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Govt demands higher standard from incubators in new funding programme

Monday 8th April 2019

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The government wants a see a higher standard from start-up incubator programmes, which have suffered from a lack of expertise in bringing new ideas to market. 

Callaghan Innovation will re-tender the incubator programme this year, after the five-year pilot programme failed to deliver pathways to commercialisation. 

Of the three tech-based incubators in the pilot programme, ASX-listed Powerhouse Ventures has attracted the most attention, as it found itself at odds with founders of several investments and sold assets to address its funding position when the Australian stock market operator questioned whether it had sufficient cash to keep operating. 

Last month, Powerhouse said it faced proceedings in the Victorian County Court from Shape Capital over claims that it failed to pay a transaction success fee. It intends to defend the claim. 

Research, Science and Innovation Minister Megan Woods is scaling up the technology incubator programme, with almost $14 million in annual funding allocated from 2019 to pay for the incubators' operating costs, repayable and pre-incubation grants, and administration fees. 

"Although the New Zealand innovation system has improved, the technology incubator programme has not been transformational, in particular because start-ups face a lack of forward pathway," Woods said in a Cabinet paper. "The success of the programme has been hindered by the small size of New Zealand's commercialisation talent pool." 

She wants the incubators to demonstrate a significant degree of commercialisation expertise, access to sufficient capital, and international connections. 

"The requirements on technology incubator providers will be higher than the current standard." 

Peter Crabtree, general manager of science, innovation and international activities at the Ministry of Business, Innovation and Employment, said the incubators will be encouraged to align themselves with the government's wider priorities for an innovative and low-emissions economy. 

“The government is committed to increasing economy-wide spending on R&D to 2 percent of GDP, and a core part of this is backing our entrepreneurs to commercialise their research and products both here and abroad," Crabtree said in a statement. 

Woods plans to raise the repayable grant available to $750,000, matched by $250,000 from the incubator. Stakeholders told her that the current $600,000 grant wasn't big enough to capitalise a start-up for the next stage in funding raising.

She also decided to cap incubation fees at 5 percent of the repayable grant from the current 15 percent. She will also allow for higher funding of direct incubator costs, up to $3 million a year across all incubators. 


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