What’s holding back New Zealand’s deep tech innovators?
Callaghan Innovation
Te Pokapū Auaha - We are Aotearoa New Zealand's Innovation Agency
At a glance
Investment in New Zealand tech companies hit an all-time high last year, growing by 8.2%, with $726 million invested across 154 early and later-stage deals. Local deep tech companies secured 22% of early and later stage capital raised.
Kiwis aren’t short of natural ingenuity and have proven themselves to be extremely capable when it comes to finding novel ways of addressing complex scientific and engineering challenges. While the impact and potential returns achieved by these groundbreaking deep tech innovations can be huge, the road to successful commercialisation is long, risky and difficult.?
So what are the biggest hurdles facing our early stage deep tech startups and how can we support them to bring their innovations to the world?
What our deep tech innovators are up against
Highest risk and uncertainty
The beginning of the commercialisation journey is when risk and uncertainty are highest for a deep tech startup. While there may be a proof of concept or even a prototype, the venture has yet to prove itself outside of a lab and there are still many unknowns.
Limited access to capital
The early stage and highly risky nature of these startups means they have uncertain and variable future returns. They are not quite ‘investor ready’ for private capital, yet are not able to access debt financing due to lack of cash flow.?
Lack of specialised expertise
Commercialisation of deep tech requires specialised expertise and skill sets. The pool of capability in New Zealand is limited and finding the right talent, advisor and mentorship is often difficult.
The missing entrepreneurial lead
Deep tech knowledge is often generated by a technical inventor, however there may not be an entrepreneurial lead that can guide the project to commercial success. Then there are inventors from public research organisations who may wish to continue their involvement in academia and don’t have the capacity to lead the commercialisation of the technology.?
New Zealand deep tech startups poised to win
Callaghan Innovation’s Technology Incubator Programme was created to help Kiwi deep tech startups overcome the barriers to commercial success. The programme, which has been running successfully for over two years, has become a lifeline of funding, investment and support for visionary Kiwi startups like Scentian Bio, CarbonCrop, Amaroq Therapeutics and MACSO.
Disease detecting with an ‘electronic nose'
Scentian Bio is harnessing the power of insect senses to create a special electronic nose to detect diseases like tuberculosis and malaria. The bio tech startup spun out as a commercial venture from Plant & Food Research and partnered with Sprout Agritech, one of our technology incubator partners, to ensure it is well supported to achieve its vision for the future.
Making it easy, quick and low-risk to access carbon credits
CarbonCrop is developing a technology platform to make it easy, quick, and low-risk for everyone, including smaller landowners, to access carbon credits. CarbonCrop gained $1.5 million in investment, led by technology incubator WNT Ventures, which also helped build the team’s commercial capabilities and governance.
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Therapies to fight some of the most hard-to-treat cancers
Amaroq Therapeutics is developing therapies to fight some of the most hard-to-treat and prevalent cancers. Technology incubator Brandon Capital led the $14 million in investment to get the startup’s cutting-edge research out of the lab.
An artificial Intelligence (AI) and edge computing business
MACSO is harnessing the power of ethical AI and edge computing to detect illness in animals and for voice recognition applications where data safety is critical. Technology incubator Bridgewest Ventures invested in the business and is providing founder Saba Samiei with the support and connections she needs to realise her vision.
Filling the gaps
Deep tech specialists
Callaghan Innovation has partnered with deep tech specialists Brandon Capital Partners , Bridgewest Ventures , Sprout Agritech and WNT Ventures to give Kiwi startups access to significant commercialisation capability, follow-on investment capital and international connections.
Access to funding
Through our technology incubators, successful applicants have access to a minimum of $1,000,000 in funding, made up of a $750,000 repayable grant from Callaghan Innovation and a minimum of $250,000 in private investment. Startups make repayments on the grant only if and when they begin earning revenue.
Hands-on involvement
The Technology Incubator Programme was set up to support deep tech startups with the highest risk profile -? the kind that would normally be unable to access private investment. Recognising the degree of risk involved, the Programme encourages our technology incubator partners to take a hands-on co-founder role in guiding startups through their commercialisation journey by having a 20% to 50% shareholding in the startup.
In exceptional circumstances a minimum of 10% incubator shareholding could be appropriate, for example, in syndicated deals where strategic partners come onboard to provide additional support and increases likelihood of startup success. Shareholdings above 50% are also possible, especially in cases where there's no entrepreneurial lead and the incubator steps into that role.
Proven success
Since its launch in 2020, the Technology Incubator Programme has committed support for? more than 29 Kiwi deep tech ventures. These startups have received approval for repayable grants from Callaghan Innovation totaling over $21 million, matched with a private sector investment commitment of over $56 million.?
Notably, the startups engaged in the Programme attracted private investment exceeding seven times the minimum co-investment required to access the repayable grant. This demonstrates the strong commitment from our partners to support these early stage very high risk ventures and the high level of investor confidence achieved by the Programme.
Bring your innovation to the world
Callaghan Innovation's Technology Incubator Programme supports Kiwi deep tech startups to bring their groundbreaking ideas to the world.
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This article was guest written by our Technology Incubator Product Owner Celeste Peh .
Innovation, Responsible Intelligence, Applied Science of Success | Public Speaker | Coveo ML Certified
1 年I recently read on LinkedIn an interesting argument that NZ (and the government) is focused on low wage economy (farming etc).. and there is little incentive for that to change and focus of high value/high wage industries like tech. I’m interested to see if this offers alternative ideas. After reading the article it looks like they are helping to solve this issue by providing support for start ups.
CEO, Growth Innovation Adviser, Product Leader, Venture and Network Catalyzer
1 年I find the biggest gaps here are in valuation, path to revenue, IP strategy and global commercialization strategy from day one; all the while balancing with iterative validation. ?? It takes experience to manage all of this as a first time founder and you need people by your side who have done all of these things themselves - day 1 to $1M ARR in quick succession. Great to see awareness building.
Speaker |Author |PhD Cand, Infoecosystems & AI for Forest and Ecosystem Services | AI Strategy, Policy & Governance
1 年This article is very good at outlining key challenges that Deep Tech innovators. Thanks for sharing.