Investing in innovation

Elon Musk was quoted as saying, “If things are not failing, you are not innovating enough.”, which is easy to say when you are a billionaire, but does strike at the difference between attitudes to innovation in New Zealand and most other OECD countries.

As a firm, Gilligan Sheppard have been supporters of innovative companies that are looking to grow and commercialise ideas which can make a difference. The recent budget made a number of changes to the innovation and commercialisation landscape which I will summarise below.

Last year saw the launch of the Matu Science Based Fund, and a number of our investor group have committed to the fund, so this analysis looks at what the budget means for those early stage companies and funds like Matu.

From a Matu perspective the budget was a strong advocate
for their strategy and approach.

The budget commitment of $300m for Pre Series A and Series A investment will see new funds emerge at least some of which will focus broadly on the technology and science sector. This will aid early stage companies and provide that critical funding needed to make the biggest leap in commercialisation, typically into overseas markets and scaling up. A big question to be answered will be valuation, local investors in this space have not had local competition and have not valued companies as highly as off-shore markets.

There are at least two local groups and two overseas funds looking to establish in this space on the back of this funding. The impact of this for early stage companies and funders is that there will be more choice for follow on funding. If the new funds act rationally, this will be good for the science and technology sectors.

The Commercial Partner Network, (CPN) (the money that funds Return on Science, Kiwinet and Pre Seed Accelerator fund (PSAF)) had their funding almost exactly doubled in the budget, a clear sign of the government’s support for this program and the achievements each group has shown during the first phase. This will certainly see more PSAF money able to be seeded to pre-company formation activities, the result of which will be a greater number of projects and opportunities for Matu to invest in and certainly the quality of the projects will continue to be better when they are ready for initial investment.

Funding for the Technology Incubators was also approved although a bit less than expected by Callaghan, probably a casualty of the need to tighten the belts when the CGT was canned and by the dishing out the $300m and increased investment in the Commercial Partner Network, there simply wasn’t quite enough to go round. The previous technology Incubator programme did not deliver well which was obvious to most observers. Will this new version be any different? It is hard to tell, but after reading the RFP, there are the hallmarks that appear like the same thinking and people are driving this process.

As a summary, here is a brief description of the latest investments by Matu. More details will be sent to our investor database, please let us know if you would like to receive more information as Matu is still raising funds for these and other opportunities.

Synthase is a NZ biotech start-up company, based at the Ruakura Science Campus in Hamilton. The company was formed in 2015 with IP relating to specific plant enzymes that comprehensively repair damage caused by the oxidation of lipids contained in the membrane of cells.

Mekonos Inc disrupts how drugs are administered to patients, through new innovations in gene therapy delivery. Custom-developed, parallel silicon chips, each with the potential of holding thousands of individually moving nano-needles, are used to carry drug cargo that is injected ex vivo (outside the body) into the nucleus of human cells. This high-tech methodology is much safer than today’s virus-based methods for gene/genome editing, has a substantially higher uptake rate, and is backed up by several patents with more pending.

Compliance Audit Systems Ltd (CAS) have developed a software and an AI platform designed to automate compliance documents and processes in various industry sectors. The first market focus is the building and construction sectors for Building Information Management (BIM), a global market. By operating as a plug-in for existing BIM design systems, the CAS software ACABIM automatically checks building design documents and specifications against relevant rules and regulations, highlighting issues that require further inspection or correction.

PowerON are revolutionising soft electronics that could enable a new generation of soft robotic systems, particularly for industrial applications. Originally from the Auckland Bioengineering Institute’s Biomimetics Laboratory, their dielectric elastomer switches designs allow for sensing, actuation, control, and basic logical computation. The key advantage is that these switches are ‘printed’ into the soft system material, instead of requiring expensive and error-prone external hardware.