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Insights and comments

What we do

What we do

Insights and comments

All science-based startups start to face various regulatory challenges as they scale up from a research to a commercial environment, as mapped out below:

Types of regulation which might present challenges for researchers beginning to commercialise their work, sorted into several broad categories.

The following sections describe general insights derived from interviews of startup founders and others with first-hand experience of startup regulation, as well as specific comments around regulatory challenges faced. The first subsection is aimed at founders of new startups, while the second is aimed at regulators and policy makers who might be interested in the regulation-related feedback received from founders.

For founders

General comments

Regulatory planning

Incorporate regulatory planning into your early-stage business plan.

  • Develop your product strategy based on what compliance looks like for your business. A "hope for the best and see what happens" approach could prove costly at a later stage.
  • The cost of regulatory compliance should also be accounted for when budgeting. One respondent in the medical device space noted that "fees for product registration, clinical evaluations, biocompatibility testing, regulatory consulting and local authorised representation quickly add up."
  • Online AI platforms such as Perplexity and ChatGPT, used with appropriate caution, are very useful for creating short summaries of legislation for quick consultation.
  • One respondent noted that sometimes it is worth making some early assumptions and creating a plan based on those assumptions.

Network of advisers

Begin building a network of advisors who are knowledgeable about business regulation as early as possible.

  • Valuable insights can be obtained from global industry insiders and commercialisation experts who have previously worked with similar technology. When engaging with regulators, these advisors can help you understand "what to push back on, and what to give up on".
  • When engaging with potential advisors/investors, check your values are aligned and you have a shared view of the journey ahead.
  • Two respondents noted that the scientific founder does not always need to be central within the startup. You need to be pragmatic about your role and know when to hand responsibility to experts from other fields. Be willing to appoint a CEO and board with non-academic backgrounds as the startup grows.
  • One respondent commented that your team should evolve over time as the company moves through different growth stages, and recommended continuously reaching out to people in industry who may have different experiences and different networks, which give them particular insights into the regulatory landscape.

Regulatory approvals

Design choices

When developing your technology, remember that your design choices will affect the regulatory approvals required for your product at a later stage.

  • For example, scaling up using off-the-shelf rather than generic or in-house components may mean you have to work closely with your suppliers to get regulatory approval for your product (see Inhibit Coatings case study).
  • The use of animal tissue significantly increases the regulatory requirements to be met before you can bring your product to market (Opo Bio, Chitogel).

Product strategy

When designing a product strategy, consider the regulatory implications of adopting a specific product classification and market niche.

  • Advisors can be valuable for helping you understand the cost and market access implications of selecting a particular niche.
  • Different markets have different regulatory processes. Adopting a product classification and market niche with particularly demanding regulatory requirements may lead to having to pivot to another approach at a later stage, which may be time-consuming and costly (see Spherelose, Zincovery, Chitogel, Inhibit Coatings case studies).
  • For example, different jurisdictions have different processes and requirements for environmental protection or resource consent applications. The timelines for these applications should be compared when choosing a site for your production facility (Zincovery).
  • Focusing on specific markets with simple regulatory requirements may allow you to build capital before breaking into broader markets with more demanding regulatory requirements, but ensure that you consider market access and investor expectations when doing so (Spherelose, Chitogel, Inhibit Coatings).
  • For example, complying with regulations in one market may shut you out of others: China requires animal testing data for cosmetics ingredients from NZ, while the EU strictly prohibits cosmetics ingredients which have been tested on animals (Spherelose).

Regulatory definitions

Stay updated around regulatory definitions relevant to your product.

  • Have a plan to adapt your product design or market niche if your product’s regulatory classification or risk class changes eg, from a device to a drug, or from CE class II to class III (see Spherelose, Boutiq case studies).

Internationally recognised standards

Use internationally recognised standards to verify value propositions around quality and safety.1

  • Examples of internationally-recognised standards include ISO certification, FDA approval and the CE mark (see Spherelose, Chitogel case studies).
  • One respondent in the medical device space noted that "certain markets [outside the US] hesitate to grant approval until the FDA Randomized Controlled Trial (RCT) is completed."
  • Another respondent cautioned that CE approval should not be sought for a product still under development, as any further adjustments may mean the product requires recertification.

Novel products

Novel products may not have clear pre-existing regulatory approval pathways; begin health & safety approval processes for your product and manufacturing facilities as early as possible, as approval timelines can be lengthy and unpredictable.

  • For example, when importing raw materials for a product, check whether any import restrictions apply to those materials, and apply for import permits as early as possible (see Zincovery case study).
  • A second example: if large storage containers for hazardous chemicals are required at scale, an early application for certification can lead to significant savings at a later stage (Zincovery).
  • One respondent commented that beginning to collect quality and safety data independently early on helped to speed up their approval processes significantly.

Military applications

Any technologies which could potentially be used for military applications are considered sensitive and may require an associated export permit.2, 3, 4

  • One respondent noted that it is not necessarily obvious whether a product is considered sensitive; as they were unsure, they consulted MFAT (the Ministry of Foreign Affairs and Trade) and the Defence Technology Agency, who used a dossier of information about the product and buyer to determine the product did not require a permit.

There is a lack of straightforward regulatory paths for startups developing novel and unusual products, leading to high costs and extended timelines. This is intrinsically likely to be the case when commercialising novel research.

For regulators and policy makers

General comments

Responsiveness of officials

Respondents found the responsiveness of officials to their enquiries varied greatly between departments.

  • In-person contact was generally preferred over online resources, as founders often needed help with novel cases that did not fit well to existing frameworks.
  • One respondent suggested each department have a direct line of contact specifically for advising businesses on regulatory decisions, with the representative able to be reached by phone as well as by email.

Lack of support

Respondents noted a lack of support for science-based startups outside of the academic research pipeline.

  • Outside the university ecosystem it is very hard to access money for scientific innovation.

Regulatory approvals

Lack of straightforward regulatory paths

Respondents spoke of a lack of straightforward regulatory paths for startups developing novel and unusual products, leading to high costs and extended timelines. This is intrinsically likely to be the case when commercialising novel research.

  • A lack of clarity around the correct regulatory classification of novel technologies increases regulatory burden for innovative startups (see Opo Bio, Spherelose, Boutiq case studies).
  • For example, obtaining approval for exporting cultivated meat products from NZ is slowed by the lack of an existing regulatory pathway (Opo Bio).
  • Another example is the lack of a regulatory framework for nanoparticles in NZ, which creates uncertainty for startups manufacturing products containing microscale or nanoscale particles (Spherelose, Boutiq).

Medsafe

Some company respondents found it challenging that Medsafe doesn't currently have an internationally recognised regulatory process for medical device production.

  • This gap means having to get device approval of other nations (eg, the EU's CE, Australia's TGA, or the US FDA), then importing the device back into New Zealand with Medsafe approval.
  • One respondent suggested that a more robust regulatory framework would drive innovation and force startups to become more efficient.

New regulatory frameworks

Some respondents also cautioned that new regulatory frameworks needed to be balanced, nuanced and designed with consideration for innovative technologies, to ensure products have a clear path to market.

  • Respondents commented that regulators should not try to 'reinvent the wheel' when creating regulation for new technologies, or rely on startups to design regulation for themselves. Instead, NZ regulators should align local regulations with other jurisdictions like the EU, Japan, the US etc. Aligned regulations between jurisdictions help new startups obtain swifter access to multiple markets.
  • For example, NZ regulators should emulate regulatory exemptions in other jurisdictions which enable startups to sell bespoke medical devices within limited-scale research & development markets (see Zincovery case study).
  • A theme that emerged from the case studies was the need for regulatory frameworks to evaluate innovative products in an impartial manner. For example, if a medical gel contains carbohydrate polymers with similarities to bacterial cell walls, a robust method should still verify the gel as being pathogen-free (Chitogel).

Inflexibility of regulatory approval processes

Respondents suggested that inflexibility of existing regulatory approval processes sometimes created unnecessary difficulty for new startups.

  • A major challenge for young startups is umbrella regulatory approvals which cover a wide range of regulations using a single permit. Waiting for approval on multiple fronts can create problems when scientific startups need to show investors a steady stream of tangible goals being met for continued funding.
  • For example, the resource consenting process may cover earthworks, wastewater and chemical storage, with all actions needing to be approved before any can begin. One solution could be to break the consenting process into smaller parts, giving startups the option to move forwards with elements of their critical path (such as earthworks) while the consenting process is ongoing (see Zincovery case study).
  • One respondent suggested the creation of innovation parks with regulatory pre-approvals, which would allow new startups to scale up rapidly in a safe manner.

Regulatory requirements aimed at protecting the environment

Respondents suggested that regulatory requirements aimed at protecting the environment sometimes have unintended and undesirable outcomes.

  • Regulators need to ensure they consider potential unintended consequences of new regulation, and ensure there are lines of communication between different departments to ensure various standards align appropriately.
  • For example, a low limit on the amount of hazardous waste which can be imported into the country might hinder the development of technologies for cleanly disposing of hazardous waste (see Zincovery case study).

Auditors and compliance officers

Respondents noted that there was an insufficient number of auditors and compliance officers in NZ, which slowed down regulatory approval processes.

  • For example, there are a limited number of compliance certifiers for chemical storage tanks in NZ, which results in long and costly approval processes (see Zincovery case study).

Broad terminology

Respondents were sometimes unsure whether broad terminology used in regulation applied to their novel technology.

  • For example, one respondent initially thought section 3B of the New Zealand Strategic Goods List4 applied to their product – further consultation was required for them to discover that it did not apply.

References

  1. What is a value proposition and how do I write one? - myNZTE.
  2. How do I self assess whether my export is controlled? - New Zealand Ministry of Foreign Affairs and Trade.
  3. Protection against foreign interference - Protective Security Requirements.
  4. Which exports are controlled? (contains download link for the latest New Zealand Strategic Goods List PDF) - New Zealand Ministry of Foreign Affairs and Trade.

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