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FRSTNews
June 2007
From the Chief Executive
Budget 2007
In the last issue of FRSTNews, I commented on the need to lift private sector R&D investment in New Zealand.
It’s a need the Government recognises and has responded to with its decision, announced in the Budget, to introduce R&D tax credits. There has generally been a positive reaction to this decision from people in both the RS&T system and the business sector although, as always, the devil is in the detail.
The detail will be up for discussion when the relevant legislation is considered by Parliament’s finance and expenditure select committee. In the interim we are continuing to work with MoRST and IRD on further planning for the administration of tax credits.
Also announced in the budget was the Government’s decision to end the Grants for Private Sector Research and Development? (GPRSD) because it was seen to overlap with the tax credits policy.
We’ve worked with many agents around the country to administer this scheme and I want to take this opportunity to thank those organisations for their contribution. We are considering how we can continue to draw on their skills and knowledge of regional business as we move forward.
With regard to budget increases, the Government is providing $4.5 million over three years to enhance New Zealand's participation in Antarctic science projects aligned with International Polar Year.
The Budget also included another $12.3 million for 2007/08 for public good science and technology, in the New Economy Research Fund?, Research for Industry?, and environmental research areas and $3.37 million in 2007/08 for Pastoral 21.
There’s new funding in the Budget for facilitation and promotion to support accelerating the commercialisation of R&D and to promote linkages between firms and research organisations ($0.67 million in the 2007/08 year). There is also an increase in Techlink funding ($2.7 million on the 2007/08 year). The Techlink fund currently supports businesses through a number of schemes including SmartStart?, TechNet?, and support for collectives and special projects.
Building a sound platform for investment
We are aware that we are in a challenging time for many in the RS&T sector, as we complete our decision making processes for the current investment round and at the same time you are starting work on your bids for the 2007/08 round.
We know that the implementation of a more stable funding environment is also increasing pressure on everyone, as we bed down our negotiation processes and work on reviews.
All this work is important in setting a sound platform for a better funding system in the future. I know it seems we are asking a lot at the moment, but from later next year the impact of the longer term investments will begin to show in a reduction of bidding and review work.
We are continuing to listen to the views of the sector, and we are identifying changes where we can to reduce the pressure. A couple of specific examples being looked at are the requirement for ‘contract ready’ proposals and whether the quality assurance process in negotiation could be more individually targeted. However these are taxpayers’ dollars we are talking about, so we need to be able to clearly demonstrate why we have decided to invest and what we expect to get for that investment.
Media
In recent weeks there has been some comment in the media about the Foundation’s cash surplus of just over $40 million at the end of the last financial year (30 June 2006). This first came up at a parliamentary select committee review meeting. I cannot reiterate strongly enough that the amount referred to was committed expenditure awaiting drawdown. The Foundation receives money once a month and then has drawdowns that average around $40 million over the month. This is about cash flow, and as I told the media, we are not sitting on a mountain of unallocated cash.
New positions in the Foundation management
The Investment Group is being restructured to increase our focus on the facilitation of getting value from our investments, provide a clear focus on investments in businesses and ensure a structure for effective management of business managers and clients nationally. This restructure will take effect from 1 July this year.
Most existing permanent roles remain and where new roles have been established the majority will be filled by existing staff.
There are three new director roles.
The Director Investment Performance is Philip Aldridge, currently southern and central regional manager. Philip will be responsible for our business manager network (client relationships and contract monitoring) and regional offices.
The Director Business Investments (being advertised internally and externally) will be responsible for making investments or investment recommendations in individual private sector firms. Two sector business managers will report to this role as will the Global Technology Partnerships (GTP) team. This role will incorporate the GTP programme manager role.
The Director Commercialisation is Suki Siriwardena, currently northern regional manager. Suki will be responsible for implementing commercialisation strategy and capability through supporting research organisations. Two commercialisation managers will report to Suki along with an investment assistant.
We are confident that this new structure will serve clients well and ensure we can meet our strategic goals.
Welcome to our new Board members
We warmly welcome two new Foundation Board Members - Dr Tom Richardson, Chief Executive of Scion, a crown research institute and Warren Larsen, company director, consultant and chair of the Massey University Foundation. We wish them every success in their new roles.
Regards, Murray Bain
topMaking international connections
As part of the Foundation’s efforts to accelerate commercialisation of research and build useful links for those we invest in, we facilitated a New Zealand presence at the Venture Forum in San Francisco in May.
The Venture Forum is an annual showcase bringing together innovative companies with potential investors, partners and customers, organised by LARTA, a US technology commercialisation and capital raising organisation.
We achieved high visibility for New Zealand with the 700-strong audience at the forum and made some good connections for a number of companies that travelled with us. Our presence at LARTA has helped put New Zealand on the map for many potential investors and partners.
One of the stand out points from a number of discussions at the forum was that the search for innovation is becoming increasingly global.
The LARTA experience, and the feedback from those who attended, will be valuable as we develop our commercialisation strategy moving forward.
The companies attending were:
- Living Cell Technologies (cell therapy targeting diabetes and neurological disorders)
- Methodware, (governance, risk and compliance software)
- Nano Cluster Devices (self assembled nanowires)
- RoamAD (software based wireless network technology)
- Zephyr Technology (smart fabric products and technology for remote condition monitoring).
- The university commercialisation offices attending were Auckland Uniservices, Canterprise, Otago Innovation and WaikatoLink.
Update on 2007/08 investment round
The week commencing 16 July will mark a busy period for both the Foundation and our clients. This week sees the release of the 2007/08 final investment signals, the announcement of investment decisions for 2006/07 and the start of the negotiated investment process for 2007/08.
See the Foundation updates for more details.
Te Tipu Pūtaiao Fellowships
In addition to our contestable and negotiated investment round we are offering up to 17 Te Tipu Pūtaiao Fellowships. These fellowships support students to develop their science and Māori research capability and are available to students completing a masterate, doctorate or postdoctoral work in a science, technology or engineering discipline.
In addition, we are offering up to four Bridge to Employment awards. Applications are due by Friday 3 August, with decisions announced towards the end of September.
topSimplifying the way we communicate
The Foundation is committed to improving the way we communicate with our stakeholders and clients. By adopting a plain English approach, we hope our communications will become more user–friendly and succinct.
The development of our new website is one step along this path. We have been working hard on the architecture and written content for the new website so that it will be easy to navigate and understand. The new website will be up and running in the second half of the year.
In addition, our 2007/08 investment documents will be published soon. They have been restructured and rewritten with the aim of keeping them succinct and simple without losing meaning, context and content.
In both cases we have been working with a group of stakeholders and clients to ensure our communications meet your needs. We welcome feedback.
topMacDiarmid Awards
The judging for these awards is complete with panel judges Professors Paul Callaghan, Richard Faull, David Penny and Carolyn Burns very impressed with the outstanding calibre of the 15 finalists who presented their research to the panel.
The awards will be announced at the gala dinner on Wednesday 20 June 2007 at the Sky City Convention Centre in Auckland.
For more details visit MacDiarmid Awards page.
topRS&T Success
The Foundation invests in an impressive range of innovative and exciting research and development – browse through our latest RS&T success stories, which showcase New Zealand’s world class science and technology, and our outstanding scientists, researchers and technologists. Here are some recent successes:
- Success at the Wellington Gold Awards
- Saving a taonga
- Returns to New Zealand economy quantified by Endace
- Smart sensing technology will improve life for diabetics
- Marge, the low fat milk producing cow
Success at the Wellington gold Awards
The Foundation congratulates all Wellington Gold Award winners and finalists for 2007. Eight of the nine Award winning companies were assisted through Foundation funding.
In addition, the new category - Green Gold Award - saw Foundation-funded businesses achieve overall winner and finalist status.
Held on 9 May at the TSB Arena in Wellington, the annual Awards recognise and celebrate leading businesses in the Wellington Region.
The following table lists the Award winners and finalists the Foundation has invested in:
Award Business
Creative Gold – winner
Gibson Group
Cyber Gold – finalist
Project X Technology Ltd
Discovering Gold – winner Robinson Roglider Seismic Isolator
Discovering Gold – finalist
Terralink International’s Property Guru
Discovering Gold – finalist
Xero
Global Gold – winner
Phil & Teds
Global Gold – finalist
Earthquake NZ & Natural Hazards NZ
Emerging Gold – winner
Magritek Ltd
Generating Gold – winner
Pertronic Industries
Supporting Gold – winner
Serco Project Engineering Ltd Vibrant Gold – finalist
Karori Sanctuary Green Gold Award – winner
Karori Sanctuary Green Gold Award – finalist
Envirocar Ltd
Gibson Group Gold
Independent film and television production company Gibson Group won the Creative Gold Award for its standout performance in the film, media and creative content industries.
General Manager Stephanie Hopkins says the award is recognition of the company’s ability to push the technological boundaries to produce new projects such as its ground-breaking kids quiz series, the Simon Eliot Show, which screens on TV3.
The Foundation provided investment of $105,000 through its Technology for Business Growth (TBG?) scheme for Gibson Group to create unique technology that combines an interactive animated television character and real life contestants.
Stephanie Hopkins says Foundation investment made it possible to animate and produce the on-screen Simon Eliot character.
"I’m not sure if we would have funded the research and creation without Foundation money. If we had tried to do so without the funding it would have taken longer, been laborious and may not have been as successful," she says.
Research and development is the cornerstone of Gibson Group business, she says, because more projects requiring new technology are emerging constantly.
The Simon Eliot animated character presents a quiz from his bedroom beaming in children from their own homes around New Zealand using laptops and the Internet to interact.
Emerging Gold winners – Magritek
Magritek Ltd won Emerging Gold at the awards, for the innovative products it is creating in the field of Nuclear Magnetic Resonance (NMR) and Magnetic Resource Imaging (MRI).
Magritek products use portable, low cost and low-field NMR and MRI techniques to make instruments that provide unique solutions for a wide range of industrial applications.
The Foundation has been a key investor in the NMR research that underpins Magritek’s work with funding of nearly $NZ5 million over the last 13 years. The Foundation’s investment is ongoing.
Magritek CEO Dr Andrew Coy says Foundation investment in the underlying research has been pivotal in developing this novel and complex area of science.
"NMR is one of the most successful technologies to come out of the 20th century," says Dr Coy, "but its potential in commercial activities is only just beginning to be understood.
"Magritek is bringing together a wide range of leading edge research conducted over many years by staff at both Massey and Victoria universities, which was supported by the Foundation, and putting it in a simple to use format for research and industry partners."
He says there is significant potential for applications of Magritek"s technology in sectors such as building, construction, wood and food.
Saving a taonga
A research project to develop an eel management plan in the Ngāti Raukawa iwi region, from Bulls to Otaki, is being hailed as an outstanding example of inspiring a community to get involved in sustainable management.
The research, conducted by tertiary institution Te Wānanga-o-Raukawa, grew out of concern among Ngāti Raukawa about depletion of eel (tuna) stocks in their local waterways and wetlands and a dream to restore the fishery to plentiful levels of the past.
The three-pronged project involved collecting narratives from elders about the traditional tuna resource, assessing current stocks and habitats and ultimately producing a management plan for the lower North Island area. The Foundation for Research, Science and Technology committed $196,000 over two years to the project.
Foundation Business Manager Rawiri Faulkner says 24 hapu were consulted about the project and gave it their support, with 18 actively taking part, delivering a unique degree of end user participation.
"To my knowledge, no one has ever been able to get the reach achieved through involving so many hapu groups," he says. "Not only is the local community really inspired by the project, we have new knowledge about restoring tuna stocks. There is strong interest in the findings from other hapu groups and iwi around the country who will be able to use the model and process followed here to do their own research."
The research showed a significant decline in both the number and size and type of eels according to Environmental Researchers Pataka Moore and Caleb Royal.
They believe commercial over fishing is partly to blame, saying the quotas introduced over the last seven years are unsustainable, given the time it takes for eels to grow to maturity.
The minimum weight of an eel allowed to be taken by a commercial eeler is 220 grams, with an eel of that size likely to be around 16 years old. It can take up to 70 years for some eels to reach breeding age.
While the findings of the research are sobering, Royal and Moore says the good news is that restoration measures combined with the exclusion of commercial eelers are an effective solution.
Other measures under consideration for inclusion in the Ngāti Raukawa ki te Au o te Tonga Tuna Management Plan include limiting access of cattle to waterways, restoring wetlands and restocking them with eels, controlling noxious weeds and opening floodgates at strategic times of the year to help with the migration and breeding cycles of native fish which eels feed on.
Moore says the project has achieved excellent outcomes.
"As well as training some of our people in oral history we’ve run a workshop on how to age and sex eels and have bought the equipment necessary to do that so hapu can continue researching their own waterways and make informed decisions about tuna."
Returns to New Zealand economy quantified by Endace
Endace was commercialised out of the University of Waikato in 2002 and listed on the AIM (alternative investment market) of the London Stock Exchange in 2005. The company has enjoyed strong export growth in recent years with revenues increasing 55 per cent in the 2006/07 financial year, to reach NZ$23 million.
Endace estimates it has paid a total of NZ$7.9 million in tax since 2003. Of that, NZ$4.2 million has been in PAYE on staff salaries and NZ$3.7 million in company tax. The company also estimates that it has created more than 120 jobs in the high tech sector.
"In addition to building a skill base through that job creation, there is further economic spin off from the salaries we pay to staff being spent in New Zealand," says CEO Selwyn Pellett.
Mr Pellett believes it makes sense for government investment to be targeted at high performing and fast growing New Zealand companies.
"Even though we are in a better position now to completely fund our own R&D having government investment continues to encourage us to take risk and keep innovating. The returns to New Zealand as a whole are greater if top performers are receiving that investment – you get a bigger bang for your buck."
The Foundation has invested around $1.8 million in Endace since 2002, through its Technology New Zealand suite of schemes. The investments have helped Endace develop parts of its original core card for monitoring systems, extend that technology for use in open source systems and, most recently, to develop the NinjaProbe™ family of appliances.
Mr Pellett says the Foundation investment has made a significant difference to the company both in terms of actual dollars and technical stretch.
"These investments are about the government subsidising risk," says Mr Pellett. "Your application only succeeds if you can meet the risk criteria so it encouraged us to push the boundaries and take a bigger step than we might otherwise have done.
"The process of applying for investment also forces you to start planning and to ensure your business model is rigorous and achievable."
Smart sensing technology will improve life for diabetics
A device being developed by Auckland company Zephyr Technology that could prevent amputations is being championed by international experts for its potential to significantly improve quality of life for diabetics.
Zephyr’s research and development project to create a high tech inner sole for shoes that will help detect and prevent foot ulcerations in diabetics is being supported by investment of $348,000 through the Foundation’s Technology for Business Growth (TBG) scheme.
Zephyr is working with scientists at AUT University to develop its ShoePod product, an inner shoe sole fitted with sensor technology, into a device that can detect foot ulceration in diabetics, potentially reducing a major health problem that results in 90,000 amputations each year in the United States. Zephyr Director of Business Development Steven Small says people with advanced type 2 diabetes frequently lose feeling in their feet so aren’t aware of the first signs of ulceration that can eventually lead to amputation. He estimates 85 per cent of the amputations performed on diabetics in the US each year could be prevented with the new ShoePod.
Key advantages of the Zephyr innovation will be its reliance on fewer sensors than other products, making it simple to use and affordable for individuals who might otherwise have to go to a clinic to be connected to sophisticated monitoring equipment.
The project has won endorsement from specialists at the Dr William Scholl College of Podiatric Medicine in Illinois with Dr David Armstrong, Professor of Surgery and Associate Dean of the College and an acknowledged world authority on the diabetic foot, working with Zephyr to develop and promote the technology.
Support from the Foundation will help Zephyr overcome significant technical hurdles in developing a system that is thin enough to be incorporated in an inner sole, give accurate readings through socks and withstand constant use.
The R&D will also provide the means for information from the ShoePod to be easily accessed through a mobile phone or the Internet.
"Helping Zephyr get its product to market faster was a key driver of our investment," says Dr Suki Siriwardena, the Foundation’s Northern Regional Manager. "This is leading edge technology from a company poised to grow and win a share of valuable global markets if it can get products out there ahead of competitors."
Zephyr has been turning heads in the global technology world this year, being profiled by the BBC on the first day of world’s biggest ICT? trade fair, CeBIT, in Hanover, in March and winning the best of show award at the Larta Venture forum in San Francisco at the beginning of May.
Marge, the low fat milk producing cow
Hitting the headlines recently has been Marge the low fat milk producing cow, identified by scientists working at Fonterra’s research subsidiary ViaLactia Biosciences.
"Marge is unique because a natural variation in her genetic makeup reduces the amount of fat in her milk," explains chief scientist Russell Snell.
"Her milk is also reduced in saturated fatty acids and higher in omega 3 fatty acids, while butter made from her milk is spreadable straight from the fridge."
The research involving Marge featured in the British journal Chemistry & Industry but Dr Snell says while this discovery is interesting any commercial development is a long way off.
It’s part of an ongoing research programme supported by the Foundation of Research Science and Technology, through the Research for Industry fund.
ViaLactia Biosciences (NZ) Ltd, a fully owned biotech subsidiary of Fonterra Co-Operative Group Limited.
topFoundation updates – what’s coming up?
- Late June – Contestable investment guidelines for 2007/08 available on website.
- Week commencing 16 July:
- investment decisions for 2006/07 will be announced
- final investment signals for the majority of 2007/08 investment will be released
- draft investment signals for Te Tupu o te Wananga (TTW?) released
- negotiated investment process commences with letters to eligible organisations
- 17 July – BIS? concepts due.
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