Startup accelerator programmes are funded to the tune of millions of dollars a year, but some say new businesses are being ‘suffocated with support’. 

When you enter the Ministry of Awesome’s office, part of the Ara campus in central Christchurch, it certainly looks the part – if the part is “stock image of modern startup office”. There are monitors on modular desks, several big leafy plants and lots of couches. 

CEO Marian Johnson is in her element. It’s Friday afternoon, quiet, but she assures me that on other days lots of people come to use this space. “[Ara] offers this space to us, to give all these startups a home when they can’t afford rent,” Johnson says. She thinks it’s working. “Christchurch has leapt from something like 25 startups four years ago to 200 now.” It’s all part of the Ministry of Awesome’s plan to keep more innovation in the South Island and create jobs, simply by nurturing start-ups. 

But perhaps we should wind back a little bit. What is a startup? “We define it as any business doing innovative things with the potential for high growth,” says Jenny Douché, the founder and startup product manager at Callaghan Innovation, the government’s innovation agency. And what is a startup accelerator? 

“It’s normally about a three-month programme, with a focus on helping businesses to develop markets, make prototypes, test and iterate – and get ready to pitch for capital,” Douché says. In other words, it’s a business course with a slightly unusual funding structure, dressed up in Silicon Valley speak. (Johnson: “the [startup] world is so jargony it’s not even funny.”)

Callaghan Innovation clearly thinks that startup accelerators are valuable; it spent more than $2m supporting startup accelerator and incubator programmes in the last financial year. According to its annual report, 341 customers (what the organisation calls the individuals and businesses it supports) received a service from either an incubator or an accelerator. And that isn’t all the money going into these programmes: Callaghan funds accelerators on a 1:2 ratio, meaning the organisations that actually run these courses have to provide twice as much money themselves. Ministry of Awesome gets some of that money from Christchurch NZ, the local development fund; Creative HQ, the Wellington equivalent, is jointly funded by the city and regional council. There are accelerators focused on agritech and Māori and Pasifika businesses too. Altogether, it amounts to a lot of public, as well as private, money being poured into these services, which are free for the startup founders. 

Supporting founders, testing and iterating, nurturing development, pursuing investment, creating a competitive environment, bringing jobs to New Zealand – it all sounds good. But do accelerators and incubators (which provide similar kinds of support for businesses that have ideas but not a clear product to sell) actually achieve these outcomes? 

That’s harder to tell, according to Rowan Simpson, a veteran investor and watcher of Aotearoa’s startup scene, who has written extensively, and persuasively, about the limitations of accelerators and incubators. Providing office space can be helpful, he points out in one essay – but lack of space to work is rarely what is holding a new company back. “It seems that every town around the country has decided it’s important for them to have a space to host startups. However, if they took the amount they have ‘invested’ so far in incubators and applied it directly as seed capital it could have completely funded a large number of startups.”

Often, Simpson says, New Zealand startups are “suffocated with support”, which means that new ideas are funded less selectively – a good and innovative idea could plausibly receive the same amount of funding and focus as a bad and inefficient one. 

One reason that startup accelerators can be good, proponents say, is that they allow business concepts that were never going to be effective to “fail fast”, so that time and resources aren’t invested in ideas that were never going to succeed. 

That’s certainly the case for some of the businesses the Ministry of Awesome is “accelerating”. When I visited in September this year, I talked to Nicole Gaviria, founder of a company called Lulah, which was manufacturing limited-run activewear for plus-size women, through a contract manufacturer based overseas that she’d found online. Gaviria was bubbling with enthusiasm, talking about how she was fitting in her business with her full-time job and study. “I’ve loved doing the programmes and the learning, but what’s been most valuable is the community,” Gavria said, discussing her plans to expand: more colours, manufacturing at a big enough scale to buy recycled fabric to increase her sustainability. A month later, writing this article, I checked Lulah’s website and it’s closing down. In a statement on Instagram, Gaviria says that “the fashion industry, particularly as a solo entrepreneur, is a tough space to break into.” 

Other organisations see accelerators as an opportunity to more clearly identify their direction. Connor Read is an entrepreneur who initially founded Shutl, a micromobility company with an app to hire scooters and bikes. But along with his co-founder Aidan Smith, Read realised that it wasn’t possible for Shutl to compete with massive companies like Lime operating in the same area. Instead, the pair have chosen to focus on an initiative called “Workride”, which helps employers provide ebikes and escooters to their employees while navigating the complexities of the fringe benefit tax on employers’ behalf. “It’s quite a small niche, but we’ve wedged it wide open,” Read explains. Navigating the tax system has been difficult, but going through accelerator programmes has given him useful connections with others. “That horizontal support is amazing.” 

Since the public contributes to funding innovation programmes like startup accelerators, it seems fair for there to be more clarity around what value these provide. To those inside the startup world, it seems like accelerators help. “Given the size of our country, our output is going to be limited in terms of the number of startups,” Johnson says. But maybe that means there can be more focus on what is happening. “You can build something great from here, because this country will allow you to do that.” 

There are certainly lots of problems to solve. “We have to have a higher productivity rate, and higher-value jobs, to transition from a service economy to a knowledge economy, so my grandchildren won’t be living in Australia. And on top of that, climate change!” Johnson says. With the money and time that the government, councils and accelerator providers are putting into this, potential business founders, and the rest of us, will have to keep hoping that accelerators really are an answer.