Angel Association Networking Function Speech

Thank-you to the council of the Angel Association for inviting me to address you. 

Before starting, let me acknowledge your main speaker, Bill Payne, who has considerable experience as an angel investor.  Congratulations to the ICEHOUSE for having the vision to invite Mr Payne to New Zealand for six months, to share his knowledge with Kiwi entrepreneurs, investors and universities.  And thanks to you, Mr Payne, for taking the time to come to New Zealand.  I trust you will find it a rewarding visit.

When I last spoke at NZX in August last year, I talked about the low level of science investment by firms, and the fact that the New Zealand Government is a comparatively larger investor into research, science and technology.

Since then, my Cabinet colleagues and I, and the officials I work with, have been focusing on improving the performance of the science sector. We have reduced transaction costs, set priorities and will soon be responding to the CRI Taskforce.

We are also looking towards this year's Budget. The Prime Minister has already signalled that business R&D will be one of the few areas to receive new money.

All this work adds up to the most significant reforms to government research, science and technology in 20 years. I am sure that this will lead to a more focused and better performing science sector.

These reforms have mostly been about improving the contribution of research to economic growth. However, I am increasingly aware of where the next challenge within the innovation system lies.

Commercialisation has taken a bit longer to understand. This is more because the focus over the first half of this term in government has been on lifting the performance of Government departments and assets. Commercialisation in the business world requires a nuanced understanding of the various incentives and barriers to success.

So I am forming an impression that this sector will be the next one to address. The global financial crisis has also had an enduring effect on capital for development. I have heard many issues around commercialisation investment in New Zealand. One thing that these people agree on is that New Zealand is not short of ideas. Where we need to raise our game is around innovation. New Zealand is, by many measures, one of the easiest places to set up and do business, yet our ability to commercialise and profit from this is obviously not good enough.

Last year, NZBIO published the 2009 Bioeconomy Industry Summit report. This report neatly summarises the issues facing all commercialisation in New Zealand. For instance, do we need to lift the performance of our intellectual property system? How can we encourage Government funds like ACC and Superannuation to develop in this space? Does New Zealand have the people with the skills to create an effective commercialisation system?

Business NZ has consistently maintained that New Zealand needs more people with skills in both science and commercialisation. Where I have been able to, I have involved such people in the Government's work. Neville Jordan was the chair of the CRI Taskforce, and many of the new appointments to the boards of CRIs have been people with science and entrepreneurial backgrounds.

The level of angel investment in New Zealand in 2009 grew to $50 million, nearly twice that of 2008. Since Young Company Finance began measuring angel investment in 2006, a total of $127 million has been put into company development.

The New Zealand Private Equity and Venture Capital Monitor is yet to report on what was invested in 2009, but the half-year results from last year showed that just over $82 million was invested. Given the challenging conditions at that time, this was a reasonable level of activity by the venture sector.

The Government has of course provided funding, through the Venture Investment Fund, to venture capital and angels. The amount invested through the Venture programme is now around $245 million of combined VIF and private sector money. This has been distributed in six funding partnerships, benefiting 49 companies.

I do think that we will need to turn our attention to how we can improve the performance of this. I would note that NZVIF delivered their first surplus last year, of around $3 million, so that portfolio is beginning to perform.

To have a person like Bill Payne come to New Zealand is a fantastic opportunity. Not only are we able to call on his tremendous expertise and experience, but it provides an external perspective on the challenges that commercialisation faces.

Bill may also be able to offer confidence to us all that we have identified the key issues, and now we just have to get on and make the necessary changes.

Ultimately, New Zealand does have successful companies who have commercialised and capitalised on their opportunity. TradeMe and Weta Digital are two high-profile examples from this city, and the TIN100 lists the very best innovative companies in New Zealand.

The Government will be increasing support for business R&D this year. It may be the first concrete step we take to lifting commercialisation. Ultimately the Government cannot pick winners; we can only back the best. We need to provide the best possible environment for angels, Venture Capital and private equity to create the winners of the future.