In­cu­ba­tion and fund­ing

Element - - Solar - By Adam Gif­ford

Start­ing com­pa­nies is tough. That’s why many en­trepreneurs work in in­cu­ba­tors, where they can share space and re­sources with other fledg­ling com­pa­nies.

They also get ac­cess to some of the busi­ness ex­per­tise, net­works and money they will need to suc­ceed.

The lat­est evo­lu­tion to the in­cu­ba­tor model is the ad­di­tion of gov­ern­ment fund­ing through Cal­laghan In­no­va­tion, which is sign­ing three-year con­tracts with eight in­cu­ba­tors.

The five founder in­cu­ba­tors, in­clud­ing Auck­land’s Ice­house and eCen­tre, Soda Inc. in Hamil­ton, The Bio Com­merce Cen­tre in Palmer­ston North and Welling­ton’s Cre­ative HQ, build sup­port around an en­tre­pre­neur who has a par­tic­u­lar idea or busi­ness con­cept.

Cal­laghan’s grants man­ager Nor­man Evans says in­cu­ba­tors can help peo­ple struc­ture a busi­ness and get it ready for trad­ing.

“They are there to take the risk out of build­ing a busi­ness. It’s not much dif­fer­ent to what a busi­ness would do on its own if they have all the skills and knowl­edge. Be­cause in­cu­ba­tors have ac­cess to that knowl­edge they can keep them from fall­ing into traps.

“Ki­wis of­ten try to do things them­selves be­cause it is cheaper and they make the busi­ness so risky it falls over, or they talk to the wrong peo­ple and try to en­gage with a ven­ture cap­i­tal­ist far too early be­fore they have enough to say to them.”

He says busi­nesses that have been through the in­cu­ba­tion process have a much higher sur­vival rate.

“I’m very op­ti­mistic. I think we are head­ing in the right di­rec­tion,” Evans says.

“As a na­tion we are get­ting bet­ter at com­mer­cial­is­ing tech­nol­ogy in par­tic­u­lar, and in a few years we will be turn­ing out some ex­cel­lent com­pa­nies.”

Power-House chief ex­ec­u­tive Dr Stephen Hamp­son says his in­cu­ba­tor, which has been op­er­at­ing for five years, works closely with the tech­nol­ogy trans­fer of­fices at Lin­coln and Can­ter­bury Uni­ver­si­ties.

“We work with the re­searchers, and if we iden­tify an op­por­tu­nity that’s worth build­ing a com­pany around and pro­vid­ing cap­i­tal, part of the process is to find some­one to move into that busi­ness and run the com­pany and build up a man­age­ment team. We have a role iden­ti­fy­ing those early cus­tomers, find­ing the cap­i­tal, find­ing the peo­ple to run the busi­ness.”

Power House wants to turn the re­search into some­thing that can be in the hands of the first cus­tomer within 12 to 18 months.

That doesn’t mean it’s a fully-fledged prod­uct. Hamp­son says the aim is to find a cus­tomer with a prob­lem to be solved – by fo­cus­ing on the prob­lem, the ap­pli­ca­bil­ity of the tech­nol­ogy can be bet­ter un­der­stood.

“We’re of­fer­ing guid­ance on how to in­no­vate, how to pick the right first cus­tomer, how to make the right choice of first prod­uct.”

Hamp­son says Power House raises about $5 mil­lion a year to fund its com­pa­nies, and the Cal­laghan grants will al­low it to speed up the process of early-stage re­search, test­ing whether there is a busi­ness case.

Ice­house chief ex­ec­u­tive Andy Hamil­ton says most in­cu­ba­tors have moved to be­ing more in­vestor aligned, as with the Ice An­gels, or even pro­vid­ing in­vestor funds them­selves, like Pow­er­House.

“In­cu­ba­tors and an­gel groups like to fund what they have the ca­pac­ity to fill. They might put in $200,000 be­cause they’re con­fi­dent they can raise $2m to get the com­pany to break even, but if it’s a $200 mil­lion op­por­tu­nity, that may be too chal­leng­ing,” Hamil­ton says.

He says the big­ger in­vest­ments will prob­a­bly need to come from over­seas.

“The good news for the clean tech world is that global cap­i­tal is look­ing ev­ery­where.

Khosla Ven­tures has in­vested in three kiwi clean­tech busi­nesses – Lan­za­t­ech, Rock­et­lab and Bio Dis­cov­ery. That doesn’t mean any kiwi com­pany can rock up to Khosla and ex­pect to be let in, but is shows what is pos­si­ble for qual­ity en­trepreneurs.”

Ice­house chief ex­ec­u­tive Andy Hamil­ton Photo: Martin Sykes

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