Govt to debut grants to get private sector into incubation funding

Govt to debut grants to get private sector into incubation funding

The government will offer repayable grants of as much as $450,000 per company for tech startups to develop their ideas and commercialise IP, as part of an initiative to establish up to four new incubators led by the private sector.

Funding of $31.3 million was earmarked for the scheme in the 2013 Budget and will see the new incubators add their own funding of at least 25 percent of the startup's costs.

Callaghan Innovation will distribute the government's contribution.

Science and innovation minister Steven Joyce says the incubators will be modelled on Israel's company incubation model which emphasises getting more tech-based startups "at the front end of the pipeline".

“The new grants will address a critical gap that early-stage technology businesses face, where they need money to meet startup costs but they are not yet at a stage where investors will commit capital,” Joyce says.

The grants will be repaid according to a royalty of three percent on the startup's gross revenue.

The programme will include additional grants of up to $35,000, given to the new incubators to assess the startup idea. The number of pre-incubation grants allocated will depend on the quality of proposals received from startups, the government says, adding they'll be limited so they don't exceed the expected number of full repayable grants.

New Zealand Trade and Enterprise’s Incubator Support Programme was launched in 2001 and funds seven incubators. They receive between 50 and 65 percent of their operational funding through the programme.

The new scheme, kicking off as a three to five year pilot, will fund founder-focused incubators and tech-focused incubators, the government says.

Founder-focused incubators will operately largely under the current funding model, while those with a tech focus will be eligible for the new programme.

The amount of the direct operational funding incubators receive will be gradually decreased, the government says, with an overall target of 25 to 35 percent of total revenues, as a percentage of the incubators’ total income, during the pilot.

Owners of the new incubators have to match the $450,000 over two years at a rate of one to three.

Eligible startups need to have IP or capital-intensive products or services, propects for high-value export growth and a global outlook; commercial viability and identified markets, novel, complex technology and entrepreneurial ability, the government says.

Eligible incubator owners have to show at least 51 percent private commercial ownership and a track record in commercialising new technologies, strong tech transfer relationships, access to investment networks and the ability to attract and develop entrepreneurial talent.

It's expected the first new incubators will get funding by July next year.

Callaghan Innovation will put out an expression of interest for the remodelled programme by 15 December.