Frequently asked questions about our Technology Incubator programme
What is a technology incubator?
Callaghan Innovation’s Technology Incubator Programme is an initiative aimed at supporting the commercialisation of complex products and technologies which are often derived out of research and development. It is very important New Zealand develops a strong eco-system that understands how to commercialise deep science IP and has the drive to take these innovations global.
Technology Incubators screen complex technologies from Universities, Crown Research Institutes, and private sources to select intellectual property that, with the right business capability, have the potential to be a high-value export success.
Technology Incubators provide investment and incubation services to their portfolio companies such as market validation, dedicated incubation facilities, business planning and development, governance and management processes.
Technology Incubators have access to the Repayable Loan Scheme administered by Callaghan Innovation. It’s a Government funding product that:
- supports the Technology Incubators to screen and shape high-growth technology opportunities, and lead investment in the early stages of the startup company;
- provides runway for a technology start-up company to improve their chances of sourcing further investment and scaling in the global marketplace; and
- benefits New Zealand’s economy through the entry to market of new, innovative technology businesses with global ambitions;
- ensures successful technology startups repay the Government funding via a 3% p.a royalty against ongoing revenues.
What is the repayable loan scheme?
Start-ups commercialising complex IP are often capital intensive, requiring substantial up-front investment to develop their product and business. Via the accredited Technology Incubator, a start-up company can access up to $450,000 of Repayable Loan funding to match $150,000 of private investment to commercialise complex technologies to the point where the next funding round (typically Series A) is required.
The Repayable Loan Scheme consists of two parts:
- The Pre-incubation Grant provides the Technology Incubator with up to $35,000 to validate the commercial viability of complex technology.
- The Repayable Loan is used to fund the start-up company’s costs associated with commercialising the technology. The Repayable Loan is repaid by the start-up when it begins to generate revenue, in the form of a 3% royalty on its gross revenue from sales. The Loan accrues interest daily at a rate of 3% per annum.
What activities can be funded by the repayable loan?
The Repayable Loan is to support the start-up company to undertake commercialisation activities. This might include market validation, further prototyping, customer engagement activities, or IP protection. Up to 25% of the repayable loan funding can be spent on further R&D.
How does the application process work?
Only Callaghan Innovation-funded Technology Incubators can apply for a Repayable Loan.
The Repayable Loan is typically part of a seed or start-up stage of funding.
To be considered for a Repayable Loan, the start-up company formed by the Technology Incubator will typically:
- be pre‐revenue or have some revenues from trial orders/beta sales
- have negative cash‐flow
- have generally no or a very small customer base
- consist of the researchers, IP founders, inventors and perhaps some other resource assistance
- require additional specialist skills (entrepreneurial, commercial, leadership and/or governance ) to successfully establish the business and commercialise the technology
- have no (or little) prior market-focused investment due to the high risk involved in the stage of commercialisation and the technology involved (any previous investment is likely to have been on technology/product development).
The Technology Incubator will apply to Callaghan Innovation, providing a business case, project plan, budget, and investment terms. Applications for repayable loans are assessed against the following criteria:
IP & Complexity of Technology
- IP status
- Level of capital-intensity (causing capital constraints from increased perceived investment risk)
- Novelty and complexity technology with potential for ‘new-to-world’ innovation.
Commercial Viability and Identified Markets
- Prospects for high-value export growth and a ‘born-global’ outlook
- Commercial viability and identified markets
- Potential to disrupt markets or create new markets.
Team / Recruitment strategy
- Strategies to develop and/or recruit commercial and governance capabilities necessary to develop IP and the venture.
What is the criteria of the Technology Incubators selecting technology?
Technology Incubators have their own selection, screening and investment criteria that they use to select investment opportunities before they apply to Callaghan Innovation for a pre-incubation grant or repayable loan. You can check their websites to see previous investments and areas of interest.
What is the difference between a Technology Incubator and other types of incubators?
Technology Incubators are all about the technology and intellectual property. They wrap the business and management and governance expertise around the technology to create high potential, globally focused companies. The creator of the technology or intellectual property may or may not continue to be involved in the business.
Other types of incubators, such as Founder Incubators funded by Callaghan Innovation, have a strong focus on the founder or founding team. They guide the team to build entrepreneurial capabilities in business, management and governance so they can apply these skills to their start up.
Updated: 18 June 2018