NZ innovation: More startups needed, not just more restructuring

Wednesday, 2 April 2025

New Zealand has 2400 globally ambitious startups, but should have more like 1000 startups per million in population to be competitive, according to Startup Genome.

James Burnes is acting chief executive at Ministry of Awesome.

OPINION: The Government’s bold shake-up of New Zealand’s science and innovation system is a step toward reform to catalyse the economy, but so far has failed to address an underlying problem: we simply don’t have enough risk-taking entrepreneurs building high-growth, globally ambitious ventures.

The disestablishment of Callaghan Innovation prompts changes for our crown research institutes, creates an additional public research entity focused on AI/bio/advanced computing, centralises university research commercialisation, creates a focused agency on foreign investment ‒ all with an intent to drive the economy forward.

However, none of these will create the economic boost we want if we don’t address a lack of investment in creating a strong pipeline of founders who can win at venture building.

New Zealand is lagging in startup formation and continues to fall behind our OECD counterparts. There are ~2400 globally ambitious startups operating today across the country. Startup Genome, globally recognised for its research on startup ecosystems, indicates economies like ours should have 1000 startups per million in population to be competitive in innovation-led economic impact.

Callaghan Innovation is being disestablished, with an intent to drive the economy forward - but this won’t happen without a strong pipeline of founders, says James Burnes.

That leaves us more than 2700+ startups short of just achieving the average.

For more than 10 years, government investment in innovation has ignored the most productive part of our innovation sector ‒ non-research-based innovation (think software, technology-first professional services, and new product development startups). These types of startups can be built faster with fewer capital requirements or barriers to entry than research-driven innovation that is getting all the attention (and funding) from policymakers.

Simply put, an investment strategy placing 99.9% of our bets on deep tech cannot get our innovation sector where it needs to be in this decade (or the next). We need to lean further into non-research-based startups and dramatically increase the capability within an existing national network of startup support organisations to build a pipeline of innovators who are launching companies faster and at a fraction of the cost that deep tech can.

That means reallocating an over-indexed innovation budget on deep tech. How much are we spending? Minister Judith Collins noted in her January announcement of reforms that NZ invests $1.2 billion annually in the science and innovation sector. Of that, less than $5 million is directly invested in our non-research-driven startup ecosystem (.0042%).

Ministry of Awesome’s acting CEO James Burnes says we need to prioritise investment to create a systematic pipeline of entrepreneurs.

Callaghan Innovation launched the Deep Tech Incubator Programme in 2014, with a vision of nurturing world-class deep tech startups. In its first 10 years (2014-2024) the Government has invested $5b+ in the early-stage deep tech pipeline. According to Callaghan Innovation’s 10-year report on deep tech investment, the results from those incubators (who receive millions annually) have yielded 84 startups supported, which have been awarded $44m+ in repayable grants, raised $81m+ in private investment committed during the programme and raised $300m+ in follow-on capital raised after exiting netting 600+ new jobs.

These are exciting numbers, but let’s compare the results of the team I lead at Ministry of Awesome, operator of Founder Catalyst ‒ the country’s largest incubator programme for founders building companies outside of deep tech. Since 2019, Ministry of Awesome has received less than $1.5m in total funding from Callaghan Innovation for our founder-development startup programme. Despite the limited funding, this programme has already supported 276 startups that raised $185m in capital, and produced more than 460 jobs.

Now zoom out to consider the results of the entire startup ecosystem community in NZ that serves innovation outside of deep tech including Ministry of Awesome’s peers at The Factory, GridAKL, Creative HQ, Startup Dunedin, Startup Queenstown Lakes, DOSO, SODA Inc, and the many other regional partners hustling to support founders on their journey to build global companies.

Add in programmes like the dozens of Startup Weekend entrepreneur experience events run across the country, YES (Young Enterprise Scheme for high school students) or the university startup groups including the University of Canterbury’s Centre for Entrepreneurship or the University of Auckland’s Momentum student entrepreneur programme. As a collective group, more Kiwis are discovering entrepreneurship and learning the skills necessary to solve global problems, despite the limited funding to date.

NIWA research vessel RV Tangaroa will voyage to Antarctica to collect critical climate change data.

If we truly want more innovation to achieve commercial success and for New Zealand to become the place Sir Paul Callaghan envisioned ‒ excelling at some pretty weird stuff ‒ then we need to prioritise investment to create a systematic pipeline of entrepreneurs eager to create great global companies supported by a culture that celebrates the failures and successes of their journey.

This call for action isn’t new. In 2023, the NZ Startup Council, a non-partisan independent committee of founders, innovators, and startup ecosystem leaders compiled their Upstart National Report that encouraged strategic investment in connectivity, capability building, and cultural changes to achieve our real potential as an innovation nation.

Little action has been taken from that comprehensive industry report. Now is the time. The reset on science and innovation strategy and funding is the perfect time to invest in founder and company creation in sectors outside of deep tech. We can’t just restructure how science innovation works in this country, we have to acknowledge that most of the output will come outside of research-based commercialisation and deserves the funding and support to deliver thousands of founders creating new high-growth startups with innovative solutions to the markets they serve.

Investment must balance the moonshot opportunities of deep tech with the speed and low cost of entry that high-growth startups beyond deep tech fuel job creation, exports, and national prosperity.

If we continue to ignore this underinvestment, we’ll be watching from the sidelines while other nations reap the benefits of a thriving startup ecosystem while we wait patiently and hope a few big science bets pay off.

New Zealand cannot afford to wait decades for a handful of deep-tech big bets to pay off. We need a bold, immediate investment in entrepreneurs’ capability building. By shifting focus beyond deep tech and backing high-growth, globally competitive startups across industries, we can drive job creation, exports, and prosperity and build a two-pronged strategy that sees both deep tech and the rest of the startup ecosystem create the kind of productivity we all want NZ to achieve.