New Zealand Trade & Enterprise (NZTE) is winding up its $2.1 million investment training and brokering service, Escalator. NZTE stopped accepting businesses for Escalator’s broking service at the end of April and has announced it will stop offering Escalator’s Investment Ready training programme after 30 June.

But this isn’t the end of government-funded investment training services or capital raising help for the country’s smaller businesses, says Euan Purdie, NZTE’s acting director of performance improvement. “Escalator came in and met its need, but we’re not saying we don’t recognise the need any more; far from that.”
Escalator’s training programmes will be offered by other providers through NZTE’s Regional Business Partners network of 14 regional economic development agencies that work with chambers of commerce, other education providers and private organisations to provide assessments, training, advice and funding vouchers to businesses needing support. NZTE’s Regional Partners network was launched last year to work alongside TechNZ’s regional research and development partners, replacing NZTE’s Enterprise Training Programme and walk-in Biz Information networks.
Escalator’s days have been numbered since a 2009 Ministry of Economic Development report into NZTE’s training and mentoring programmes recommended closing it. The report noted the high regard many businesses had for Escalator’s training programme but said views on its broking services were mixed. Angel investors and Escalator clients “expressed concern” about the quality of “approximately one third” of Escalator brokers, it reported. It also noted the service’s success rate was falling with the number of deals completed down from a high of 36 in 2005-2006 to 15 in 2008-2009; and capital raised from $23.4 million to $7.3 million, despite the $1.6 million a year cost of the broking service eating up the bulk of Escalator’s annual budget.
Purdie refused to say whether the decline in Escalator’s performance was the main reason for the closure of the service, saying instead that the world has moved on since Escalator was born from its successful predecessor the Investment Ready Scheme (IRS) in 2003. IRS was developed and run by the Economic Development Association of New Zealand (EDANZ) and specialist investment adviser I Grow New Zealand, whereas Escalator was managed by EDANZ and Deloitte and involved about 20 different brokers offering capital-raising services.
“We’ve moved on a lot in the last four to five years,” says Purdie. “There’s been a significant rise in other forms of assistance for small businesses, like the angel investment networks and the Venture Investment Fund (NZVIF).” Purdie says many angel networks are now working closely with NZTE’s Regional Partners, and he’s confident this will only improve as time goes on.
With the country’s angel networks operating well, NZTE’s new internal capital group has been charged with dealing with the tricky early stage venture capital gap – the $2 million to $10 million capital raising stage, says Purdie. The demise of Escalator is an opportunity to work with NZVIF, the angel networks and others interested in this space to work out how best to plug this gap, he says. “We need to look at the wider spectrum here. Escalator was a wee bit segmented. So now there’s an opportunity to sit down and have a look at a total solution. And we’re very excited about that.”