If early reaction is anything to go by, the tech industry loves the two core elements of National’s tech policy, released this morning: new visa options to draw tech talent to NZ, and a promise to consider a tax change that would make it a lot more feasible for cash-strapped startups to dish out shares as part of a remuneration package.
But some also noted what was left out.
National promised a new International Graduates Visa, capped at 500 applicants for its first year; 250 12-month “Digital Nomad” visas; and a Global Growth Tech Visa aimed at high-skilled people earning more than $400,000 a year, also capped at 250 applicants. National immigration spokeswoman Erica Stanford said family members would be included on the new visas, and family members would be able to work.
National also promised to “investigate” the tax treatment of shares granted to employees. Currently, tax has to be paid on unrealised gains from employee stock option schemes (esops).
“That will be a game-changer,” said Dr Ehsan Vaghefi, co-founder of Toku Eyes - an Auckland-based AI startup that recently raised $13 million for a tilt at the US optometry market.
“It’s essential for young companies like ours, we need esops to attract talent. But the law is stacked against them at the moment; they’re a tax liability. The visa changes are good because one of the things that can make or break a young company is access to top-tier talent - someone who’s done it before and been a CEO of a multi-billion company.”
“I like the esop thing,” said Paul Miller, co-founder of Insightful.Mobi. “Because we’re in a position where want to retain our people but we don’t have a lot of money to dish out.”
He also liked the broader visa policy. “We just signed our first export customer a few weeks ago and having someone who could help with that phase - someone like the people they described coming into the country; I’m pretty excited about it.”
No tax breaks for investing in startups
Maker Partners co-founder Jonathan Reid was very positive on the policy overall, but said he was disappointed it did not feature tax breaks for venture capital investments - one of several recommendations floated in the recent Startup Advisors Council report that did not make the cut for National’s policy (or, indeed, any other party’s).
But immediately after the announcement, National Party technology spokeswoman Judith Collins said tax deductions for investments in startups were off the table.
“We simply can’t do that, when you consider we’re looking at about $100 billion in debt. We just have to be really careful. It’s the sort of thing that, at another time, could possibly be looked at.”
Top-up for $300m Elevate, more KiwiSaver involvement - maybe
The policy also made no mention of another big talking point in the tech and R&D community: The $300 million Elevate Fund set up by the current Government in 2020 to ginger the sluggish venture capital scene by co-investing with private players. Big VC operators like Movac have leaned on Elevate money to meet their targets for recent funds, but Elevate is now nearly exhausted. The Startup Council wanted Elevate boosted to $500m.
Collins said National’s commerce spokesman Andrew Bayly was assessing a possible Elevate top-up, along with the Startup Council’s related idea of removing barriers to KiwSaver funds investing in startups.
That policy might not emerge before polling day. “We’re not committing to details of things where we really need to be in government to understand just where the money is,” Collins said.
‘Reject Act’s plan’
“Overall, it’s positive to see a plan to lift tech in New Zealand - a zero-weight export category, with high-paying jobs and low carbon footprint,” said John-Daniel Trask - co-founder of one of NZ’s fastest-growing tech firms, the Wellington-based Raygun. Trask, a front-foot critic of the current Government, said immigration had been too hard for the past six years.
“But I’d have liked to see National reject Act’s plan to remove the R&D tax credit if they did form a coalition, as I see that as being very important to the local industry’s future growth.”
Collins responded, “We don’t normally comment on other parties’ policies. If people want our plan, it’s important to vote for us.”
Act only supported one of the Startup Council’s 25 recommendations - removing barriers to KiwiSaver funds investing in startups.”
Industry groups react
“It is fantastic to see National taking the growth and challenges of the digital technology industry seriously – especially the creation of a Minister of Technology which will hopefully bring together the various fragmented elements into one portfolio,” IT Professionals NZ CEO Victoria MacLennan said.
“The initial year caps on these new visa categories are really important in this post-Covid world to help us navigate creating and growing local talent – bringing diversity into our industry including attracting Māori and Pacific people into digital tech roles – alongside supplementing the workforce with skilled migrants and others.”
“It is great to see National’s commitment to supporting the further growth of the fastest growing part of the New Zealand economy, the tech sector,” NZTech chief executive Graeme Muller said.
“This policy shows they clearly understand the linkages between innovation, skills, startups and the creation of fast-growing companies that are creating the high-value jobs and export growth that will fuel New Zealand in the coming years.”
Procurement: Not addressed
“Catalyst doesn’t have a problem attracting talent, either locally or internationally. We invest in Kiwis,” said Don Christie, a director of an IT services firm and cofounder of NZ Rise.
“National needs to address the core problem of IT in New Zealand: The very deliberate exclusion of Kiwi companies from large government contracts. This has reached levels I have never, in 27 years of business, seen before in NZ.”
A Technology Minister
National’s pledge to create a Technology portfolio was popular, even if to a degree it was semantics. (Both major parties have moved away from a “Technology Minister” title over the past decade or so as the portfolio has broadened. The trend began with Amy Adams being named Communications and IT Minister in 2011.)
“NZTech has encouraged the introduction of a Minister for Technology for the past few elections. This level of focus should help with cross-sector coordination to take advantage of tech where possible and be better prepared to manage any emerging tech risk. For example, the role technology should be playing in our emissions reduction commitments,” NZTech’s Muller said.
“It’s great we have both parties taking tech seriously and that is being talked about at the election,” Staker Translations cofounder and Startup Council member Grant Straker said.
“Immigration settings and esops are critical initiatives so great both main parties are looking at this.”
Straker added, “We recommended a Minister of Technology/Startups in our Startup Council report so it’s excellent to see National is looking at this. It would be great to see Labour also have this as an election policy.
“If New Zealand wants to pay down debt, we need to create new high-value export companies out of NZ, and the best way we do this is through a strong technology and startup ecosystem.”
“National’s proposal looks like a really positive step in the right direction,” Movac managing partner Phil McCaw said.
“We also strongly support the creation of a Ministerial portfolio for Technology or Startups. Often policy is crafted in a way that may be workable for big business but is completely unworkable for small, fast-growing startups. Having someone in government exclusively focused on that will help ensure that future policy implementation is practical and right-sized.
“Start-ups are the growth engine for our economy and we look forward to continue working on these issues across with whoever is in power post-election. It’s bloody exciting to see these issues being put front-and-centre.”
Toku Eyes’ Vaghefi added, “To me, that’s really important. It gives us a voice at the table.”
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.