or funding programs geared to women who start businesses because they want to get more women into entrepreneurial fields, or Aboriginal [people], or specific tech sectors. In Calgary, they are focused on certain technologies, like agriculture and biotech, for example. So they want to give something in that way.

Doug Ross 7:08

So they’re supporting, in that case, one of the cases you mentioned there, a specific group they’re encouraging. So women entrepreneurs, minorities, you mentioned as well or First Nations folks. They have the equivalent here in the US as well. And then sectors too… coming in from different sectors there’s support out there. So it seems that many businesses, perhaps not all, but many businesses would be able to access grants. This amazing, non dilutive, you don’t-have-to-pay-back money. People can find an angle in and they can find someone who might be interested in doing it. You’ve just got to look.

Doug Ross 7:50

Hey podcast listeners, we’re gonna take a short break now. If you’re enjoying the show, feel free to invite your friends, remember to subscribe, and if you want to help spread the word leave us a review on Apple Podcasts or your favorite podcast app. Each episode of Conversations on Startups focuses on a single topic. If you want to comment on something you’ve heard on the podcast, or suggest a topic for us to cover in a future episode, send an email to: go@todaysgreatidea.com or douglas@sparkclickgo.com. Glenn and I appreciate you and hope you find our uncut and unrehearsed stories, perspectives, and tips helpful. Speaking of helpful stuff-let’s pick up where we left off.

Glenn Suart 8:35

It’s like free money, you gotta sometimes do the smell test and figure out whether, in fact, it’s real money. There was a scam grant site in Canada for several years that I found out about because people would call me and ask me to do business plans. So they could submit to this particular website. And they were promised $100,000, you know, if they just submitted their business plan, and for a lot of people, that’s a nice chunk of change to get a business started. But unfortunately, of course, you’re thinking… well, you know, why is it a scam? Well, [it] turned out for a whole bunch of reasons that they never actually gave any money out, number one. They gave out a little bit at the beginning to make it seem like they’re giving money out but they didn’t do anything more. So they just basically took these business plans in. And, of course, what they would do is they would actually recommend other business plan services to do the business plan for you, for the service. Then they would take a kickback from some of these guys who were doing the business plans, which is of course unethical – whole bunch of issues there. But also, what was worse I think, is that you’d submit your business plan and your financing information and you don’t know who these people are. And you don’t know if they’ve taken this information you’ve submitted in confidence about your financial situation and passed it on to somebody else. No proof that they did anything bad, but it just… it was very bad situation. And I think they’re shut down.

Doug Ross 10:03

Good. Pleased to hear that.

Glenn Suart 10:05

Of course, but like anything else, people got sucked in thinking, Okay, I don’t have enough money. Oh! Someone’s gonna give me money! Well, they may give you money but you’ve got to investigate them. And if they do give you money, they’re gonna make you go through hoops for paperwork. That’s the other thing. So be prepared for that. You have to justify what you’re doing. But, if it’s a legitimate business grant it’s worth it for sure. Because you get some sense of what doing it… it forces you to actually write a good business plan.

Doug Ross 10:33

Yeah, I see those benefits too. And I take your tip to look into who the granting organization is. If it’s a federal government, or a state or provincial government or some other body, definitely check them out. It’s not necessarily a ton of money. [Yes] I think that’s something to bear in mind, too, when you’re thinking about this. So how can it be helpful? Well, maybe when you’re in the early stages, and you’re really just forming your business, you don’t have a lot of costs, or you need money for, say, product development, or maybe to cover some salaries. I’ve seen this happening, and this is in the eastern provinces in Canada, it was New Brunswick, and there’s money there at the provincial level to support early employees, especially for companies that are looking to set up business and keep business. It’s an economic development initiative[tool), a tool, yeah, from the point of view of the state of the province. So I take all those tips… [it] is a lot of work, you have to figure out if it’s worth the money, there are also people out there that will do this research for you, and not [for] a lot of money. So again, vet them, make sure you’re… you’re working with someone who’s legitimate, maybe get word of mouth referral, or check them out online, meet them, that kind of thing. But for not a lot of money, people can research what might be available for you. And they might have some good insight into how the granting organizations work which could be helpful when you’re pitching them for a grant – to know what it is that they’re looking for and… and how they make their decisions. So there are people out there to help you on that research step that you could do. So essentially outsource that for maybe a couple $1,000, something like that, and get a list of granting agencies, and then those same people can either do or recommend, or you could do yourself, these grant applications. And I have seen some… you mentioned that they can be work intensive, I agree, I’ve seen that too.

Glenn Suart 12:38

Yeah, well, and that’s when hiring somebody who… grant specialists… realize that it does take a lot of work to do that. And that’s why… [what] justifies the expense. In some cases, they’ll take a percentage of the funding that you get …

Doug Ross 12:53

Yeah, a contingency basis.

Glenn Suart 12:55

Very much so. But again, even though it’s free, and it doesn’t… it’s non dilutive as you mentioned, which is why it’s valuable, it can be onerous even after the fact… because there are reporting requirements. So just factor that time and energy into it, at the end of the day. I know that the federal government here in Canada has just announced a digital asset thing that almost any business seems to be able to apply for. We’re just investigating that now. And so for one of the businesses we’re working on, the cooler business, we’re thinking, Oh, okay, that’s $15,000 Canadian, not a huge amount, but it may be worth it for us to do a specific thing that we hadn’t thought about doing yet, and move us forward in a way that… that’s beneficial to us in the long run, but we just didn’t have the time or energy to do something. That’s why it’s worth exploring these things.

Doug Ross 13:46

Yeah, and you know, another benefit – in addition to this non-dilutive money is, in some cases, in fact, probably in many cases – it’s a sign of approval. It’s a sort of a little star on your resume. You can put it on your website, as funded by x, y, or Zed or Zee. I think there’s a little bit of cachet to be had by that because it shows that these granting agencies thought that what you had, your idea, your product, your service, your production, whatever it is, has some value in that industry or for society. And they have given it a seal of approval by granting that money. And you can tout that. [Yeah.] I see that all the time.

Bridget 14:34

You’re listening to Conversations on Startups with Doug and Glen, thanks for joining us. Let’s get back to the show.

Glenn Suart 14:44

Everything we’ve talked about here with grants makes good sense. So I guess in summary, there is money out there… to be worthwhile to go after. Do your investigation to make sure that it makes sense. Realize that the money is usually targeted to specific groups, or to tech sectors. So, for example, if you want to open a, for sake of argument, a retail store, there is not going to be many grants available to you. Because the people who are doing the grants aren’t thinking they would need more retail stores. They’re thinking they need more biotech, or they want to employ more women type of thing, or encourage more women entrepreneurs. Realize that it’s very focused and if you’re gonna go in there’s gonna be a lot of paperwork. It may be worthwhile to find somebody to help you do that so you don’t get bogged down and you can get… learn some tips of the trade in terms of making sure that you are successful in applying for these things. It’s a good thing. Anything else I missed there in that quick summary…, Doug?

Doug Ross 15:44

I think that’s a great summary, really, it’s just something that people should look into as a possible source of a portion of funding that they need to get off the ground, or to grow. I think that’s how it should be thought of. It’s not typically going to be sizable enough to do something major or for a long period of time. But to get you going, you know, some of that initial Spark, Click and Go that I talk about in my book, I think it can be a great source. So people should look into it.

Glenn Suart 16:20

Very good. Well, I’m Glenn Suart, in Canada. Today’s Great Ideas. Have a great time. And we will see you next episode.

Doug Ross 16:28

Yeah, next episode. Looking forward to that and we’ve bantered around a couple of topics, one of them was Pitching. Do you want to come back to that one? There was another one too, that we had mentioned, but that could be a topic for next time. What do you think, Glenn?

Glenn Suart 16:43

You’re pitching all the time. You have to have that elevator pitch ready to go, as an example, to talk to somebody because you never know when you’re in front of somebody and you have to tell them in 30 seconds why they should be interested, and why they should be giving you money. It’s a hard thing to do.

Doug Ross 17:10

Conversations on Startups is a production of Glenn Suart and Douglas Ross. We hope you’re having fun listening but mostly that you take action on your business idea. For more inspiration visit our websites: todaysgreatidea.com and sparkclickgo.com. Another episode of Conversations on Startups will drop soon, or is already available to binge. Thanks for joining us, and remember to subscribe and invite your friends. See ya next time!

Transcribed by https://otter.ai