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Upstart Nation

by Stephen on September 4th, 2023

This post is a bit long.  I have picked I up and put it down far too many times.  Initially, I did so as a reaction to what I saw as some quite limited media coverage last month (which was not overly positive) on the ‘Upstart Nation’ report – several times.  The target audience for the report is the Government and it was the output of work by a panel of industry folk assembled by MBIE and called the Startup Advisory Council.  MBIE and therefore the Council’s goal was to accelerate innovation and development in the start-up ecosystem.

The Report makes 25 recommendations, clustered under 4 headings and then sets some metrics for success, in terms of start-up generation and, particularly, the generation of high-value (new) jobs. 

The principal media coverage, the day after the report was released, focused on the suggestion that the Government should invest $500m over 10 years, through the NZGCP (NZ Growth Capital Partners – which was previously NZ VIF), a program which has already received circa $300m of Government funding for seed capital purposes. 

As might expected from such a heading, the commentary that followed came attached with the usual pejorative labels.  And it ended with a pretty damning criticism of one of key elements of the recommendation to make it easier for KiwiSaver funds to invest in start-ups.

Having hung my own shingle out, after a long innings institutionalised in big law firms, my footprint in start-up land is not large.  But I try to make sure that I always have one or two in my roster at all times.  And whilst might be seen as some sort of altruistic contribution – there are plenty of other members of the legal profession who contribute far, far more than my modest effort.  Perhaps selfishly, one of the other primary drivers for (my) wanting to stay involved is because I meet the most fascinating people and encounter the most interesting ideas.  Mind blowing, often, and fascinating for someone with distinctly a nerdy/trainspottery bias.

I continue to try to read the things published by those with a proven track record in the industry, which I also try to link to people at the coalface, trying to make their start-up happen.  This is because the basics, such as decent (by which I also mean fair) and understandable contracts are important – but lessons from those who have played the Saturday matches are vital.

For example, I wholeheartedly agree with some comments that I read recently that, at the start-up / friends & family funding stage, as with the documenting of all commercial relationships, underinvestment can be disastrous, and leave the project exposed to the usual risks of fallings out and a minority shareholder with a bee in their bonnet that prevents progress – often for no good reason.  As a result, clarity, transparency and one (or a small set) of understandable documents are needed almost from the get-go – to make sure things “work” for everyone.  A short list of what this looks like will include:

  • Clarity, on the part of the founders, about their personal commitment to the project – time and money – and what they expect in return.  If this isn’t a side hustle – how are they going to put Weetbix on the table?
  • Clarity, again, about the process for building the business – and funding that process.  Everyone who has some exposure to this sector has their share of war stories and scar tissue about investment rounds and dilution – and the disappointments, arguments and, seemingly, surprises, involved.
  • A consensus about what happens if someone leaves the band early (particularly before one / a good number of the key milestones, waypoints etc have been achieved) – can they get their capital out, will they get some sort of “ride” (Ugh!), etc.
  • The housekeeping basics – pre-emptive rights (for both capital-raising and transfers), board appointments rights, drag along and tag along rights, etc – in the event of an exit.

More recently, I was pleased to see some more measured and more constructive commentary about Upstart Nation from one law firm with a long-held commitment to the sector.  I am sure they won’t be alone.  Maybe the others have other channels with which to address their audience.


I can’t add much more on the bits of the ecosystem that one commentator labelled ‘Derivatives’.  Perhaps mine was a kneejerk reaction to what felt like a bureaucratic process and more hurdles and reports.

I also worried about support for the regions (more on this below) and what was being done to support the really important science being developed every day around those areas where New Zealand (still) has a competitive advantage and important export industries populated by a lot of smart, busy and very committed people. 

Nonetheless, I observe that there are some people working very hard in the start-up resource, incubator etc space, and maybe they have a measurable strike rate.  But the successful start-ups that I have been fortunate to advise have typically not found success through any of the existing infrastructure.  They haven’t had time for much of it.  They have either been working around the clock on what they have developed, or they have been investing time in the (small) network of relationships that ultimately provided the resources (human and financial) they needed.

Talent visa

And I confess to having little time for permutations on the talent visa theme – unless it means importing the specific skillset needed to do a specific job.  Robotics engineers being one target being discussed often of late.  Whoever occupies the Treasury benches after 14 October will, I suspect, have more pressing issues with our immigration settings. 

From my narrow window on the issue, I cannot help but conclude that winning the war to attract and retain talent needs a system-wide approach towards the key things that will (continue) to make this a great place to raise a family.  Largely, they are the same issues that will be on the minds of voters at this election – and each one of them will require a mix of sound policy settings, sound investment and sound management to deliver outcomes.  And they will take time.

Tax discussion

Next, I found the tax discussion baffling.  To me, until we reform the tax system generally in line with the Tax Working Group’s recommendations, the authors of ‘Upstart Nation’, no matter how well-meaning, risk being painted as just another ginger group pleading for special treatment in ways that will (inevitably) be seen as risking the integrity of the tax base.  At a time when that tax base is going to be under some pressure to fund the things that this little economy so desperately needs – such as infrastructure and hospitals and social housing and climate change mitigation and the list goes on. 

In my time working in central Government, there was a Wellington joke attributed to Muldoon that past Presidents of the Manufacturers Assoc were only buried 3ft under – so they could still claim the next hand out.  From where I sit, the Economics are bad, and the optics are worse. 

One of the bits of commentary does contain a detailed and well thought-through discussion about making one of the recommendations “work”.  They are likely to be right – but (sadly) it might be some time before this bit of re-engineering sees the light of day.


And finally, there is the capital piece.  The idea of more taxpayer (funded) involvement was always going to attract media headlines and bad press.  On one level, every bit of encouragement (all good things in moderation) to encourage local investors to get involved in start-ups – even if it is simply reducing a few more of the hurdles that impede that investment, will be another value-add for the start-up ecosystem.  But I would add that my list would include a serious review of the operation of a number of (fundamentally important) provisions in the Companies Act.  Which are likely to be a hurdle to a number of start-ups attracting the governance support that many of them need, if not from the outset, then certainly from an early point in the lifecycle.

I can’t leave this topic alone without mentioning regional development.  Perhaps surprisingly for someone who studied Economics in the mid-80s, I do think there is a place for regional development.  So, I view the calls to scrap Government support for it with some alarm.  And I have come to fully appreciate just how tough this role is.  But, equally difficult to watch is the risk of how a very small administrative resource seems to get stretched every which way.  Which makes it very hard for candidates (who are also typically very thinly-resourced) to deal with.  For reasons that are not always easy to understand.  People who are seeking to ‘partner’ (ugh) with them, seem to spend an inordinate amount of time shaping pitches and proposals to the ever-evolving approach to investment.  And, from where I sit, not all of the would-be applicants have the time and/or the skillset to do so.  Which must be unsurprising.  It is a landscape to which the more experienced end of the consultancy market is better suited.  From where I sit, these advisers do a really good job – but struggle to make this market segment financially viable.  And, typically, have more work than they know what to do with – so someone else misses out or they are donating time (that the individuals themselves often don’t have). 

And I worry about those start-ups who need experienced help to front those conversations – but don’t have an entree to someone who has played the Saturday matches.  I suspect that they either miss out altogether or someone has to spend vast amounts of time helping them to help themselves on what may well be viable and important projects for the region.

So, in the spirit of election season, it is often very easy to identify what’s wrong – not so easy to pinpoint solutions.  At least ones which are viable and/or palatable with the target audience.  But, with no disrespect to the people involved with the report, who will have worked hard and, I am sure, meant well – there was little at the macro end of Upstart Nation that I thought (noting my narrow, small footprint) grabbed me as a ‘must have’.  There might be some gems at a micro level – but I was put off by (my view of) the top 10.

And finally, I am not at all persuaded by the conga line of recent commentators bagging NZ and literally telling our kids’ generation to migrate to the West Island.  Sure, there are a lot of things that need fixing, and we (my generation) have made a real mess of some things, structurally, because of some very short-term thinking.  But time served doing a Big OE – and reading and talking to others continues to underline, for me, that this is (still) a great place to get things done.  So, no criticism by me of the task force members one and all – I just found a number of the recommendations missed their mark.  But I remain optimistic that, perhaps with some more input from MBIE officials and those commentators who took the time and made the effort to offer constructive criticism, the workable bits of the report can be mined and put to good use.

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