"The number one job creator in the world right now is start-ups. And the number one job destroyer is larger corporates," says Startup Advisors Council member Grant Straker. Photo / Michael Craig
The Government asked a group of experts for ideas on boosting the start-up sector - which has seen some early-stage firms grow to take on the world (like Xero or Rocket Lab) but struggle.
Today, the Startup Advisors Council delivered 25 recommendations in its “Upstart Nation” report (because the tech industry loves to confuse things with a new buzzword, and random capitals, it refers to start-ups as “UpStarts” throughout.)
“All of the recommendations are totally doable,” chairman and Movac managing partner Phil McCaw told the Herald.
“Many of them are based on what we’re seeing other countries around the world do, with a Kiwi twist.”
But there could be a post-election roadblock.
The Act Party - which could play a pivotal role after October, with polls indicating a National Government requiring its support - says it only supports one of the council’s 25 recommendations, and even that single policy only has its “potential” backing.
The report’s five biggest recommendations in terms of concrete policy shifts or big-bang moves:
The council says these measures would see the Crown forego $39.6m in tax revenue today, rising to $79.2m by 2027 - but it says this would be offset by increases in GST and PAYE paid by successful young companies.
There are also broader suggestions for mentoring, business networking, storytelling, and addressing the skills shortage. The report suggests a Start-up Visa and a Global Talent Visa, “a minimum global income of US$200,000 per year [$323,000]” and a requirement to attend and participate in at least two New Zealand industry events a year.
It also suggests the Government “Establish a Māori-led venture fund “to remove barriers for Māori participation in the UpStart ecosystem and further encourage iwi investment in the sector” but doesn’t suggest a budget. Nor does it recommend specific structures - a process it says should be led by iwi.
The council also wants a new “agency dedicated to boosting the entrepreneurial ecosystem” which would be called Accelerate Aotearoa. And it wants the Government procurement process to include local start-ups, who it says are largely snubbed in favour of established companies or multinationals today. But it doesn’t offer specifics on how that aim could be implemented in Crown tenders, whose costs, complexity (and, some would say, hand-to-hand political combat) disadvantage smaller firms.
There is of course a big gulf between “doable” and actually getting done in the world of politics.
Angel Association head Suse Reynolds, who served as the council’s deputy chair, says the group met with the ministers several times, and showed them drafts. (The council was appointed in May 2022 by then Research, Science, and Innovation Minister Megan Woods and then Economic and Regional Development Minister Stuart Nash - who have been respectively replaced in their portfolios by Ayesha Verrall and Kieran McAnulty. Barbara Edmonds is also in the frame as Economic Development Minister.)
She said the ministers were broadly positive.
Regardless, Reynolds said she was not expecting any recommendations would be adopted during the current term, simply because the election is rushing up so fast (the House is due to rise on August 31, with Parliament dissolved on September 8).
And indeed, the Government did not leap out of the blocks.
“We will take time to carefully consider the council’s report and their valuable recommendations to support and strengthen the environment for New Zealand startups,” Verrall said as the report was released.
The Herald asked National Party technology spokeswoman Judith Collins if she could commit to any of the Startup Advisors Council’s recommendations.
She said she did not want to pre-empt her party’s tech and innovation policies, which have yet to be launched.
“I expect the council will be pleased with the policies, but, of course, not everything that they ask for will be in the policies,” Collins said.
“However, the work of the council leans very much into where I see New Zealand having to focus.”
“We are short on capital, talent, and markets. We have a culture that needs a reboot to embrace not only success but also accept that failure should be seen as a natural part of learning and growing.”
National’s policy is due in a couple of weeks, Collins said.
Act was more willing to give an immediate verdict - and it was blunt.
“Only one of the recommendations could potentially gain support from Act,” spokesman Simon Clarke said.
“If there are barriers to KiwiSaver funds investing in start-ups, Act would support removing them.”
Council member Grant Straker (Ngāti Raukawa) had the working assumption it will be up for the task of convincing any holdouts in a future Government to back the council’s report.
“If we don’t do it, what happens? The number one job creator in the world right now is start-ups. And the number one job destroyer is larger corporates,” he told the Herald - referencing the recent round of Big Tech layoffs.
“If we want to be a prosperous nation, good ideas have to meet good capital in the right channel to market. Having been through this myself [co-founding Straker Translations], my thinking is that you need to have inclusive capital, not extractive capital - so you’ve got New Zealand institutional investors, New Zealand retail investors and New Zealand mum-and-dad investors, then you’ve got far more New Zealand ownership of these ideas that get turned into companies.”
The report says “offshore funds tend to be ‘fair-weather friends.’ History, however, informs us that offshore funds are active in the good times but disappear in tougher economic conditions such as we have now”.
“Tend” is the operative word, with some trans-Tasman VCs like Blackbird continuing to put money into Kiwi start-ups, and co-investing with the NZGCP.
Although Act might not like the idea of the NZGCP getting $500m, the council says its recommendations would ultimately lead to a capital market for start-ups that “can stand alone without ongoing government support.”
But in the Startup Advisors Council’s view, it will take a bit of nudging to get there. “We would like to see a future where New Zealanders think about growing wealth through investing in a diversified range of UpStarts rather than our current default thinking of investing in property,” its report says.
Straker says the payoff is huge. He points to the report’s “successor indicators” section, which would see the start-up sector shifting from a hardscrabble landscape today to one that by 2030 creates:
The council’s report also says: “We aspire to reach representative parity with our population, which means building a start-up and investor cohort that is 17 per cent Māori [from around 10 per cent today], eight per cent Pasifika [from less than two per cent today] and 52 per cent women [from around 30 per cent today].”
Startup Advisors Council members spoken to by the Herald all expressed the hope that their recommendations would be seen as pragmatic and nonpartisan, and draw broad cross-party support.
“The council’s recommendations focus on creating a world-leading vibrant start-up ecosystem. One that will drive economic growth for all, growing wages and increasing the tax base, and foster the innovation needed to solve the world’s toughest challenges,” chairman McCaw said.
“If we collectively embrace this opportunity - entrepreneurs, investors and government - then all the recommendations are totally doable. The results won’t come quickly, this is a long-term strategy to drive innovation and growth and will require consistent policy application by political parties across the divide.”
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer. He has written extensively about startups, venture capital and related policy.
She has been profiting from selling Tesla stock since joining, but especially of late.