Startup fundraising broadly falls into two categories: equity financing, where investors receive shares in exchange for capital, and funding that can be received without issuing shares. The latter is known as non-dilutive funding and includes grants, tax credits, and repayable loans. In Canada, two programs serve as the primary examples of this type of funding for R&D activity: SR&ED and NRC IRAP. Used alongside equity financing, they can improve cash flow while limiting share dilution. This article explains how each program works and what Japanese startups need to know before pursuing them.What Is Non-Dilutive Funding?Non-dilutive funding refers to capital received without issuing shares. It includes grants, tax credits, and repayable loans, and can be used alongside equity financing to secure working capital while protecting the cap table. Canada's R&D support programs are considered among the strongest in the world, and it is common for companies operating there to pursue both equity and non-dilutive funding in parallel.SR&ED: The Scientific Research and Experimental Development Tax CreditSR&ED (Scientific Research and Experimental Development) is a federal program that provides tax credits for eligible R&D activities conducted in Canada. Claims are filed with the Canada Revenue Agency (CRA). Because a portion of the credit is refundable, meaning it can be received as a cash payment rather than a reduction in tax owing, the program functions as an effective grant for pre-revenue startups.Credit rates by company type:Canadian-Controlled Private Corporations (CCPCs): Up to 35% refundable tax credit on the first CAD 3 million of eligible expenditures. The rate phases down where taxable income exceeds CAD 5 million.Other corporations (including those with significant foreign ownership): A 15% non-refundable credit on eligible expenditures, which can be carried forward to future tax years.Eligible expenditures include wages, contractor fees, materials, and overhead costs incurred in Canada for qualifying R&D work. The program covers basic research, applied research, and experimental development, with a focus on activities aimed at resolving technical uncertainties in the development of products or processes.For Japanese startups entering Canada, maximizing the benefits of SR&ED requires Canadian incorporation, the hiring of Canadian residents to carry out R&D activities, and confirmation that the work takes place in Canada. CCPC status also comes with foreign ownership restrictions, so it is advisable to consult a specialist when structuring the company's capital from the outset.[1]NRC IRAP: The Industrial Research Assistance ProgramNRC IRAP (National Research Council Industrial Research Assistance Program) is a technology innovation support program for small and medium-sized enterprises operated by the National Research Council of Canada. It supports startup growth through both financial contributions and technical advisory services.A defining feature of NRC IRAP is the Industrial Technology Advisor (ITA). ITAs are assigned to companies across Canada and provide free advisory support on the direction of technology development and how to navigate government programs. Building a relationship with an assigned ITA is often a direct pathway to financial support.Key funding streams include:IRAP Contribution: Non-repayable funding for technology development projects. Amounts vary by company size and project scope, ranging from tens of thousands to over CAD 500,000 in some cases.Youth Employment Program: Wage subsidies for hiring highly qualified personnel, reducing the cost of bringing on technical and research staff.Eligible companies are for-profit corporations incorporated in Canada with fewer than 500 employees. Foreign-owned companies may also apply, provided they can demonstrate substantive operations and R&D activity in Canada.[1]Using SR&ED and NRC IRAP TogetherSR&ED and NRC IRAP are distinct in structure but can both be applied to the same R&D project, provided the same expenditures are not claimed under both programs. NRC IRAP contributions must be deducted from eligible SR&ED expenditures, so careful planning around timing and amounts is important. Working with a specialist SR&ED consultant or tax advisor can help maximize the total benefit received.ConclusionSR&ED and NRC IRAP are programs through which the Canadian government directly returns value on R&D investment. Used alongside equity financing, they offer a way to improve cash flow while limiting dilution. Both programs have eligibility requirements that a Japanese entity cannot satisfy directly. For startups considering a serious move into Canada, the starting point is to verify your specific situation with a tax or legal specialist before applying.[1] Source: Canada Revenue Agency, SR&ED Program https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program.htmlSource: Canada's Venture Capital Market and Key Players (March 2026) https://www.jetro.go.jp/world/reports/2026/02/ca54be8ab9ebcbcf.html