Incubators wait for lifeline

BY SIMON COLLINS

The Government's stalled support programme for business "incubators" is back on the Beehive agenda - just as Australian Prime Minister John Howard is due to announce a $A2 billion ($2.5 billion) "innovation action plan."

Associate Economic Development Minister Pete Hodgson, who returns to his office from Antarctica today, meets Industry New Zealand officials this week to discuss the incubator support strategy.

The Government allocated $2 million to the strategy last year, but diverted $1.3 million of this to a seminar and deal-making advice programme run by local councils' development agencies and venture capital promoter I Grow New Zealand.

Industry NZ spokeswoman Suzanne Cookson said on Friday that this left $684,000 for incubators in the financial year ending on June 30.

"A bid is being developed for funding in the next financial year," she said.

Mr Hodgson had instructed Industry NZ that he would like "pragmatic assistance, including advice and funding."

"Industry NZ expects to offer some form of awards scheme in addition to an advisory role, for instance sharing best practices and finding ways others have solved problems, using both New Zealand and offshore experience," she said

Australia announced a $A78 million scheme last April to pay for 10 specialised information technology and communications incubators in mainland states, a further $A40 million "Intelligent Island" plan for similar incubators, and research and training in Tasmania.

In addition, individual states and universities have been sinking money into support for information technology and communications businesses.

The idea of incubators is to nurture young firms to help them to survive and grow during the start-up period when they are most vulnerable.

Last month, Western Australia agreed to pay $A20.4 million to secure a 200-job software engineering centre for American cellphone giant Motorola in Perth - $A5.4 million from the state Government and $A15 million from the University of Western Australia, which will house the centre.

Motorola considered Christchurch, and then Brisbane, for the centre. The New Zealand Government and Christchurch City Council were believed to have offered well under $8 million to Motorola, mainly in grants and graduate fellowships available under existing Technology New Zealand programmes.

Australia's innovation incentives are expected to get another huge boost in today's $A2 billion announcement, which is tipped to include up to $A500 million for research facilities, $A600 million for research fellowships and an increase in the research and development tax concession from 125 per cent to between 170 and 200 per cent of costs.

A former president of the New Zealand Software Association, John Ball, said New Zealand had to change the way it saw support for new high-tech businesses.

"Our annual [overall Government] spend is billions of dollars. It comes down to how much of that you are allocating to your future investment," he said.

Mr Ball's company, Soft Tech, moved last week into Massey University's new $3 million "e-centre" at Albany, an incubator for new high-tech businesses which has been financed by the Tindall Foundation ($2 million) and the university and North Shore City Council ($500,000 each).

Centre board member Chris Kirk said there had been "zero support" from the Government.

However, he hoped Prime Minister Helen Clark might use her opening of the centre on March 2 to announce the new incubator support policy.

The Albany incubator, which is still deciding on tenants for one-third of its space, joins others established in the past two years by universities and local councils in Dunedin, Christchurch, Wellington and at Unitec in Auckland.

The director of Unitec's Centre for Innovation and Entrepreneurship, Dr Howard Frederick, said two new information technology businesses had moved into his incubator so far. Two more have agreed to move in and 10 have applied.

He said New Zealand was going to have to "play the game" of supporting local high-tech businesses and multinationals such as Motorola.

"Western Australia and the Australians in general understand the calculus: 'We'll give you $85 million to set up 10 incubators if you promise in four years to generate $350 million in business that we can tax'," he said.

The Australian Department of Communications, Information Technology and the Arts argues on its website that information technology and communications start-ups need seed capital in order to "capitalise on the brief windows of opportunity which characterise these industries."

Mr Hodgson met officials who developed high-tech incubators and a venture capital fund during a visit to Israel in November.

He said in December that he would push for the Government to invest "tens of millions" of dollars in a new venture capital fund this year.

He said the incubator programme had "fallen behind" and he intended "to have incubator support policy up within two months."

"I have some views on how we might manage incubator support. They will not be classical Israeli or North American ways of doing it."