New govt grants for startups come with clawback provisions

New government grants for startup technology companies will be subject to clawback provisions if the recipient company is sold to overseas interests or its operations relocated overseas.

The repayable grants, of up to $450,000 per company, will be distributed by a new type of private sector-led technology incubator, which will add its own funding to provide at least 25 per cent of the startup company’s costs on a one to three basis. Up to four incubators are planned.

The cost of the scheme is budgeted at $31.3 million over four years. There will be a three to five-year pilot.

Funds will be distributed by Callaghan Innovation.

Science and Innovation Minister Steven Joyce says the grants will address a critical gap that early-stage technology businesses face where they need money to address startup costs but are not yet at a stage where investors will commit capital.

The repayment of the grants will be applied as a royalty of 3 per cent on the incubated firm’s gross revenues.

Joyce says the new incubators are modelled very closely on a successful Israeli model of company incubation.

As at March this year, Israel invested 4.9 per cent of GDP, the highest of any OECD country. New Zealand invested 1.3 per cent of GDP.