Kiwis too self-critical, says Israeli tech innovation expert Oren Gershtein

Monday 13th June 2016

The Israeli technology expert who helped kickstart New Zealand’s tech incubator programme says this country’s worst problem is self-criticism.

Oren Gershtein was formerly head of Israel’s leading technology incubator, Jerusalem-based Van Leer Ventures and through his new company Ideality Roads consults on lessons learned from the growth of the country's hi-tech sector.

He’s advised government-funded Callaghan Innovation on the introduction of three private sector-owned tech incubators in New Zealand and Latin American organisations on setting up the CITES incubator in Argentina.

New Zealand’s innovation eco-system has a lot of the right elements but one of the things that impacts momentum is our tendency for self-criticism, Gershtein said.

“You’re so tough on yourselves and there is no reason for that,” he said.

Tech incubators focus on commercialising complex intellectual property, mainly from universities and Crown Research Institutes.

Gershtein claims New Zealand’s tech incubator programme is a step up on the Israeli one it was modelled on, even though the grant funding in Israel is more generous. The Israeli government puts in 85 percent matched by 15 percent from the private sector. That compares with a 3:1 ratio in New Zealand with the government contributing up to $450,000 compared to the private sector's $150,000 over two years.

One of the big improvements from the Israeli model is that innovative ideas aren’t vetted by a governmental professional examiner before incubation, which slows things down, he said. In New Zealand, innovative ideas still need final funding approval from Callaghan.

Gershtein said what’s lacking in New Zealand is funding support for incubated companies through their entire life cycle, although that’s something he’s currently working with Callaghan and the government on.

“What is the road map for that? What should the government participation be? There needs to be more transparency around this strategy as the parts are not fully connected,” he said.

“There’s a chasm where a lot of companies fail,” he said. “In Israel, there is an entire, sophisticated structure and any gaps are transparent to the private sector. If entrepreneurs need money at any stage they know how to find the places to get it.”

The trick is working out when the baton can be passed by the government to the private sector to take on the commercialisation risk, he said. “You have to create that moment.”

Repayable grants help prove up technology typically before angel investors will risk their money and pre-sales. Pre-incubation grants are a step earlier and allow the incubators to explore whether a promising technology is worth investing in.

Figures provided by Callaghan Innovation show 30 pre-incubation grants worth a total $1.03 million were handed out in the 2014/2015 financial year and 37 worth $1.3 million have been awarded in the year to date. The pre-incubation grants have to be repaid if the companies later get repayable grants, otherwise it’s written off.

As at April this year, 18 companies had also received repayable grant funding totalling $9 million. The bulk - $5.85 million – has gone to Powerhouse which is due to list on the ASX in August.

Innovative technologies incubated by Tauranga-based WNT Ventures have received $1.35 million while Auckland-based Astrolab has had $1.8 million. The repayable grants are limited to tech incubators.

Additional funding to the three tech incubators for operating expenses totalled $2.24 million in the 2014/2015 financial year, $1.75 million the following year, and is budgeted to be $1.26 million for the 2016/2017 year.

That compares to the other five founder incubators – BCC, Creative HQ, ECentre, The Icehouse, and Soda Inc - receiving operational funding totalling $2.9 million in 2014/15, $2.52 million the following year, and $2.25 million budgeted for the 2016/17 financial year.

(Fiona Rotherham travelled to Israel with assistance from Spark New Zealand and the Trans-Tasman Business Circle Michael Nathan Fellowship. BusinessDesk also receives assistance from Callaghan Innovation to write about innovation commercialisation).

BusinessDesk.co.nz

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