Mood of the Boardroom: A private role in innovation

Business Editor at Large·NZ Herald·

26 Sep, 2016 04:00 PM4 mins to read

Spark NZ chief executive Simon Moutter. Photo / Chris Loufte

Simon Moutter has been floating the idea of a corporate growth co-investment platform. He talks to Liam Dann

After leading the New Zealand Innovation mission to Israel in June, Spark NZ chief executive Simon Moutter is fired up and focused on putting corporate muscle into accelerating our fledgling tech sector.

That's not to say Spark itself will be getting into the Venture Capital business. But Moutter has been road-testing the idea of a corporate growth co-investment platform with the aim of scaling up capital, capability and capacity. This will boost and accelerate New Zealand innovation and the growth of commercialisation resulting in greater returns.

In other words, he's looking at whether the private sector might be able to add real value to the local innovation space with a fund that could attract wider investment interest from local and international players.

"My conclusion is that the Government is broadly doing its bit. When you compare the numbers and programmes through Callaghan and NZVIF and the CRIs and the universities, the Government is the dominant contributor to innovation sector in New Zealand," he says.

Big corporates are "probably the bigger missing piece of the puzzle".

There is certainly a lower appetite for risk among local investors and a bias towards yield stocks. Many of the big local corporates are domestically focused, mature, bricks and mortar kind of businesses, Moutter says.

"In Israel we didn't see a difference in the level of innovation, we saw a difference around the appetite to commercialise innovation.

"So are Israelis more innovative than Kiwis? No I don't think so. Are Israelis more inclined to invest harder? Definitely."

He will be road-testing a proposal with other NZ corporates over the next few months.

Approaches will be made in confidence -- and he will be looking for indications of willingness to explore the co-investment platform concept, subject to other corporates also participating.

Moutter is still scoping out how such a model might operate, and what the co-investment opportunities and benefits would be.

"That's involved getting feedback from the experts -- we are keen to ensure a corporate growth model works well with existing eco-system players and programmes," he says.

So are Israelis more innovative than Kiwis? No I don't think so. Are Israelis more inclined to invest harder? Definitely.

"It's not just a do-gooder thing. We're a large company in a small country so the long-term economic success of the country is quite important. I'm a committed New Zealander. My children are all here and I want them to have a bright future.

"I think we have to view the 21st century and the digital tech century in same way as the 20th century was the industrial century."

He points out that the world's five largest listed companies are now all tech stocks. Ten years ago only Microsoft featured.

"There is compelling evidence worldwide that strong investment in these early-stage tech businesses, done well, is very accretive."

New Zealand has generally been good at the angel investment stage. There is a vibrant tech start-up scene but companies struggle to scale up quickly. But venture capital can be hard to attract. International VC funds are typically looking to invest in multiple companies and on a scale where New Zealand has struggled to attract their attention.

I'm a committed New Zealander. My children are all here and I want them to have a bright future.
Simon Moutter

A new growth fund could offer the kind of vehicle required to attract international and local investment from big funds.

"If you think about the mum and dad investors," says Moutter, "then the wrong answer is to be stock-picking.

The right answer is to say the institutions managing our KiwiSaver and Super funds should be starting to put a modest percentage of the portfolio into earlier stage technology ... giving New Zealanders exposure without putting them into the territory of picking individual stocks."

So far the feedback has been very positive, he says.

"There is a belief increased corporate investment into technology businesses could boost the outcomes of the system and enable corporate participants to access growth sectors, increasing their innovation exposure and shareholder returns while also helping New Zealand grow."

It is still early days, he says. But watch this space.