Five Challenges for NZ Innovation
Callaghan Innovation CEO Vic Crone outlines New Zealand’s great challenges and opportunities
The young nation of New Zealand is built on a DIY culture of innovation, developed in part through our pioneering spirit of resourcefulness, and in part out of necessity being so geographically distant from other bigger countries and economies.
In recent years, that distance and attitude have been real assets to New Zealand. It has fostered a culture of collaboration where you may find potential competitors talking to each other and even helping each other out. In a time of great global upheaval and rapid changes across almost every sector, and where global problems present great opportunities to those who desire to make positive impact, our small size and flexibility have become a distinct advantage.
We were honoured to have Vic Crone, the CEO of Callaghan Innovation, speak recently at our New Frontiers summit. Callaghan are the Government-run entity to support, fund, and connect New Zealand’s innovation, research, science and technology community, in pursuit of the late Sir Paul Callaghan’s vision of building a nation “where talent wants to live”.
While the future is looking bright, Vic presented five challenges (read: opportunities) for New Zealand’s entrepreneurship and innovation sector. Each of these is surmountable with a bit of determined effort and cooperation from stakeholders across the community, willing to leverage New Zealand’s unique advantages on the world stage, forge new global connections and our growing international reputation for ingenuity. You can watch her video below.
1. Thinking Global — Being a young nation with a relatively small market, it is crucial that our businesses and startups are thinking global from Day 1. Initiatives like the Edmund Hillary Fellowship are bringing the world’s innovators to New Zealand and helping to build bridges worldwide.
2. Lack of investment in Research and Development — While good ideas are bountiful, entrepreneurs struggle to raise the necessary R&D capital to get to a place where products and services are in a position to compete globally. This presents a unique opportunity to bold investors who are willing to look outside usual circles to find talent and paradigm-shifting ideas.
3. Lack of venture funding — While New Zealand’s angel and venture investment community is growing, we don’t yet have the critical mass of investors with the capital necessary to get behind all the incredible ideas we have, particularly in the $2–10 million range. The tide is turning here with new funds like the Impact Enterprise Fund, and more and more international funds looking to establish bases in New Zealand.
4. Lack of connection to multinationals — While traditionally, multinational organisations may have passed New Zealand over for bases or headquarters, many are beginning to recognise that there are great opportunities in New Zealand to benefit from our highly educated workforce, business-friendly government, open attitudes, and culture of innovation. You can get things done quickly here which would take many years in larger countries.
5. Lack of Experienced Directors — As more our of homegrown companies are succeeding in global markets, our pool of experienced company directors is steadily growing. There are many exciting opportunities for willing international entrepreneurs, investors and innovators to help build the momentum, and steer the course of the innovation sector towards increased global impact.
Learn more in Vic’s talk at New Frontiers:
Below, we have posted the full transcript of Vic’s talk.
Kia ora, tēna koutou, tēna koutou, tēna koutou katoa. I hope you are all well, thank you so much for having me here today. And for those of you who are here from overseas and around the world, welcome to Aotearoa.
We are one of the youngest nations on the earth and it is that youth that provides us with many, many opportunities as a country. But also the odd challenge for us as an innovation ecosystem.
That’s what I’m gonna talk about today. Having been around the ecosystem for a couple of decades now, in corporate innovation roles and startups through to also organisations like Creative HQ, incubators, and accelerators. I’ve got quite a good view on what it looks like. I thought I’d start actually sharing a little bit about Callaghan Innovation to give you context of the lens that I’m talking through today.
We are New Zealand’s innovation agency. We are here to catalyse demand for innovation, and to accelerate the commercialisation of the incredible ideas that we have throughout our country. We do that by showing our businesses the future of where technology and innovation is going, and by encouraging them and stimulating them to be innovative and do R&D (Research & Development) themselves. We also do that by liberating innovators, by helping connect them to others that can help them solve their challenges. I also wanted to share a little bit about how the Government sees research, science and innovation as the portfolio that we sit under — the Government is very committed to all three of those.
The great thing is that the new Government also understands that research and science is really important to a country, but innovation is absolutely critical. You can have all the amazing ideas in the world, but if you can’t take those to scale, for the world to make impact and benefit, then the ideas just sit there on the shelf, often doing nothing.
Our Minister’s view, in her words, is that innovation, when set against a powerful vision, is incredibly powerful.
The Government’s vision for New Zealand is that we are an economy and a society that creates well-paid jobs, that is an inclusive economy and society, and is one that looks after our environment.
How she is thinking about how innovation can support the government’s agenda includes eradicating child poverty and transitioning to a net-zero carbon economy by 2050. So personally, we’re quite excited. And we’re already working with a range of businesses who can help the Government’s agenda in that space. So let’s get stuck into my observations of innovation in our country and what it looks like.
First of all, right across our lands, we have amazing ideas. I went and visited 200 of our customers last year — we work with about 2,500 customers. We have incredible ideas being developed in our country. They are world class, they are phenomenal, and some of them are seeing the light of day, while others are not.
The world is definitely starting to understand that, and if you look at a snapshot of what’s being invested in or who are partnering with our companies over the last year, you’ve got Rocket Lab, you’ve got Snowberry, you’ve got Robotics Plus, you’ve got StretchSense. We’ve got some incredible ideas that are getting the funding that they need to be able to have impact on the world stage. So the quality of ideas is excellent. We also have some outstanding individual entrepreneurs.
The other really unique thing I think about our country is how well our indigenous economy is now going. Our Māori economy, which was valued at around $50 billion recently, is going from strength to strength. And what I’m observing is that in our non-Māori businesses, they are intrigued by the principles of mauri, the tikanga, the practices that they bring to their businesses to make sure they are sustainable, inclusive, that they are looking after communities. I think over the next decade, that will become an increasing competitive advantage for our businesses on the world stage. But the challenge is how we scale those ideas. That’s really where I think the biggest challenge in our ecosystem sits. So let’s have a look at that.
The first one is, our businesses must think globally from day one. That’s the benefit of sessions like this and connecting to international entrepreneurs and innovators — we kinda wanna think global, but we don’t always have the confidence. We are a young nation, we don’t have decades and decades and generations and generations of successful entrepreneurs behind us. You can help provide us with that confidence.
The second one is a lack of investment in R&D. That is a goal of the current Government and a huge focus of Callaghan Innovation, to ensure that our businesses are applying technology to improve products and services, improve manufacturing processes, build new business models, and on it goes. We are making very good progress there, but there is more work to be done.
The third is a major challenge, and that is funding. We know that our angel community is growing nicely — we’ve been tracking that for a while now and it is in a good space. Where we have our biggest gap is in the $2–10 million range, which is critical to being able to take these ideas, and scale them for global impact on the world stage.
As a result of that, we are actually underselling our IP on the world stage. If you think about what we gave wireless technology away to Apple for — it’s not a disclosed number, many of us can probably guess — but the ability to wirelessly charge every wireless device, every mobile Apple device around the world, that was an absolute steal.
The ability for us not to get the funding to support our businesses to the necessary level of global scale that we need, means that we are in instances selling out our IP, in terms of what it’s really worth on the world stage. So that $2–10 million space and up is a real problem.
The fourth challenge is the lack of connection to multinationals. We’re not really a testbed yet for multinationals to bring their ideas and pilot more of their new products and services, and new approaches here — but we could be. The benefits are, firstly, that our international and local market knowledge goes through the roof, and secondly, we will benefit from the disciplines and practices in regards to how we do business in New Zealand.
The final challenge that I see is that New Zealand is pretty young in regards to having directors available, and having enough of them to be able to help globally scale these high-impact ideas quickly. We are seeing more directors coming through, but we simply don’t have enough to understand how to take a Xero, or a Pushpay, or a Rocket Lab from start through the next 10 years to being billion-dollar companies.
Having said that, we are spitting out of our ecosystem about one billion dollar company every year, so when you think of all the constraints that we’re operating under, that’s pretty damn good. Which shows the calibre of the ideas that we have.
The last bit that I wanted to talk about was some of the advantages that we have.
We know and we understand our challenges — the Government is focused in supporting the sector in those, but we do have some advantages as well.
Our investment in science is really strong. We’re spending well over a billion dollars a year in science in our country. What we must do a better job of, is taking what we are finding in that research and connecting it into business, into startups, so that we can take those ideas from the shelves of universities and CRIs and pop them into the market in New Zealand and around the world. So we’re actually investing a lot there. The Government has been getting behind tech incubators, and it’s likely, we hope, that will continue. It is one of the hardest parts of the markets, but one of the most rewarding parts when you get it right.
NZTE (New Zealand Trade & Enterprise), VIF (Venture Investment Fund), and Callaghan Innovation are coming together around how we can actually provide a much stronger platform of services to innovators and entrepreneurs in New Zealand. We now understand when a customer comes into Callaghan, how long they take to then get funding by VIF, and at what stage they need to go to NZTE. Connecting into this programme is another big part of government services coming together with the MBIE Global Impact Visa programme.
I thought I’d just touch a little bit on sectors. We have a really, very strongly growing high-tech sector in New Zealand. The 200 or so top companies now create around $10 billion of revenue, of which over 70% is global revenue. That is a very strong and fast growing high-tech sector.
Agriculture is another area that is critical to our economy, and while we don’t quite yet understand the world threat around alternative proteins in New Zealand, we are starting to see some new ideas emerge, such as Sunfed, which has the potential to become another billion-dollar company in the next five to ten years.
So we’ve got progress there but we need to do more. And we’ve already talked about the Māori economy, which is going from strength to strength as well.
So how can we help?
We provide help in a range of ways.
We provide grants. In regards to helping you do R&D, we are transitioning some of those into tax credits, more on that for those of you who are interested in the coming month.
We provide programmes to help build innovation capability in organisations, and we do international delegations, which is one of the most successful ways to stimulate that global ambition. We also have a couple of hundred scientists ourselves who are helping businesses do their R&D in areas like advanced manufacturing, robotics, and big data.
So we can help in a number of ways.
Moving forwards, I want to leave a collective challenge to you.
Callaghan Innovation can play a really strong role in connecting the ecosystem. However, we need to be working very closely with the different parts of the ecosystem to do that, and that’s where our focus has been shifting over the past six months. One of the ways that we’re doing that moving forwards is starting up an online connection platform, it’s kind of tagged Scale-Up Nation at the moment, that probably won’t be its final name. But that will be where startups, investors, incubators, accelerators, and universities, can all come together to see and get visibility of the companies and startups in New Zealand who are doing incredible work.
At the moment, it’s really hard to connect and find because all that information is in our heads. It’s not any good individually in our heads, so how do we extract that? Get it down, so that international investors can come in and see all of the talent we’ve got, and so that we can also be better connecting the resources that you need across the ecosystem?
The next one is in regards to how we put more capital with our entrepreneurs and innovators. We’ve been working with NZVIF, who are doing work in this space. Part of why we’re very keen to connect to international capital that is coming into our country, is to support the strong connections that we need there.
We are also very interested in how we can create some public-private partnerships with the Government around some of the Government’s focus areas. So we were talking to them at the moment about 100–150 organisations in the clean energy, the green space; companies that right now could be adding value to our transition to a zero-carbon economy. Connecting them with the work that the Government’s doing is a good example. Connecting Auckland University, with its a robot tree planter and that the technology they’ve built for that, into the Government’s billion tree project, etc. We can absolutely play a role there, where the Government can achieve its vision by tapping into the ideas that we have.
The final one, and I think this is an area where New Zealand can pioneer roles; many economies have struggled for the benefits of innovation to be inclusive for all of society. As we head into the fourth industrial Internet revolution, we know that we will not be in a position where products and services, or production is short.
We have enough capacity as we head into the next decade to produce for everybody, so how do we make sure that everybody can have access to the benefits of that production?
We’ve come out of a production shortage, we will have enough for everyone. So thinking about ideas in that space is really interesting as well.
Just say to you all, it’s fabulous to connect, and kia kaha, kia māia, kia manawanui — be strong, be steadfast, and be willing.
Kia ora.
Are you a visionary entrepreneur, investor, or changemaker building solutions to global challenges? You can bring your vision to reality from New Zealand by joining the Edmund Hillary Fellowship. Apply here.
