From its inception in 2013 until March 2020, Callaghan Innovation the government’s “innovation agency” ran a growth grant scheme that gave millions in research and development (R&D) funding to qualifying businesses.

New Zealand organisations spending north of $300,000 on R&D per annum equating to at least 1.5% of revenue could apply to receive an additional 20% of their eligible expenditure, capped at $5 million per annum.

The scheme was closed to new applicants from March 31, 2019, and was replaced with the R&D tax incentive (RDTI) regime. Existing benefactors could claim up to December 31, 2020, at the latest. 

BusinessDesk can now exclusively reveal the four NZ businesses that received the most funding during the growth grants’ seven years. 

The figures were released to BusinessDesk under the Official Information Act (OIA). 

Rocket Lab

Callaghan initially refused to disclose how much funding Rocket Lab had received as part of the scheme, citing commercial sensitivity. 

The recently Nasdaq-listed space company was awarded $29,209,632.80 from the start of its growth grant on April 1, 2013, to December 31, 2020 – only the fourth highest sum. 

“The growth grant allowed Rocket Lab to part-fund its initial and ongoing development of Electron and the development of other R&D efforts for related activities such as rocket reusability and Photon spacecraft,” Rocket Lab director of communications Morgan Bailey told BusinessDesk. 

“The funding provided confidence and certainty to Rocket Lab as it expanded its NZ-based R&D team, which is reflected in the growth of NZ-based employees to almost 500 people currently.”

Rocket Lab financials show the company received $24.8m of its $29.2m in growth grants between 2017 and 2020. 

“This funding has seeded and helped grow NZ’s space industry which is competing with the world’s greatest (and worth well in excess of its 2019 $1.7 billion value),” Callaghan said. 

In recent years, Callaghan also awarded Rocket Lab founder Peter Beck’s company $213,469 in co-funding for R&D student fellowship grants and $1,181,791 for four R&D project grants.

Top up

Tait Communications received the largest total growth grant since 2013 at $34,655,238.39, while Orchestral Developments Limited (Orion Health) came in at the second highest with $34,241,658.00, and Zespri the third highest with $29,857,228.24.

Under the $5m a year cap, the maximum the businesses could have been awarded was $35m. 

“Callaghan Innovation’s funding focus is to grow high-value R&D activities in NZ, as we know this will make the biggest impact on our economic growth and resilience,” a Callaghan spokesperson told BusinessDesk. 

“Our R&D co-funding model means that any business funded with R&D growth grants needs to spend at least five times what we put in, specifically on R&D.”

The growth grants were announced as being phased out in 2018. 

At the time, research, science, and innovation minister Megan Woods said only about 300 companies were eligible and that lowering the minimum R&D expenditure for the existing RDTI scheme would help more businesses apply for funding. 

The tax credit rose from 12.5% to 15%.

Head of communications for Tait Communications Bryn Somerville told BusinessDesk the amount reflected the large investment the company makes in R&D.

“Support amplifying R&D investment is among a range of assistance provided to NZ exporters by the various arms of government,” he said via email. 

“For the years in question (2013-20), Tait Communications’ average spend on R&D was $28.7m a year.”

The company is moving to the RDTI scheme to support R&D for its portable radio technology. The company has a large global client base that includes the NZ Police, St John Ambulance, Transport for London, and the Hobbiton movie set.

Best of the rest

Orion Health, which received funding through its software development arm, Orchestral Developments Limited, received only slightly less than Tait during the seven years of the growth grant scheme.

“Our R&D spend during that time has been about $345m … not all of that was eligible but a big chunk of it was,” Orion chief executive Ian McCrae told BusinessDesk. 

Growth grants paid up to 20% of company spend over $300,000, but the current RDTI organisations can claim 15% on eligible R&D expenditure between $50,000 and $120m.  

McCrae said Orion, via Orchestral, is signed up to the RDTI scheme, which puts a $25m per annum cap on internal software development. 

He is concerned the cap means NZ software companies, which he calls “the backbone of the NZ tech sector”, are losing out.

“Where you’re going to get the best return on R&D investment, I would assert, is in the software area. You get returns within, you know, one or two years, so it’s a good place to invest R&D dollars. But that would be my bias, of course,” he said.

Zespri’s head of global science and innovation told BusinessDesk the grants had helped NZ’s kiwifruit industry deliver strong returns for growers and communities.

“The science research programmes supported by the Callaghan Innovation Grant have included building expertise in pest and disease protection, biosecurity initiatives, orchard productivity to deliver optimum tasting and high-quality fruit, supply chain technologies and expertise, and new agritech projects.”