Cutbacks Sour Sweet Taste of Success

Almost everyone agrees that New Zealand needs to produce more high value, knowledge based goods and services to pay its way in the world. But the gestation period from good idea to global superstar can be in the order of five to seven years – and that’s just the ones that survive. Changing the policy settings for research, development and business growth to accommodate political cycles creates uncertainty for long play economic development projects.

In 2004 I made some introductions for a little known Wellington company called Open Cloud. They had a Java based middleware product for telcos that had the potential to go ballistic, given the exploding mobile market. Seven years on the company has a UK office, solid investor backing and mobile telecommunications companies beating its door down. Research and development remains based in New Zealand, a commitment the company made very early on in its evolution. Some forward thinking individuals at New Zealand Trade & Enterprise made sure that doors were opened, even though the company had only a handful of staff at the time.

Waikato company BioVittoria developed a plant based food sweetener that has caught the attention of global markets. Again, this company is a prime example of the kind of enterprises we need to be cultivating in New Zealand. But it too started out small with just its founders and a small number of contractors. The company leveraged research done in New Zealand and diligently built up a supply chain and manufacturing plant in China to process locally grown fruit and distribute the product globally. Even though BioVittoria suspended plans for a share float in 2009, the company instead secured an influential equity partner that will help with growth.

In the face of government funding constraints NZTE recently announced yet another senior management reshuffle and cut the number of direct client-facing roles. They also dumped the Escalator programme, which has been educating small business owners for many years in the art of capital raising. So now that New Zealand Trade & Enterprise has eased itself out of minding small businesses, will there be any support for the next generation of technology and science based ventures that are stepping forward? Intermediaries such as government agencies and consultants do have a role to play in building the networks that small ventures need to scale upwards. We should not rely on economic Darwinism alone to identify winners and losers.

Smart Capital

Amidst the hand-wringing over Christchurch’s loss of Rugby World Cup games I was once again left wondering why we struggle as a nation to focus on the really important issues that underly our efforts to rekindle economic growth.

In the global scheme of things the fact that a handful of rugby games won’t be played somewhere is hardly world breaking news, especially in comparison to the extraordinary drama unfolding on the other side of the Pacific Ocean. Yet the media spent a good portion of last week hounding politicians on the topic of World Cup venues. It was obvious that McCully and others were stonewalling and already knew the outcome, but there were much meatier issues left untouched. For example, where was the government going to find the $10 billion or more needed for the reconstruction of Christchurch and how will we round up sufficient numbers of skilled trades people to do the work?

Later in the week I attended a closed forum for leaders in the ICT community discussing how we could boost the economic return to the capital city from our industry. It was notable that at least half of the attendees were skilled migrants who, at some time or other, had deliberately chosen Wellington. It really brought home the significance of the contribution made by migrants to our creative industries. Naturally much of the forum conversation was taken up with suggestions around making our city a more engaging place for creative types and telling our story widely and more often.

Disconcertingly however, the topics of identifying external sources of capital and strengthening our entrepreneurial ecosystem were treated superficially. Recently I was reading an article by YCombinator’s Paul Graham talking about what start-ups need to help them stay in a given location. Provide them with financial capital, he says. Accessing creative talent and facilitating cross-pollination of ideas are really important too, but ex-pats don’t have a franchise on these things. Access to smart capital and developing a vibrant entrepreneurial community culture are major growth drivers. These are themes I will continue to be advocating for strongly.

Riding the Wave

It’s exciting being at the forefront of innovation in your industry and riding a growth wave. But there are dangers lurking in the breakers for service oriented web companies with big goals.

Selling services online front loads a business with customer acquisition costs including infrastructure, marketing and customer support. But if sales are subscription based then cashflow can be lumpy and tends to lag well behind sales conversions. Another reason for this problem is that, for online sales, the payment gateway at your bank holds funds until they are cleared. If you are a new company, the holding period can be up to a month. In the meantime there are bills to pay and mouths to feed.

There are only two ways to get around this problem, bootstrap the business or raise capital. By bootstrapping, the founders are effectively providing the operating capital by contributing their time until the business reaches profitability. This is the approach we took at iWantMyName. Bootstrapping generally leads to slower, more manageable growth and allows founders to retain control. Raising growth capital is a valid strategy as well, but the task itself takes up a great deal of management time and head space that can distract from improving the core business. Ultimately, happy customers are your best source of capital.

Whether or not you go for raising capital, the ultimate goal should be investing time in improving the service offering. This in turn lowers the cost of customer acquisition. By improving the customer experience you should attract more referrals, have fewer support enquiries and enjoy better margins through additional sales of premium services. It seems intuitive, but for us it was a thrill seeing organic growth tick upwards as we gradually improved our site. Happy surfing.

Startup Weekend Comes to New Zealand

Startup Weekend is a life-changing creative workshop for web entrepreneurs that has been held all over the world from Boston to Bangalore. Participants have 54 hours from 6pm on the Friday evening to strategise, build and launch a brand new web business. It’s a pressure cooker event that ensures everyone leaves with new ideas, brilliant personal networks and maybe even a new business. The great news is that the very first New Zealand Startup Weekend will be held in Auckland on 1st-3rd of April.

About a year ago, Startup Weekend global director Marc Nager approached me about bringing the event to New Zealand. But anticipating a very full year at Unlimited Potential plus lots of hard work growing iWantMyName, regrettably I had to decline. So I’m really pleased that Jason Armishaw and his team have stepped forward and I’m chuffed to be invited along as an advisor to the initiative. I’m looking forward to rolling up my sleeves and getting stuck in with some brain-storming on the day. It’s an opportunity for me to share some of the lessons learned within a high growth web start-up business and no doubt to learn heaps myself from a bunch of much smarter people.

With the event only a few weeks away, we need to muster resources and get folks signed up pronto! Developers, designers, business strategists, marketers, investors. Get your dream team together or just rock up by yourself and be ready to contribute your particular skills. If you know of any companies that can help out with some resources please contact Jason as soon as possible. There will be media involvement, so it’s a great opportunity to share what you do. See you there.

Touch Tech Turntables Triumph

Ever since the movie Minority Report hit our screens we’ve all been fascinated by the promise of touch screen technology. I think touch tech is going to be big this year, which is one reason why I’m currently working with a young entrepreneur on an interesting project involving tablets. More about that soon. In the meantime, there are other companies in New Zealand that are already well advanced in this field.

North Shore manufacturer Kevin Andreassend grew up dreaming about futuristic multi-media too and he now runs a company called ICE AV that assembles and re-exports tailor made big screen and audio set-ups around the world. The company recently had the opportunity to work a high profile stage equipment provider in London, delivering large screens for a massive DJ gig in the city. The same company also works with other huge touring acts such as U2.

But it will probably be much smaller screens that drive the mainstream adoption of this technology in 2011. Most smart-phones and tablets now have touch screen tech. In fact much of the new technology now driving workplace and personal productivity tools ironically had its origins in the home amongst an earlier generation of electronic games platforms. This will inevitably lead to greater interest amongst the general public in future applications. ICE AV have capitalised on this interest by creating a clever system called Holodesk that integrates a fully interactive touch screen system with a DJ turntable set-up. This creates a new kind of experience for part-goers and has (literally) been receiving “rave” reviews in Europe and the UK.

More Kiwi tech going global – Got an interesting software product or app that you’d like me to review? If it’s made in New Zealand and a little bit left field, please drop me a note.

2010 Rocked Us, Roll On 2011

To say that 2010 was a year full challenges and opportunities is somewhat of an understatement. For many people in business it was a case of  hanging in there as a recessionary economy misfired and struggled to get up off its knees. But much worse than this, New Zealand (and in particular the south) was stricken by the triple tragedies of a huge investment business failure, a destructive earthquake and a terrible mine disaster. Whilst these events provided a much-needed distraction for the government, they were devastating for the people directly affected and shocked all of us.

When national morale takes a hit, I’ve noticed the economy tends to suffer as well. Good spirits lead to more spending which in turn leads to more optimism. It’s a virtuous circle. On the plus side, we have been sheltered a little from the storm by high global dairy prices and the fact that our banks are stable and government debt not completely out of control like elsewhere. But there’s still lots more work to be done on diversifying the economy and I don’t think we should rely entirely on the Thugby World Cup to reignite our passions in 2011. We can’t afford to sleepwalk through another year.

The government needs to be looking at providing a more aspirational science and innovation framework that goes well beyond moving the deck chairs around with yet another departmental restructuring. In the lead up to the election, we also need to start thinking about reforming our entire legal system. When a senior judge thinks it’s ok to preside over a court case involving a business partner and peeping toms get longer prison sentences than drunk drivers who kill and maim, we know we’ve got a serious problem.

On a personal level I had the immense satisfaction of working with two great teams. The first was the crew at ideegeo from whom I learn something new every day. We headed into our third year of domain renewals this month at iWantMyName and grew revenue at over 200% during the year. We also addressed some growing pains by improving our platform technology as well as our management systems as we position for the next chapter. The most exciting aspect of going global with the technology was that we secured a core following of early adopters amongst the developer community worldwide that may open some interesting doors for us in 2011. Watch this space.

My other team are the good folks at the Unlimited Potential committee who help bring the coolest events to the ICT community here in Wellington. We had a very busy year with a strong focus on promoting technology entrepreneurship through a number of well supported events. We also completed our wonderful new website. All of this was achieved in a very tough funding environment. Because of UP activities, teams got built, tech businesses were started and people found jobs. Real life social networking is important. Thanks to the supporters who made it happen and let us know if you’d like to get involved as an event partner or committee member in 2011.

Best wishes for a safe and happy holiday season and a prosperous 2011.

StartupDigest Offers Event Buffet

It has been a busy year, but I always manage to keep some time free for an important project close to my heart. It involves curating content for the New Zealand StartupDigest. The weekly publication provides a quick reference summary of all the best start-up, technology and innovation events across New Zealand.

StartupDigest was co-founded by Chris McCann who describes himself as an “entrepreneurial activist”. Based in the heart of Silicon Valley, Chris has managed to motivate around 50 writers, entrepreneurs and fellow activists from around the globe to contribute all of the event content that goes into the various digests each week. It’s a much needed (free) service that helps everybody to connect within the tech start-up ecosystem.

You can subscribe to StartupDigest by selecting a country, city or university community that interests you. It is also possible to subscribe to specific verticals such as green tech or mobile, for example. This week’s NZ StartupDigest is available here. If you have any start-up, technology or innovation related events coming up in 2011 we’d love to hear about it. There is no cost for listing an event and it’s a great way to connect with hundreds of people interested in the tech start-up scene.

W2W Strengthens Entrepreneurial Ecosystem

Recently Unlimited Potential ran Wellington to the World (W2W), New Zealand’s leading showcase event for early stage web and software ventures. W2W is about building bridges, so we invite technology innovators, entrepreneurs and tech investors to network over beer and pizza and encourage young companies to share what they are working on through either talks or at the demo zone. This was the third year that we have run the event and  I’m personally very proud of what has been achieved so far.

Much of the progress that is being made in promoting technology entrepreneurship in New Zealand is underpinned by communities of interest that are flourishing right now. I shared some remarks about this at the opening of W2W in my capacity as Chairperson at Unlimited Potential. We think it’s important to support developer communities and start-up groups because they nurture the seeds of future ventures and provide a deep pool of knowledge for new entrepreneurs.

If you didn’t make it to the event this year, check out the W2W entrepreneur videos. There is also some images and an event review available.

Thank-you once again Wellington City Council, Grow Wellington, Viclink and Summer of Tech for helping make this event possible.

W2W – Innovators Ready to Roll

Global Entrepreneurship Week has rolled around already and Unlimited Potential is once again doing it’s bit to promote technology entrepreneurship as a career option. I’ll be working hard this week on a few last minute details for our Wellington to the World (W2W) event on Thursday.

Wellington is alive with tech talent at present and there has been somewhat of a renaissance as geek-preneurs have got cracking launching some great products onto the world stage. In some cases these are second or third generation ventures where there has been an earlier exit. W2W is a showcase event that brings together technology innovators, entrepreneurs and investors to share ideas and celebrate emerging tech ventures from around the region. 

We have a cool new venue this year, so have included a small demo zone adjacent to the bar area in the programme. There will be plenty of opportunity for hands on experience. Some of the companies in the demo zone will also be presenting during the entrepreneur flash talks. The event begins at 4pm on Thursday 18th November with talks by technology researchers from Victoria University. A number of these projects have commercial potential and will be seeking partnerships and investment in the future. Victoria University commercialisation arm Viclink is an event partner, so please support these speakers. 

The event also encapsulates the Summer of Tech launch for 2010/11. Summer of Tech is a great initiative that matches software and engineering companies with students looking for work experience over the summer holidays. It’s an important plank in a strategy to build up capacity and grow employment in hi-tech around the region. This year we are very pleased to have Xero CTO Craig Walker to speak at the launch. There are a small number of places left at the event, so be quick, registration is essential.

Is Branding Part of the Value Proposition?

I’ve recently finished reading a book called “How Brands Grow” by Prof. Byron Sharp. Although it is not specifically technology venture focused, I would highly recommend it for any marketer, especially those marketing web-based B2C services such as we do at iWantMyName. The author questions much of the accepted wisdom on marketing and turns a lot of traditional textbook strategies about marketing on their head.

In a dynamic market, you can compete on price, but this is akin to an arms race and damages everybody. You can also compete by innovating and making your product more feature rich, but this is expensive and takes time. A third approach is to have a brand strategy in place from the outset that puts you in a stronger position when competition arrives. But product developers sometimes overlook branding as part of the overall value proposition.

In his book, Prof. Sharp argues that the quickest way to build a market is to make your brand physically and mentally available to consumers as well as targeting the large pool of dissatisfied customers that change brands each year. He scoffs at differentiation, citing cases like Coke and Pepsi who have attempted to differentiate within the cold drinks category, but whose respective market shares hardly change year after year.

Coke and Pepsi are constantly fighting off cheaper brands and do so quite successfully because customers are prepared to pay a premium for a brand they feel connected to. That connection has been built up through generations of consistent positioning. Everybody recognises the Coke symbol, right? It’s irrelevant whether or not the product itself is substantially better than the cheaper ones. What matters is that customers mentally associate positive attributes with a brand such as trust, some kind of meaningful narrative plus “sticky” graphical images. Customers ascribe value to intangible features and this should not be overlooked.

This post is an extension of a discussion on a value based strategy to competing in new markets started by Libby Russell on the New Zealand Software Alliance LinkedIn page.