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Sun 19 Apr 2015 9:05PM

Growing internationally successful tech businesses from Christchurch

AES Anna Elphick (CDC Strategist) Public Seen by 282

What makes an internationally successful tech business?

  • What is constraining Christchurch’s tech businesses from greater international growth?
  • What would help businesses be more successful at expanding into international markets?

For the latest research and key insights read the background paper

Please remember to refresh the discussion regularly so you can see the latest comments.

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Helen Shorthouse, CDC Sun 19 Apr 2015 9:21PM

Morning everyone - great to get this started….I’m excited. We’re going to feed in a few questions over the next week or so to get a wee bit of structure to the discussions.
To start things off - New Zealand tech businesses have a reputation for being great innovators, but not so successful at making money from taking these innovations to market.

Do you think this is true?

What do you think is causing this?

TB

Toby Burrows Sun 19 Apr 2015 9:50PM

Anecdotally I would certainly agree. Maybe it's not quite tech but the Popstars example is what I think of when I think of NZ businesses not properly capitalising on international opportunities (http://en.wikipedia.org/wiki/Popstars).

What's causing this? Well, (anecdotally) I think culture is a biggie. I'm not talking about the tall-poppy thing which people love to blame, I mean the more practical support system we have (the culture) of encouraging and supporting our budding tech entrepreneurs to think HUGE.

I'm constantly amazed by the low awareness among NZers about the success stories of some of our more successful brands (suggests our success stories aren't being told, or not well enough, at least). Our success stories need to be told to inspire, encourage and create culture.

On a more specific note, access to capital is difficult. If it wasn't then companies like Martin Jetpack wouldn't be going to Australia for investment. If Chch develops a reputation for innovation, investors will be more inclined to come here - rather than our entrepreneurs having to head overseas to find capital which surely increases their drop off rate.

JR

Jen Rutherford Mon 20 Apr 2015 9:32PM

I think we have great innovators and ideas. I do agree that as a culture we have a tendency to set our sights low in terms of success (the boat and a Bach = success), but if we could match the innovator with the funding and then add experienced management/governance from people who know how to grow a business then that combination could change our success rates. All those functions tend to come from very different types of people and capabilities are diverse and helping to match the set all together could result in more success

SM

Sheralee MacDonald (CDC) Mon 20 Apr 2015 11:10PM

@tobyburrows - how could we better lift the profile of the local tech sector and success stories and who could be doing this? How could tech companies better promote themselves? Thoughts @geoffbrash @andyhamilton @jenrutherford @owenscott ?
@benreid and @jasonbishop did a great bit of profile work on the sector with Flux but what else and next?

TP

Terry Paddy Tue 21 Apr 2015 9:23PM

I think one of the problems is that we (small hitech companies with great "potential") start off totally under resourced so we end up spending all our effort on staying alive. If you look at the standard USA model, 1. Have idea, 2. Raise $200 million, 3. Hire 100 staff (of which 40 are Marketing & PR), 4. Build product, 5. Go to market .... that differs totally from our No 8 wire process which is 1. have idea, 2. find customer to get some revenue, 3. enhance product, 4. Do something different (contract work) to get revenue to continue to develop product, 5. Can't afford marketing or PR so remain unheard of.... 6. Struggle...

PD

Phil Driver Tue 21 Apr 2015 9:35PM

Spot-on Terry. I await a solution with great interest.

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Helen Shorthouse, CDC Tue 21 Apr 2015 9:52PM

What you describe @terrypaddy is common :)

Are there any strengths that come from our NZ way of doing things?
What do you and @phildriver think would make a difference?
What do others think are the issues and opportunities? We have a focus group this afternoon on "what makes an internationally successful tech business" so it would be good to get some input from this discussion for us to take back into that.

TP

Terry Paddy Tue 21 Apr 2015 10:04PM

@helenshorthouse I'm loathed to jump straight to the "MONEY" answer so lets put that aside. I think a weakness from our Kiwi way is our inability to promote ourselves and tell a good story about our vision, to stay under the radar. Would more emphasis on promotion and PR about the hundreds of small HiTech businesses in our region attract more interest from potential investors, employees & entrepreneurs?

As previously discussed, the promotion aspects of our businesses is poorly done (or actually non existent) then maybe this is where an outside (funded) agency could help by actually being the PR company of a thousand startup's (sort-of-thing!)

PD

Phil Driver Tue 21 Apr 2015 10:12PM

We spent a couple of years in a relatively low cost but tiny office in the UK's Oxford Science Centre surrounded by university spin-offs. The day-to-day rubbing shoulders with entrepreneurs within a large UK/European market stimulated us and helped us think and operate more globally. Entrepreneurs feed off each other when they are immersed on a common low-cost space, especially one in which key players are thinking and operating globally.

PD

Phil Driver Tue 21 Apr 2015 10:20PM

We find it much easier to operate in the UK than in NZ. The UK is surprisingly more open to ideas, especially ideas from NZ. We've worked with the UK Cabinet Office, the UK Environment Agency, Unilever Head Office, The UK Sustainable Development Commission, British Telecom etc. I've been contracted to lecture in Germany and invited as speaker in London, Paris, Cologne, Hannover and Sydney but we struggle to even get an audience with NZ government and local authorities. So if NZ government and local authorities want to help the hi-tech sector then buying the sector's services would be a good place to start.

TP

Terry Paddy Tue 21 Apr 2015 10:34PM

@phildriver that's the classic "it must be better if it comes from overseas". I've always found the bigger the NZ company you're trying to sell to the more likely they are to dismiss your product because its made here. Even trying to sell into Australia gets you the "surely we do a better product here". However go a bit further afield like Asia or the UK and suddenly the message changes to "wow, your from NZ? You guys are really innovative down there, what have you got?". How do we fix that? Well I'm back to my "promotion/PR" message. Look at how the tech sector is now viewed after the high visibility success of Xero, Wynard, SLI etc, we need more promotion - national and international - around the little guys (riding on the coat tails of the bigger success stories) to get other that impression that its better if made overseas.

TB

Therese Banks Tue 21 Apr 2015 11:26PM

I found progress generally easier for high tech business in the UK. From my experience as UK Trade & Investment's Head of Trade for the East of England, I saw that what has made Cambridge so successful has been an emphasis put into assisting entrepreneurs to improve management ability and hire knowledge workers/executives with the right commercial skills. This has been both through government as well as local business networks. Access to both angel and VC funding has been important as have the various innovation centres such as St Johns where co-working spaces, networking and collaboration abound, as Phil has experienced in Oxford. What is also very striking is the culture of Cambridge where people go out of their way to be helpful and share knowledge - through networking and mentoring. None of this " if it comes from overseas it must be better". The Cambridge Network (a membership organisation- www.cambridgenetwork.co.uk) brings people together - from business and academia - to meet each other and share ideas, encouraging collaboration and partnership for shared success. For the small business the benefits are many - access to information and the ability to find staff particularly remote workers.

KCA

Kylie (CDC Comms Advisor) Wed 22 Apr 2015 2:33AM

So the New Zealand (or ideally the Christchurch, New Zealand) brand is something we can successfully sell far-afield but closer to home the brand, along with the culture here needs some tweaking? What does the Christchurch brand look like I wonder? Where is our point of difference from our competitors - like Wellington...?

DL

Dave Lane Wed 22 Apr 2015 2:51AM

I don't think we should give up on the local market. It's the nursery in which young companies grow build strength to withstand the rigours of overseas markets. The way procurement is done by local and central gov't and agencies is badly broken: we need to work to convince gov't to alter those practices. I recommend that all Chch-based (NZ-owned) IT firms join http://nzrise.org.nz so that our voice is heard by gov't.

TL

Trevor Laughton [Tait] Wed 22 Apr 2015 6:12AM

Let me chip in with a couple of thoughts, some already touched on by others above:
1. Culture - failure in NZ is still generally seen as something that carries stigma and shame. This drives risk adversity, which in turn stifles innovation. A Bay Area VC is unlikely to listen to you until you've already failed a couple of times....
2. Capital - getting better but nothing like the playing field in, for example, Cambridge Ma. And it's not just money, it's having your ideas (product innovation, service innovation, business model innovation) scrutinised and critiqued by experienced investors, many of whom started out with their own start-ups.
3. Management skills - New Zealand simply does not have the critical mass of large corporates (and support institutions) to tip out internationally competitive management skills (strategic, operations, performance, people management). I doubt we're much better than Australia in that regard and they're not that flash;
http://worldmanagementsurvey.org/wp-content/images/2010/07/Report_Management-Matters-in-Australia-just-how-productive-are-we.pdf
4. Access to a customer base you can use to empathise, iterate, co-create and validate your ideas with.
I don't believe any of these are show-stoppers for a Christchurch (or even NZ) tech sector, but we do need to figure out how to mitigate their impact.

GR

Gabe Rijpma Wed 22 Apr 2015 7:08AM

I see amazing innovation coming out of New Zealand and in particular Christchurch and am very proud of my home town for this. Having been based internationally now for over 17 years in Australia, USA and Asia there are a few things that really stand out for me where NZ has to get better.

  1. Capital (discussed here at length already)
  2. Sales and Marketing Investments to Build Channel (I see this as a weakness with NZ companies, not all but many) - may be due to (1) but I also think it's a prioritization problem of world class engineering vs world class sales and not balancing those effectively as we should.
  3. The Pitch and Message - I see a lot of pitches every day, some are amazing but in the majority we can really improve the way we message what our products solve as business problems and why that is important and useful to said customer/investor.
  4. Local Business/Government buying NZ tech and startups. One of the great reasons about why the Bay area is successful is local companies and government are very supportive of buying their own and encouraging startups by purchasing their solutions. I think we need to do a much better job of getting local businesses and government to buy our own to help bootstrap our companies with cash flow and customer credentials they can then use more effectively in (2).
  5. NZ and Christchurch are brands and it's good to be proud of where we come from, international buyers however are looking for solutions to their business problems whatever they are. Where you come from is less important or can even be an Achilles heal so balancing that message is vital. I like to give the example of Israel, they produce some amazing technology, I have seen that understood by customers but in some countries the stigma of buying from there makes it a challenge for them so they often dress themselves differently to focus on the outcomes they can drive for customers and that differentiation helps a lot.
PW

Peter Wren-Hilton Wed 22 Apr 2015 8:04PM

I have been working with CDC and members of the local ecosystem to bring down Bill Reichert, Managing Director of Garage Technology Ventures and Adiba Barney, CEO of SVForum, the oldest and largest entrepreneur network in the Valley, to Christchurch for 24 hours, 5-6 May. We are hosting an event for the local tech community at EPIC on 6th.
Whilst visits like this can raise the profile of an ecosystem with some key Valley players, it is what we do to follow up that matters. I look forward to working with CDC and other members of the ChCh team to see how we can establish a pathway for early stage tech companies to connect into Bill & Adiba's networks once the visit is over. Networks like those can begin to address some of the issues raised in this thread.

TB

Toby Burrows Wed 22 Apr 2015 10:21PM

@sheraleemacdonald - "how could we better lift the profile of the local tech sector and success stories and who could be doing this? How could tech companies better promote themselves?" - Good questions and I'm not sure I really have the answers, perhaps someone here with a background in PR / mass comms might be able to chime in? Here are some observations of mine though:

1/ NZ businesses need to think bigger than the Australian market where, if they attempt entering will find themselves working with a NZ handicap from day 1. Do what Flight of the Conchords did (and what Split Enz should have done) - go straight to the US instead of swimming against the tide in Australia. We need to encourage this mindset.

2/ I used to subscribe to the Business NZ newsletter. I unsubscribed after awhile because the underwhelming content coming from it was presented in a style which looked like it was designed in the 1990s. If people from a developed overseas market saw this - supposedly representing our nation's business community, I dare say they would similarly have unsubscribed. Showing up to the party wearing jandals isn't a good way to elevate a region's reputation for innovation. There is an opportunity to create a communications hub (website, EDMs, social media) focussing on Chch's tech sector specifically and do it properly with due attention paid to the design, content and brand. If Christchurch can distinguish itself and become a brand unto itself, there are opportunities in that.

@kylie - I'd love to know myself what this might look like. Hopefully we will get to find out..!

3/ As a whole we - as in, New Zealanders - are not exactly known for being strong communicators. I recall David Kirk saying something to this effect as a partial explanation for why NZers don't do so well in the Australian market, I see it everyday in my dealings and it was really drilled home last year when a mumbling NZ politician was featured on the US's Daily Show saying something incoherent about something being "pretty legal".. I would love to see Chch tech participants given access to business communication courses and resources so they can represent themselves better than that politicaian did... If Christchurch's tech people can confidently communicate, they can confidently represent themselves in markets like the US and UK where communication is key. Provide participants in our tech sector with the skills to win. Success breeds success - just as the Black Caps have shown this past summer.

@trevorlaughton with regards to the Bay Area VC attitudes toward failure this I think reflects the maturity of their VC market and aspirational risk-taking culture. It would be a good place to get to here and going by the comments on this thread it seems like we're heading in the right direction.

DL

Dave Lane Wed 22 Apr 2015 10:31PM

Even though it's harder, due to language and cultural barriers, I (speaking as a US/NZ dual citizen) think we should consider giving the US market a miss and heading straight to Europe and Asia. The US is a largely hostile (litigious and flooded with poor quality patents and patent trolls who gleefully destroy up-and-coming companies - see John Oliver's very accurate and pointed take on them https://www.youtube.com/watch?v=3bxcc3SM_KA) environment that's largely inward looking (the US believes it's the world leader in IT, and by some measures it is), and is already relatively mature and saturated. Surely the greatest gains are likely to be in markets with substantial commerce but less mature IT supply ecosystems. It just means we have to find people who speak the local language and know the local cultures! To me, that's a far more robust, forward looking approach.

TB

Toby Burrows Wed 22 Apr 2015 10:57PM

Some good points there Dave - and another classic clip from John Oliver - no one does it better..!

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Helen Shorthouse, CDC Wed 22 Apr 2015 11:38PM

@davelane you raise an interesting point there in terms of location. Given we're thinking what our strategy should be over the next 10 years, what markets should businesses be thinking of next?

Do we need to do anything to support market entry as well as the market readiness we have spoken of here?

Are there any business models that we need to be helping businesses with? Partnerships may offer an approach for some (either other NZ businesses or partners already in market), but I see alot of businesses going it alone.

DL

Dave Lane Wed 22 Apr 2015 11:54PM

@helenshorthouse I have little insight as to which markets we should be focusing on, but I think we should be focusing on learning how to identify them. There's no point in building world beating technology that a) no one wants, and/or b) no one knows about. We need to learn how to complement our ability to build things with our ability to work out what the market (where-ever it is) wants us to build. We've always fallen short on knowing who our users are/will be before we start building. The saying "build it and they will come" glosses over some very important details.

For one thing, every entrepreneur needs to realise that for every dollar they budget for building their product or service, they need to budget at least the same amount for marketing it (I say that as an engineer who's learned the hard way :)).

TP

Terry Paddy Wed 22 Apr 2015 11:57PM

When talking about markets shouldn't it be about product/service fit and I agree with @davelane about the USA and its difficulties and @tobyburrows about Australia's attitude to NZ but clearly some products/services do fit, the trouble is "me too" products don't. As @davelane suggests Asia should be a significant focus and that aligns with Govt strategy as well as just basic logic when you look how our country and our communities are evolving.

In my area of energy services I see that Asia is running about 15 yrs behind what we are doing in NZ and so those markets are looking for the innovation already present here.

Market entry is really important, as a small company I can't afford the resources to set up "in market" do the research and then launch a service. But what I want to do is find a partner in market who is involved in the sector I'm interested in and can benefit by adding their expertise/clients/widget to my technology solution.

So to answer @helenshorthouse I think active partner hunting assistance would be a real benefit. I know this is already done by NZTE but I would suggest that we are talking about moving that down a few layers into the smaller companies (the 75%) not just the bigger more visible 10%

PD

Phil Driver Thu 23 Apr 2015 12:07AM

Small hi-tech companies are generally fiercely independent. Their needs are often unique, so a one-size-fits-all strategy is unlikely to work.

We can have many discussions about what everyone thinks is needed to grow the hi-tech sector but this needs to be ground-truthed to come up with validated (!!) solutions.
To often, 'support' for high tech companies is rigidly structured to suit funding agencies - which can work well (I've successfully processed over 50 Technz proposals where this was a relevant form of support). However in many instances companies need support in completely different ways.

So I recommend establishing a system which starts by asking each company what they need (this asking may need to be fairly assertive - almost an audit) and then customising support on a case by case basis for each company.

Can government and other agencies be this flexible rather than just offering pre-defined packages of 'support'? If so then there could be hope....

ID

Ian Douthwaite Thu 23 Apr 2015 12:47AM

Perhaps a better question is "What IS a successful Canterbury tech business?"

There's lots of evidence that we have lots of good ideas (everyone says so), and clearly we have lots of people doing things (100s of companies) with the help of legions of supporters (advisers, facilitators, communicators, mentors, and even the odd old-fashioned consultant).

However our results (per the briefing paper) aren't that great. And we have some serious doubts about whether paying customers think our ideas are as good as we do. Why is that?

Some of these things are also contributors to what seems to me to be a distinct key challenge for our region (and country): fragmentation.

Because of our size, we're exceptionally vulnerable to fragmentation. Our relatively limited resources are spread too thin, with too much competition for skill, money and attention. We're doing too many things poorly, rather than fewer things well.

Now that's a challenging thing to change, since it's largely a product of the legitimate choices made by enterprises and individuals (which often amounts to the same thing). Over the years a lot of public resource has been poured into clusters, networks, programmes, etc. But in the end, improving this relies on individual enterprises getting together and working together.

PS: I'm not so sure either that lack of promotion is the problem. It seems we are now drowning in a world of promotion and that the chronic difficulty is to make yourself heard.

ID

Ian Douthwaite Thu 23 Apr 2015 1:11AM

I started before by asking "What is a successful Canterbury tech business"

I changed the question for several reasons:

  1. Because it's important to define the sector sensibly, so that you can measure it, and thus see if you're making progress. The briefing paper does a cursory job of this, using the usual standardised statistical breakdowns, but often these don't capture what you want to measure that accurately. With the sort of capability CDC has it should be possible drill down and recombine to arrive at a more useful picture of the sector. Sanity checking that against the FLUX catalogue would be useful too.

  2. Because it's considering what it is that makes something a "Canterbury tech business" is useful for thinking about what we might need to consider. Few businesses are owned and operate just locally. What are the issues around foreign-owned businesses that choose to operate here; locally-operated businesses bringing in foreign investment; locally-attached investors repatriating wealth and skills; local businesses increasingly forced to locate more of their operations (including development) elsewhere?

  3. Do tech businesses have to operate internationally to be successful? Is Australia really international? What's wrong with "me too" businesses?

TP

Terry Paddy Thu 23 Apr 2015 1:34AM

@iandouthwaite, good points and just to clarify there is nothing wrong with "me too" businesses but they are more susceptible to the local environments that @davelane was describing... I wasn't very clear.

GB

Geoff Brash Thu 23 Apr 2015 1:50AM

Certainly NZ has less capital to invest in early stage tech companies but we are also pretty good at building companies with less capital. The "number 8 wire" approach is not just for farmers but tech companies too.

The focus on "lean startups" is changing the idea that investors should throw massive amounts of money at companies that are yet to prove the basic assumptions of their business model.

There are a number of promising local activities that can help the early stage capital problem including;
- Canterbury Angels - a local angel group which formed recently
- Lightning Lab - a tech accelerator that pays companies to attend and prepares them for seed investment. Applications are open now for the first Christchurch programme.
- International Angel/Seed investors investing into New Zealand companies. We are seeing a number of exciting steps including the visit that Peter mentioned above of 2 very high profile individuals.
- Equity Crowd Funding (ie PledgeMe, Snowball Effect etc). NZ is actually ahead of the US in this area.

We have a long way to go but I'm optimistic about Canterbury's tech future and improving access to capital for early stage ventures.

GR

Gabe Rijpma Thu 23 Apr 2015 2:31AM

@terrypaddy @davelane I have to agree with the sentiment of the move and focus on Asia. Indonesia alone has almost the same population as the USA and here we haven't even started on the big ones like India and China. Philippines, Vietnam and Thailand and there you have another USA. The markets are not as mature but they are growing and spending and have major gaps in the market that are prime for NZ companies to slip into. A strong focus on JV partnerships in Asia are vital and understanding the cultural nuances but that can all be learned/taught.

A good example here is the adoption of GST in Malaysia and Indonesia recently. We have had GST since 1987, have some really good SMB cloud software solutions such as XERO etc but no one seems to be pursuing these markets proactively, where is Xero in these shifts themselves?. I remember when GST was implemented in NZ and how much it drove computerization of small business to help with the accounting problems of GST. Surely you follow government policies and go to where the major shifts are happening. Especially if we are experienced in them. We have plenty of opportunity on our door step without having to fly to LAX.

DL

Dave Lane Thu 23 Apr 2015 2:39AM

@gaberijpma again, speaking as a kiwi of US origin, the fixation on breaking into the US market is, in my opinion, folly. There's a reason why it's almost impossible to find professional indemnity insurance to trade in the US. You cite a number of excellent examples of why we should be focusing on those other countries - it's worth our while to learn about other cultures. And anything that allows us to bypass LAX has a lot to recommend it.

HSC

Helen Shorthouse, CDC Fri 24 Apr 2015 12:02AM

@iandouthwaite has talked about opportunities for clustering in the thread on Christchurch as an Attractive location. This is interesting, especially as tech companies go global really early. What sort of challenges and opportunities could clustering present - including for business model, market validation, competitor analysis?

How are these opportunities and challenges different from opportunities for companies going it alone?

GMN

Graeme Muller, NZTech Fri 24 Apr 2015 5:39AM

One thing I've noticed recently when meeting with successful international NZTech members is that most of them started with the view that they were building an international business from the start. However, the majority of startups and growth firms I talk to don't start with that vision.

So if we could build a local culture in the Chch tech community that builds the confidence and capabilities to start by considering the world as the market right from the start, and then wrap that with collaboration, experience sharing and govt support, I believe the results will improve.

AES

Anna Elphick (CDC Strategist) Fri 24 Apr 2015 9:13PM

Capital has been raised a few times in different forums but not discussed in depth. There seems to be general agreement that the early stage capital market is less developed in Christchurch than rest of NZ, and NZ is less developed than globally. Should the focus be on helping businesses address the capability side of the business - sales, mgmt., pitching etc and the money will come, or is there something more that needs to be done to improve local capital supply? @trevorlaughton, @geoffbrash @theresebanks @jenrutherford

ID

Ian Douthwaite Fri 24 Apr 2015 11:22PM

There's stacks of money about. You only have to look at what is being splashed around on crowd-funding sites and in share markets to see this. The difficulty is that there is an awful lot of competing demand. This leads to fragmentation again: this time of investment.

And that should be no surprise. While there is capital around, and people want to invest it, they don't necessarily want to gamble it. This is tending to lead to spreading capital even more thinly to reduce risk (sometimes framed as improving your chance of success) in a landscape with lots of investments to choose from.

Businesses can take advantage of this to raise small amount, or even quite impressive ones, if they are prepared to invest effort in evangelising. Alternatively they have to be prepared to invest in producing very strong investment cases (how much is needed, what it's for, and what the results are going to be). And then you have to deliver.

While there is plenty of money for early-stage companies, it does seem to get a bit harder for larger investments in more established companies. NZ actually offers reasonably easy entry to the top tier, public listing, and the advent of the NXT is likely to make this easier. However, as no doubt the SLI and WYN folks will attest, public shareholders are the harshest of taskmasters.

Private investment at serious levels and for sustained periods is likely to be similarly demanding so businesses need to be realistic about how much effort they need to make on securing and maintaining such investment, including the time spent on seeking it, as well as the rigour of critically reviewing their proposition.

It does seem likely that locally there is a gap between a potential pool of capital and some good companies that could profitably use investment. While this investment at higher levels and later stages isn't the focus of angle investment, the formation of the Canterbury Angels may provide a new nexus for owners and investors to interact.

CR

Craig Richardson Sun 26 Apr 2015 2:20AM

What is constraining Christchurch’s tech businesses from greater international growth?

  • If there is global demand and you have a compelling market proposition then only constraint is the right people and enough money. Growth isn't free. Any business contemplating international growth in the tech sector needs $20M capital before they leave home and a pathway to $100M when they reach their milestones.

What would help businesses be more successful at expanding into international markets?

  • stronger propositions, globally experienced talent and capital. There is no magic formula here.
HL

Hamish Laird Tue 28 Apr 2015 1:01AM

Key constraint for Christchurch startups, and companies in general, is the lack of in market knowledge and in market presence. The answer to this is to get your people on the plane. If you need capital get on a plane to San Francisco/San Jose, Boston (tech), Toronto (for mining), Singapore (for Oil and Gas), Frankfurt (for tech into Europe), London (for most things) and/or Hong Kong (for China) and find the banker (not the VC) who will do the eventual placement, sale or listing. Chances are there will be a New Zealander in that industry in the market that you can talk to right there.

MC

Mark Cathro Tue 28 Apr 2015 4:38AM

From my experience working with VC's in the UK and the USA, and with start-ups in the UK and NZ, two key issues I see are:

  1. Proposition - lots of entrepreneurs have great ideas, however how many of them are (i) scalable in New Zealand and (ii) scalable internationally - too many times I have seen businesses fail because the market proposition just isn't good enough.

Which takes me to point 2.

  1. Capital - there is a distinct lack of capital in New Zealand comparative to overseas markets (and there are a whole host of reasons for this), however to grab the capital that is available there needs to be a compelling market proposition. So back to point 1.

Three other points which others have touched on generally:

A. As Kiwis we're not great at shouting about our successes - the "don't put your head above the parapet" culture needs to change.

B. What is success in NZ terms - the three B's (bach, boat and BMW) seem to rule, whereas an entrepreneur in the USA would not be content with that.

C. Success or Failure, but not a mixture - as has been mentioned, in the USA an Angel/VC would be somewhat hesitant in investing in a new start-up if they hadn't learnt from previous failures. In NZ if someone fails, investors tend to look at them with great suspicion.

PW

Peter Wren-Hilton Tue 28 Apr 2015 9:32PM

Following up on last week's comment, Bill Reichert has said that he is looking to find some brilliant NZ start-ups for Garage Technology Ventures on his visit to NZ next week. He is in Christchurch on Wednesday 6th with Adiba Barney, CEO of SVForum, the oldest and largest entrepreneur network in the Valley. They are speaking at EPIC about the region's current tech/investment landscape. Bill will be talking about what VCs such as Garage are looking for in start-up investments. Ria (ria.chapman@cdc.org.nz) at CDC has more details about this event. This is a great opportunity to connect directly with two significant Valley influencers.

MC

Mark Cathro Wed 29 Apr 2015 2:33AM

Hi all - just follwing up on @peterwrenhilton the CDC event with Bill Reichert and Adiba Barney on the Silicon Valley Perspectiveis being held in our boardroom next Wednesday - if you're interested in attending then you can register at:

www.eventbrite.co.nz/e/the-silicon-valley-perspective-lessons-for-investors-tickets-16686331266

GS

George Smith Wed 29 Apr 2015 3:26AM

Hey everyone,

I am the founder of Glassjar, a mobile payments app that was born in Christchurch and is now based in Silicon Valley.

I can’t really comment on designing strategies to attract big business to Christchurch. However, I feel that the way to grow the tech ecosystem is to focus on the number of startups emerging and to give them a place to grow and return too.

We started in Christchurch, going through entre, pitching at coffee and jam sessions, working with UC Innovators and with the MEM program run by Piet Beukman. In 2014 I moved to Wellington to partake in the Lightning Lab following which we raised a seed round to begin exploring the U.S. Late last year we were accepted into Y-Combinator at which point we moved the business and our team to Silicon Valley full time. Subsequently we are now in the unique position of having seen numerous early stage scenes firsthand and in quick succession.

I feel ecosystems require three key parts; talent, capital/advice and success stories. Talent leads to success, success inspires talent and capital/advice makes it all happen.

Talent is a hard one. We need more computer science graduates and we need people to appreciate good developers. We also need to instil more drive and hunger in tertiary and secondary school students. Frankly, if UC didn’t have Rachel Wright or Piet Beukman Glassjar would have been f**ked as I wouldn’t have been pushed hard enough. Compared to Silicon Valley people in New Zealand just don’t work hard enough (the people on this thread being the exception).

With regard to success, one thing that Wellington does really well is bringing the ecosystem together. The Flux report showed there a huge number of tech companies in Christchurch and we need to bring them together. Whether it’s more Meetups, hackathons, startup weekends, conferences, or whatever. We need events that will open young people’s eyes to the potential success and inspire them to go for it. Toby Burrows also mentioned this. Coffee and Jam is a perfect example of this, Kaila is a Saint for her work.

This begins to tie in the advice side of things. The difference between, and impact of, good advice vs. great advice for a startup is staggering. If you motivate and then advise a startup make sure you know what you’re talking about. When Lightning Lab comes to Christchurch the mentors should sit down and agree on what the startups should be told. This is one thing that YC does incredibly well. They have one key statement “make something people want” and from that they have two bits of advise, talk to users and build product. All of the other crap is stripped away and the businesses do better for it.

Further we should align the support offered by the ecosystem with the stages of company growth. A lot of companies over capitalize or grow the ‘Company’ at the expense of customer engagement/retention. The entre competition, for instance, unwittingly teaches and encourages the wrong behavior in startups. It then gives a disproportionate amount of early stage capital to the winners. In my opinion this process is fundamentally wrong and yet it’s still the flagship program. Lightning Lab has some of these issues as too does the early stage investment scene. The number 8 wire approach that Terry described is what is correct and what is actually missing (up until point 4ish that is).

Speaking of which, Ben Ried is doing some awesome stuff putting together a local Angel Network. My key bits of advice to those who join is, please act quickly when negotiating, act on fair terms, invest on strengths not lack of weaknesses and please realize that bad terms hurt the founders and thus the company and thus your investment. If you treat founders with SV style terms you’ll create the best network in the country.

So that’ a brief bit on talent, success and advice. The final point I want to touch on is don’t be afraid to encourage startups to leave the city. If you want good startups you have to be prepared to sacrifice the first wave of them and trust that the founders will return with the capital and expertise that will guide the second. Ecosystems take a while to evolve and you can’t cheat the system you will grow a garden and not a rainforest. I left Christchurch but I can now share ideas and networks from the Silicon Valley ecosystem and hopefully help more startups grow and potentially get here quicker.

HL

Hamish Laird Wed 29 Apr 2015 5:18AM

Thanks George. @georgesmith2. Do you have any ideas on whether it is possible to speed the growth of the ecosystem having been in the SV one and the ChCh one?

GS

George Smith Wed 29 Apr 2015 5:39PM

Hey @hamishlaird ,

It’s a tough one as ecosystems need to evolve over time. For instance there could be a 5-10 year delay from teenagers learning to code in secondary schools (should the programs be in place) and them then starting companies. If you tried to short cut this by just paying developers to come to the city you’d have a very homogenous environment more akin to a garden. We can’t forget that Silicon Valley took decades to evolve, however, we can learn some tricks.

At the earliest stage, the key one is give more young people the belief, an opportunity, support and the resources to start a company. And to then give them the right capital and advice at the right stage. I can’t stress this one enough as there’s massive differences between the advice companies get in NZ vs. Silicon Valley.

Our journey has taken ~2 years and granted, a big chunk of that was me developing personal confidence and entrepreneurial knowledge. But I believe that journey could be shortened to 12 months for future companies coming out of Chch. We wasted a lot of time learning the wrong things, building the company as a legal entity as opposed to vehicle supporting customer engagement and we wasted a lot of time with investors. All of this consumed time/resources and slowed us down at the expense of our chances of success and, I guess, those of the ecosystem.

So, we can speed up the ecosystem by speeding up the rate at which companies can start and go on to succeed. However, we can’t lose sight of the fact that this could be a decade long endeavor or more.

Lightning Lab should be a massive boost for the city. Though I’m sure there are other initiatives that could stimulate growth as well.

HL

Hamish Laird Wed 29 Apr 2015 10:29PM

George, @georgesmith2. It looks like the customer engagement is a big difference in the advice you got. Where else did you see massive differences in the NZ sourced advice?

How did you waste time with investors? Which investors?

GS

George Smith Wed 29 Apr 2015 11:03PM

In many cases people suggested/encouraged planning the business as opposed to actually making it. Whether through business plans, financial models, getting trademarks, having legal agreements (interestingly though vesting seems poorly understood). An early stage should solely be talking to users and building quick iterations of the product. Once they have customer engagement they can begin the above. Then at Lightning Lab for instance meeting with mentors is inadvertently encouraged over and above talking with customers. Vanity metrics like signups are supported instead retention orientated ones such as cohort analysis of MAU. YC really only has that one statement, ‘make something people want’. I even have a framed copy of that on my office wall. However, following that advice is harder than having coffee with a prominent businessperson so founders do what’s easier. Further, founders can mentor shop until they find someone who tells them what they want to do. That’s why it’s important for everyone in the ecosystem to teach the best stuff because it’s typically counterintuitive and hard. It’s not sufficient for the people at EPIC to say one thing but people at entre say another because first time founders will, like I did, do what’s easier and what’s easier is typically wrong.

That's not to say I didn't get a heap of great advice along the way as I did. We almost certainly wouldn't be here without those first mentors in Christchurch and Wellington. It's just that I believe that if we can align everyone to the best ideas and strip away the nonsense more startups will get of the ground faster. Further, as Christchurch is an incredibly well connected and supportive environment (this thread being an example), we have a chance to really make a massive difference moving forward. This could be the stuff that really speeds up the growth of the ecosystem.

With that, Rachel Wright at UC needs to be on this thread she taught me this stuff better than anyone and in my opinion is the best startup educator/mentor in the country and she lives in Christchurch!

With regard to investors we were lucky in that the investors we ended up with are brilliant and our investor director is probably the best in NZ. However, our raise still took 6 months which is really bad. This was common to most LL companies. Further the terms weren’t standard across the ecosystem and they weren’t that good. Everyone at YC uses the SAFE and the good companies get money in the bank within a fortnight of pitching. Capital raising is the biggest distraction for a company, if you want to help startups then speeding up this process is the way to go.

HL

Hamish Laird Wed 29 Apr 2015 11:32PM

George @georgesmith2 and Rachel @rachelwright1.

So George commonality of terms for investments would be a really useful thing to speed the money flow. Ben @benreid are you working on establishing standard term sheets for your Angel group?

Some commonality of advice from the people helping the startups would be good. And it looks like Rachel @rachelwright1 you a doing a really good job of teaching this stuff. (George says this)

Rachel any thoughts on term sheets? And how many people do your UC Innovators courses from industry? Rachel and George and Ben Is this a way to get a commonality of understanding of how the Christchurch Ecosystem will evolve and what is necessary.

George what else would be good steps to unlock some speed in investment flow in Christchurch.

RW

Rachel Wright Thu 30 Apr 2015 2:24AM

I run a student incubator at the University of Canterbury. The incubator is for current students though we do support UC Alumni as well. We do have some great talent coming through UC. Most of these students will leave the region when they graduate as they don't feel connected to the local ecosystem and think there are more exciting things happening elsewhere. We do need to find a better way to connect these talented students with mentors and entrepreneurs in the region so that there are great things happening here in Christchurch. The University of Canterbury is in the process of creating a Centre for Entrepreneurship. This Centre will make it easier for students to see how they can get involved in the local ecosystem.

As you would expect most of the student ventures fail but these students have learnt a lot of valuable skills. It would be great to see many of these students move onto new or rapidly growing tech ventures in the region.

With regards to raising investment we need to better educate the CEOs of start-ups with what investors want to see. It would definitely be useful to have some standard terms.

HL

Hamish Laird Thu 30 Apr 2015 2:40AM

Thanks Rachel @rachelwright1,

I think that this is a really telling insight.

"Most of these students will leave the region when they graduate as they don’t feel connected to the local ecosystem and think there are more exciting things happening elsewhere."

How do we change this?

RW

Rachel Wright Thu 30 Apr 2015 3:06AM

Great question. We are looking at running programmes during the summer and term breaks for students in the Innovation Precinct. That way students have a reason to go beyond UC and see what is going on. Since the earthquakes students have more likely to not venture outside of the general region around UC.

SM

Sheralee MacDonald (CDC) Thu 30 Apr 2015 8:08AM

Thank you everyone for all your insights and ideas so far on the current challenges and opportunities and highlighting some of the great initiatives already underway.

Based on these, we've started a new thread proposing what might be considered characteristics of a successful tech sector in Christchurch in 2025. We'd love your feedback on whether these are about right, if anything is missing, and priorities.