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Backing business growth: NZ's business incubators

Hon Pete Hodgson
Friday, 27 April 2001 Speech Notes
Otago University, Dunedin.

Backing business growth: NZ's business incubators


Real economic progress needs the creation of new businesses and the application of new technologies. These are the changes that take us forward, that bring fundamental improvements in productivity and wealth.

Incubators are about getting new businesses going, often with new technologies. They are about commercialising good ideas.

Incubators can help improve the growth and survival rates of new companies. They can facilitate technology transfer and innovation. And they can create jobs.

So it makes sense for a Government that’s committed to the growth and transformation of the New Zealand economy to offer some support to the nation's business incubators.

I think it's a great sign for New Zealand's innovation system that incubators have sprung up all over the country in recent times without Government direction or funding.

They have sprung up because people in our tertiary institutions, local bodies and business community have shown vision and initiative.

I want to congratulate those people. I'm particularly pleased to be able to congratulate the team behind Otago University's Innovation Centre, who are hosting us today.

Otago tell me the Innovation Centre is the first authentic technology incubator in New Zealand. Certainly it’s the only incubator I'm aware of with wet lab facilities.

It's a bold investment by the university and a real vote of confidence in its own intellectual resources. And it has some tenants with some very bright ideas ready to move in when it opens shortly.

So I think it's a well judged vote of confidence. Otago has already succeeded in spinning off some innovative companies from its research base. And Dunedin is shaping up as a New Zealand centre of biomedical and biotechnology industry.

Watching the emergence of incubators nationwide has been an encouraging sight, but because we're a Government that takes an active interest in economic development we've asked whether we should be doing something to help.

We've consulted incubator programmes individually and last month we got as many incubator representatives as we could into one room to ask that question.

What we agreed on was that there is a wide range of experience and capacity in the establishment and operation of incubators in this country.

That's no surprise. The idea of incubation is relatively new to New Zealand. We're all learning as we go.

We've found there's a fair bit of variety in how much support our incubators provide beyond work space and administration.

There's general agreement that information and experience isn't being shared between incubators as effectively as it should be.

And there's a common problem with finding the necessary funds for developing and running an incubator, especially at the start-up stage.

Looking overseas, we can see a number of examples where Governments have found ways to help the growth of successful incubators. That might be through incubation and networking, as in Britain, direct funding as in Israel, or through setting standards or a helpful regulatory environment.

The Incubator Support Programme I'm announcing today picks up several of these tools.

Within Industry New Zealand we're going to set up a small but energetic Incubator Development Unit.

One of its key functions will be to establish and service an Incubator Network, to share around information about national and international best practice.

We expect the net to be spread wide, covering not just incubator managers but all those with an interest in seeing them work well – like support services, tertiary institutions, industry groups, local government and Maori.

The Incubator Development Unit – which will probably consist of one hard-working manager and a support person – will also be taking opportunities to promote incubation and helping incubators make use of existing Government services and programmes.

Backup expertise and guidance will be coming from an informal Incubator Advisory Group that Industry New Zealand will set up and coordinate. This group will provide advice to me, as Minister for Small Business, to Industry New Zealand and the development unit.

The other key part of the programme will be the Incubator Awards.

We're establishing these awards, which will be cash grants, to encourage incubators to develop best practice programmes and processes. They're a way of injecting public funds where they're most deserved and where they can do the most good.

The number and value of the awards is flexible but we're starting with $550,000 in total this financial year – that is, in the next nine weeks. I hope to be able to bring news of increased funding in the upcoming Budget.

The awards will be contested once a year, except for the coming year when we'll have two rounds. That's because we recognise that a number of incubators are in the early stages of development and won't immediately be in a position to enter.

Incubators will have to be part of the Incubator Network to be eligible. Some of the other criteria for awards will be financial sustainability, having a clear exit strategy for tenants and focusing on tenants with high value-added potential.

Like all the programmes we're running in the economic development area, this one will be subject to careful monitoring and evaluation. We'll be checking to make sure it's working and changing it if we need to.

The Incubator Support Programme is of course part of a wider Government effort to stimulate new business and innovation.

Some of you will be familiar with other Industry New Zealand programmes like the Investment Ready Scheme or the Enterprise Awards. Or you might have had something to do with Technology New Zealand's programmes, or Modern Apprenticeships.

You're probably aware that we've made R&D spending fully tax deductible. You might be interested in our plans for a Crown Seed Capital fund, which is likely to be a source of capital for exactly the kind of company that emerges from a business incubator.

The point is we're setting out deliberately as a Government to build capacity in our innovation system, our business sector, our education and training systems. At the same time we're looking for barriers to growth and collaboration and then looking for ways through or around them.

We think the Government's role in transforming the economy is to be a leader, a partner, a facilitator, a broker and occasionally a funder.

Providing some support for incubators is just one of the consequences of that approach. I'm pleased we can do it and, like you, I'm keen to see the results.

Thanks for your attention.

ENDS

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