Innovative Solutions Canada: Is It Worth Applying?
Innovative Solutions Canada pays small Canadian businesses to develop new technology for federal problems, and can lead to the government buying it. It fits some startups well and distracts others.
What does Innovative Solutions Canada offer?
Innovative Solutions Canada (ISC) is a federal program in which departments post problems and pay small Canadian businesses to develop solutions. In the Challenge Stream, Phase 1 funds a proof of concept of up to $150,000 over six months, and Phase 2 funds a prototype of up to $1 million over two years, with National Defence able to go higher.
In Phase 3, departments may choose to buy the resulting technology. The program’s eligibility and process page sets out the phases and rules. These are contracts for work, not grants, so you deliver what the challenge asks for.
Who is eligible for Innovative Solutions Canada?
To be eligible, a business must be for-profit and incorporated in Canada, have 499 or fewer full-time equivalent employees, do its R&D in Canada, pay at least half of its wages to workers based in Canada, and have more than half of its senior executives resident in Canada. Check each challenge for extra requirements.
When should a startup pursue ISC?
Pursue ISC when a posted challenge matches what you already build or plan to build, the department is a customer you would want anyway, and you can deliver the work without pulling the team off your main product. Avoid bending your roadmap to fit a challenge that leads nowhere commercially.
| Situation | Pursue ISC | Probably skip |
|---|---|---|
| Challenge matches your roadmap | Yes | |
| Government is a target market | Yes, Phase 3 can lead to sales | |
| You need a reference customer | Yes, a department is a credible one | |
| Challenge needs a different product | Yes, it becomes a distraction | |
| Team is already stretched on core customers | Yes, delivery will suffer | |
| You need cash in weeks | Yes, selection and contracting take time |
How does the application process work?
Departments publish challenges with a closing date. You create a profile, read the challenge carefully, and submit a proposal that addresses its criteria, before the deadline. Proposals are evaluated and successful applicants receive a Phase 1 contract. Browse the current challenges and subscribe for updates, since new ones appear throughout the year.
The government announced more funding for ISC pilot contracts and scaled procurement in July 2026. Check the challenges page for the latest calls. Selling to government more broadly is covered in selling to the Government of Canada.
Apply only where you would want the customer anyway.
ISC is most valuable when it leads to a department buying your product. A challenge that pulls you away from your market costs more than it pays.
What should you do next?
Next, check eligibility against the five criteria, read the open challenges, and shortlist only those that match your product and a customer you want. Then talk to the challenge contact, if one is listed, before writing the proposal. One well-matched proposal is worth more than several stretched ones.
- Confirm eligibility: incorporation, size, R&D in Canada, wages, executives.
- Subscribe to challenge notifications.
- Shortlist challenges that match your roadmap and a department you want as a customer.
- Estimate the team time Phase 1 would take.
- Write one strong proposal against the stated criteria.
ISC is not the only federal support for R&D. The separate IRAP guide and SR&ED guide cover those programs.
Frequently asked questions
How much funding does Innovative Solutions Canada provide?
In the Challenge Stream, up to $150,000 for a Phase 1 proof of concept and up to $1 million for a Phase 2 prototype, with National Defence able to provide more.
Is Innovative Solutions Canada a grant?
No. It awards contracts to develop solutions to a department’s challenge, and you must deliver the work.
Who can apply to Innovative Solutions Canada?
For-profit businesses incorporated in Canada with 499 or fewer FTEs that do R&D in Canada and meet the wage and executive residency rules.
Can ISC lead to a government contract?
Yes. In Phase 3, departments may choose to procure the technology developed in earlier phases.
How often are ISC challenges posted?
Throughout the year. Subscribe to notifications and check the challenges page regularly.
Can I apply to ISC and IRAP at the same time?
The programs are separate. Check each program’s rules on combining government funding for the same work.
Sources & further reading
Programs and rules change. These primary sources let you check the current details directly.