Bridging the recognised funding gap between promising research and transition to the market has hopefully become more achievable with the announcement of New Zealand Trade and Enterprise’s (NZTE) new ‘Better by Capital’ service. The programme aims to address one of the key issues facing new companies – capital management. It joins the Better by Lean programme now run by Callaghan Innovation, and NZTE’s Better by Design and Better by Strategy programmes.
Having identified a gap in the skill set of many New Zealand start-ups, Better by Capital is designed to provide information, capability development, and access to networks to help firms navigate the complex capital raising process. Economic Development Minister Steven Joyce says NZTE will work with companies involved in the programme to develop a tailored plan that identifies the work the company needs to do to become ready for capital.
Better by Capital is part of a larger Ministry of Business, Innovation and Employment (MBIE) initiative, Building Capital Markets, which seeks to grow New Zealand’s economy through developing capital markets and increasing capital investment in our export sector. The initiative focuses on increasing domestic and foreign investment and reducing the cost of capital. MBIE has identified innovation and supporting early-stage markets as key drivers in achieving these outcomes. Furthermore, the related Building Innovation initiative recognises the crucial role of the management and effective utilisation of intellectual property in supporting these goals.
Capital-raising can be a daunting task, particularly for New Zealand firms where this frequently means pitching to experienced offshore investors early in the technology and business development cycles. Sound intellectual property rights (IPR) and other intangible assets are crucial for building a credible business case to attract equity finance at these early stages, and of course for an effective commercialisation strategy once funding is obtained.
Intellectual property advice should be sought early as some actions can severely limit the value of associated IPR. For example, public disclosure of an invention prior to filing patent applications will invalidate applications in many jurisdictions. Therefore prior to collaborating with other parties or applying for grants or programmes legal advice should be sought to ensure wherever possible there is clarity around issues of confidentiality and ownership, and to ensure that any agreed contractual arrangement meets and accurately represents each party’s commercial goals. Furthermore, developing a strong IPR position makes a start-up more attractive to investors. This may include demonstrating that freedom-to-operate (FTO) due diligence has been performed, that ownership of key IPR is secure, and that all IPR being generated is captured using regular audits. Investors typically see most of the value (or potential liabilities) in new and developing start-ups as being related to IPR issues. Therefore it is critical to ensure that IPR is properly handled in order to be seen as, and remain, an attractive proposition.