New Zealand: government funding for technology companies.
March 27th, 2008Ok i don’t often talk about my own business here but time to throw a story out for comment.
As some of you know I am a director of VortexDNA, a technology company based here in Christchurch. Now a while ago we were told we could get a grant from New Zealand Trade and Enterprise, which is our economic development agency for developer resources. Great we thought because we were short handed in that department and had plenty of work available.
We applied and were fortunate enough to receive $20,000 for a developer. I’ll state now that I am not a fan of government grants at all but if it’s available then I guess you have to take it.
The developer did some work for us and was very good. We decided to reward him with some stock in the company as we do with pretty much anyone who does anything worthwhile for us. It’s a measure of our gratitude and a desire to make people part of what they help create. Sounds good?
Well no not according to NZTE who have told us we were in breach of some clause in the agreement which states there can be no financial arrangement between the company and the developer. Stone the crows!
The audit people from NZTE have played firm with the rules and told us we have to repay the money and to add insult to injury we have been placed on a high risk register for any future application.
Needless to say the directors are fuming.
And I am even more convinced that government should stay well out of business.
Meanwhile we continue to expand into the US, UK and even Russia.
Under our own steam no doubt!
Tags: government agencies, government funding, new zealand, nzte, technology, vortexDNA
March 27th, 2008 at 6:36 pm
[...] was pretty disappointed to read a post yesterday that told a sad story. Seems that VortexDNA managed to get NZTE funding to cover some [...]
March 28th, 2008 at 4:02 am
NZTE strikes the right balance on funding processes
New Zealand Trade and Enterprise is responsible for administering more than $70 million worth of business grant funding each year.
Coming as it does from taxpayers’ pockets, it is vital that we have clear guidelines on how the money can be used.
We say quite clearly that any service provider a company employs with its grant funding “must be independent and not financially or personally associated†with the company. If we didn’t, it would be possible for companies to use the money to pay their own staff – something taxpayers wouldn’t be that happy about.
Yes, we have “played firm with the rules†but these rules were clearly stated in the contract with this company. It didn’t follow them and, as a government agency, we could not be expected to be any less firm.
We strive to strike the right balance between processes that are prudent and administratively sensible and delivering a service that helps companies grow.
This month’s audit of the administration of our grant programmes by the Auditor General shows that we are effectively and efficiently administering these programmes in keeping with the intentions of government.
March 28th, 2008 at 4:49 am
Thank you Jack for your comment.
Giving someone some shares in the company on top of the grant in appreciation for their contribution doesn’t sound like its breaking your rules.
Any comments on that?
March 31st, 2008 at 4:27 am
Sure.
By being a shareholder in the company, the service provider has a financial interest in the company, which is not in keeping with the terms and conditions of the grant that require service providers to be independent and not financially or personally associated with the recipient.
These conditions hold even if the shares are gifted on top of the grant payment – unless they were gifted after all claims for NZTE funding are settled (which could be some time if the grant is one that is spread over multiple years).
March 31st, 2008 at 5:28 am
Jack, thank you for the clarification.