Top 10 Tips for Bootstrapping a Tech Startup in Canada

Written by on September 11, 2008 | Technology Startups

  1. First and foremost be building technology that qualifies for SR&ED (Scientific Research & Experimental Development Credits”!  Let’s just say you’re building something that all you’re buddies with comparable technical backgroundwould be impressed with ie. “Peer test”  How this works is you do the qualifying work, pay the developers/scientists, file your corporate tax return (T2) and up to 6 months or so later (for first time filers), you get a cheque in the mail from CRA (Canada Revenue Agency) even though you may not have even generated any revenue yet… sweet!  Several caveats so see my Top 10 things you need to understand about SR&ED!
  2. All nice but you have to pay everyone first and wait 6 months after you file…need some working capital!? Well, given that you’re doing, or think you’re doing cool, qualifying tech- go hammer on the door of NRC-IRAP (National Research Council- Industrial Assistance Program).   If you get through their sniff tests you can get typically 50-75% of your developer/scientist salaries comp’d (employees get higher % so plan accordingly!!).  A cheque will come every month following the month after you incur the costs!  They audit you so get a good bookkeeping system going- we recommend QCDocs!  See top 10 things you need to know about NRC-IRAP Programs! 
  3. Okay now things are looking hopeful!  With NRC contract (actually NRC will want to see this first so timing needs to be perfect!) in hand go talk to Mom and Dad or your rich Uncle, also known as a Friends & Family round!  Treat them just like regular investors and you’ll go a long way! Now hopefully you’ve got enough cash to get a development program started!
  4. Now enroll for GST with quarterly filing!  While you’re losing money guess what- you get your GST back for everything you pay GST on- ie. Legal fees, cellphone, mileage, meals & entertainment (only 1/2 though!), office supplies, etc.)  File each quarter and get your cheque!
  5. Now you need some space- work from home!  (Note: rent is backed out of SR&ED proxy so getting swanky office in Yaletown not good for Bootstrapping!)  Alternatively find a good incubator- I recommend Bootup Labs for obvious reasons!  Danny, Boris and Jordan have it going on so try to squeeze on in!  SFU Time Centre is good as well across the street at downtown campus!  Part-timers use Workspace in gastown!
  6. If you work from your apartment where you’re paying rent/mortgage interest then apportion a reasonable amount of space out and get some of that rent, utilities, etc. deductible!  Some tricks here so see my top 10 Tax tip links
  7. Telephone- oh my dear god don’t get me started!  Get a cheap Rogers home phone plan with call forward! Get 1 or 2 cellphones and start the juggling act or better yet get skype and never leave your desk!  Whatever cell phone plan you do get call every 3-6 months to find out what discount they are offering that they don’t volunteer until you call…baaah!? 
  8. Health Benefits- MSP is what it is so no help there…pay your monthlies personally to minimize T4 taxable benefit pains at year end!  Hook up with www.vipmd.ca and get low cost insurance for risky stuff- ie. long term disability, AD&D, critical illness and life insurance ($12-$25/month) plus a Personal Health Spending Account (PHS) for $25-$50/month.  The PHS program is cool as it allows you to pay using after tax dollars for utilization items like prescription drugs, dental work, contact lenses and everything else covered by the tax act with no “deductibles and restrictions” often bundled with insurance packages.  You just go online, enroll, set your thresholds up for your employees and they just log in and submit their receipts and get reimbursed.  You’re company gets billed monthy and builds up a trust account that you can pull back into the company if you don’t use it all!  Sweet!
  9. Bookkeeping- Do it yourself using excel and a shoebox!  If you believe your time is better spent building your technology/core competency and you don’t want an outrageous year end tax bill that grinds your SR&ED refund then think twice!  Guess what, technology is fixing this problem too!   Shameless self promotion for our sister firm Tandem Accounting Group Ltd.  powered by QCDocs!  Point your mail to PO Box # and receive all your mail by “email” while simultaneously having all your bookkeeping requirements maintained in QuickBooks.  All your accounting, HR and legal docs are filed online for your ease of reference with a virtual A/P setup and maintained through your own QCDocs Portal! Each month you use QCDocs to manage your expense reporting using CSV uploads from your online credit cards where you put all your startup expenses so you can maximize your air miles or cash dividends!  Developers log their time in QCDocs timetracker to document time for NRC-IRAP and SR&ED compliance requirements.  The lovely and talented Tamara, Lindy and Gail take care of the rest spitting out your cheques/payroll when and where you need them and firing you investor ready financials each month.   Cash management Monday reports keep you bootstrapping along!  Negotiate partial pay in equity… the owner is a bit of an entrepreneur himself!
  10. Bank with Vancity or Coast Capital to minimize egregious bank charges  – see top 10 list of recommended banks.

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