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Bridging the gap between science, entrepreneurship and capital (part two)
Thanks for all the great feedback and conversations following last month’s article. In that article I promised to cover recent developments in the innovation funding landscape.
If we assume three things:
- The New Zealand early stage company/start-up environment has not delivered enough sustainable companies that are growing and have global commercial potential,
- The upcoming change to the R&D tax credit and Callaghan System will not ensure enough early stage investment to stimulate R&D investment, and
- If we continue to do the same as we have done, we will get the same results
What is a rational response from two market participants – target and invest in the best science start-ups and target and invest in those companies tackling the big challenges such as sustainable food production, agriculture, healthcare, clean energy, housing and education.
Investment in early stage companies needs to focus on those which have real global appeal in terms of the market solution they offer, and real appeal to those capital markets which can support and fund the commercialisation requirements. The traditional Angel/VC model, despite its successes, struggles to identify and sustainably support enough successful companies. New Zealand has a long, distinguished history and tradition of science and technology based research. The challenge has been how to turn research into commercial success in the global market.
This challenge has been embraced by a new fund, Matū, which aims to drive commercial success from early stage science and IP start-ups that originate from the academic and private sectors throughout NZ. The fund already has a number of relationships including with MBIE’s Return on Science (RoS) and KiwiNet which offer early access to science based projects that are supported and developed within NZ Universities and CRI’s. A key advantage is that Matū benefits from the robust investment committee analysis programs of RoS and KiwiNet for pre-qualification and deal screening. This ensures that fund due diligence and pre-investment decisions are geared towards those with the greatest global and commercial drivers alongside their unique science/technical leadership. For those on the Gilligan Sheppard investor database, you will hear more about this fund shortly. If you are not on this database, let us know and we will include you.
The second recent initiative is the Impact Enterprise Fund, a collaboration between the Akina Foundation, New Ground Capital and Impact Ventures. They have raised a fund which has two primary objectives: delivering market-rate financial returns, and delivering tangible societal and environmental outcomes.
There are many New Zealand businesses that are looking to make a positive impact upon society through the development of their commercial operations. It is the view of the fund and its investors that these businesses are currently restricted in their ability to achieve scale by the absence of an aligned capital market able to provide investment of the appropriate nature, and at the right time, to support their purpose. Bruce Sheppard is an investor and Director in New Ground Capital, and is a member of the Investment Committee of the fund.
Time will tell if Matū and the Impact Fund will deliver the outcomes of companies delivering societal impact and commercially successful science backed companies. While they have different approaches their desired outcomes both benefit New Zealand’s commercial and societal landscapes.
They both seek to address the capital and market access challenges that exist in New Zealand. While between them they will initially be able to help around 30 companies, those 30 could deliver the next waves of Xero’s or Canadian Solar or another surprise that will keep New Zealand a great place to start and run a business, as well as a great place to live, and inspire the next generation of entrepreneurs.
Matū – science based fund. Established to commercialise academic/science based IP, funded by investors attune to the reality of early stage growth companies.
View the live conversation we had with Michael and Bruce
by viewing the clip on our YouTube channel here.