16/08/2023·3 mins to read
Upstart Nation: Building a sustainable startup ecosystem
The Startup Advisory Council recently published a comprehensive report, "Upstart Nation," aiming to accelerate innovation and development in New Zealand’s startup ecosystem.
The Report sets out a detailed strategic plan to maximise the potential of New Zealand startups. It makes 25 recommendations across four key areas: connectivity, capability, access to capital, and culture. We’re going to take a closer look at some of the recommendations in a series of four updates.
The "Upstart Nation" Report (Report) sets out ambitious success indicators to meet by 2030, including:
- 5,000 active high-growth startups;
- 250,000 high-value, knowledge intensive new jobs generated by startups;
- five new startups reaching $100m in revenue each year; and
- achieving representative parity across all stages of the startup ecosystem, with a startup and investor cohort that is 17% Māori, 8% Pasifika and 52% women.
To achieve these success indicators, the Report makes 25 recommendations across the four key areas above. We’re going to start by taking a look at connectivity.
One of the key concerns that the Startup Advisory Council (Council) raised was how the fragmented nature of New Zealand’s startup ecosystem makes it difficult for founders to find support, with Government support programmes spread across multiple agencies, and little co-ordination and knowledge sharing between regions.
In the Report, the Council recommended the following strategies to consolidate New Zealand’s startup ecosystem:
- Establishing a national coordination body, tentatively named Accelerate Aotearoa, based on successful models such as LaunchVic in Melbourne and Tech Nation in London. Accelerate Aotearoa will consist of a small group of startup experts and be responsible for implementing the Report's recommendations, advocating for the startup ecosystem, and tracking and reporting progress.
- Establishing centralised startup hubs in Auckland, Wellington, and Christchurch, which will be incentivised to support innovation outside the main areas. Resourcing for incubator support programs will be centralised around these three national hubs, on the basis that startups and founders need density of support, capital, and capability to achieve success. Accelerate Aotearoa will coordinate and support founder and mentor connection programs, and founder meetups in these hubs.
- Government facilitation of regular connections between New Zealand and leading global startup ecosystems.
Evidence shows that companies which embrace leadership diversity achieve greater innovation and creativity and higher profits. Although New Zealand is above the global average for startups led by women, with 30% female-led startups, Māori and Pasifika are underrepresented in the startup ecosystem, with only 10% Māori-led startups (population base of 17%) and 2% Pasifika-led (population base of 8%).
The Report emphasises the importance of increasing diversity and inclusion within the startup ecosystem, with plans for Accelerate Aotearoa to partner with tangata whenua to develop specific plans to engage with Māori communities. Accelerate Aotearoa will also work with underrepresented communities, including women, Pasifika, Asian, LGBTQi, and neural diverse communities to ensure that they can fully engage with New Zealand’s startup ecosystem.
The Report presents a bold strategic vision for the future of New Zealand's startup ecosystem. However, the proposed merger and consolidation of existing startup resources into only three regional hubs based in Auckland, Wellington, and Christchurch raises potential challenges. This streamlining of resources and agencies will need to be carefully managed to avoid inadvertently creating another layer of bureaucracy, resulting in slower response times, increased paperwork, and more complex processes to access support and resources.
In addition, the focus on consolidating into three hubs to enable each to gain sufficient density of support, capital, and capability means that startups in smaller regions will be more likely to struggle to receive adequate resources and support. Given that the global agritech sector is now worth $250 billion worldwide and, with growth forecast at around 18% per year, the lack of an agritech hub is out of step with other prominent agritech countries, such as the Netherlands, the United Kingdom, Israel, and Singapore. The Ministry of Business, Innovation, and Employment has estimated that better uptake of agritech in New Zealand could improve primary exports by $7.3 billion. A KPMG Scoping Study on Australasian agritech found that some New Zealand agritech companies are forced to look offshore for funding earlier in their life cycle than is ideal, resulting in some selling their business to international investors and New Zealand losing the revenue from those companies, as well as the IP. The Council’s recommendation to focus startup hubs only in urban areas seems like a lost opportunity to capitalise on New Zealand’s growing agritech industry.
Further, there is a potential risk of dividing New Zealand based on three geographic areas as opposed to any other criteria. The division could instead be based on the specialisations and expertise existing in an area and concentrating complementary startups in that area to ensure more efficient outcomes and results. New Zealand is relatively small on the global stage and should make the most efficient use of the resources that it has available to it.