Screams from the high-tech nursery

By Yoke Har Lee

Between the lines

John Kernohan, chief executive of the University of Auckland's commercial arm UniServices, would like to get his hands on some venture capital - quickly.

Last year, Mr Kernohan spent more than 18 months looking for $US7 million to proceed with the development of NeuronZ, a company set up by UniServices to tap into the commercial opportunities for research done on the central nervous system.

NeuronZ has identified two key compounds to treat brain injuries but has taken a long time to find investors.

The $US7 million, if Mr Kernohan finds it, would be just a start on a long road for this and any other start-up knowledge-based company.

But his quest is no different from many others in New Zealand. Finding venture or any private capital to back high-risk projects is an arduous business.

But New Zealand now faces the ultimatum of having to design quick ways to groom technology-based industries or lose them to foreign operators who have by now figured out that we are a good nursery for high-tech companies because we don't have the capacity to fund, develop and market their products.

The Government has shown as little enthusiasm for getting involved in the development of the venture capital industry as it has for any other in the past 15 years.

Contrast this with other nations, such as Taiwan, which not only provides funds to co-invest with the private sector but has designed legislation to attract investors as well as promote specific investments.

The Singapore Government's equivalent of the New Zealand Trade Development Board, the Economic Development Board, has a company called EDB Ventures which has $S50 million for co-investments in desired industries with the private sector.

In Australia, the Innovation Fund Programme has a kitty of $A200 million for investments undertaken by private equity managers. It also has two major pieces of legislation - the Managed Investment Companies Act and the Pooled Development Fund Act to promote desired investments.

The high-tech business is driven by three things - the capital, the technology and the distribution of the technology. We are not bad with the technology component but need urgent work on capital and distribution.

New Zealand is light years behind others in getting a slice of the global high-tech business. It is time the Government wakes up to this fact.

Its most urgent task is to find a model that will best tackle the need to nurture high-tech companies. High on the agenda should be the removal of punitive taxes on research and development expenditure. Failure to do so will see the private sector shy from further R&D investment.

Complementing that should be a set of laws to nurture the development of private equity, more specifically venture capital, targeted at technology-related investments.

Failure to initiate any fiscal incentive will be costly for New Zealand.