Category Archives: Innovation

CGT A Setback For Innovation

Posted on by

The Global Innovation Index judges nations’ progress against a basket of parameters including infrastructure, research output plus market stability and institutional strength. In 2010 New Zealand surged ahead to 9th place out of 125 countries after languishing at 27 the previous year. But in 2011 we dropped back a little to 15th place, or more correctly, we were slightly overtaken by our close competitors U.S., U.K., Ireland and Canada. Whilst there’s no need for alarm, we must remain vigilant that government keeps the right settings in place and that businesses continue to take advantage of global opportunities by leveraging our creativity and growing new knowledge. I remain optimistic.

Last week I attended the outstanding Ice Ideas conference presented by the much lauded Icehouse business incubator which has a close relationship with the University of Auckland and has been involved in raising $50 million in funding for high-tech companies in the ten years since its inception. The incubator has now set itself the goal of achieving 3000 new business launches over the next decade. It’s an unashamed grab for more deal flow and a call to action for the community to support the initiative financially, for the betterment of NZ Inc.

Incubation is certainly a valuable aspect of the overall innovation ecosystem and I applaud these efforts. But we must also ensure that other structural features are strengthened, not undermined. Not the least of these is ensuring that the spectre of a capital gains tax (CGT) on business asset sales never sees the light of day. On the other hand, some kind of modest taxation of gains on speculative property transactions certainly has merit, in order to encourage more productive forms of investment. Unfortunately the two issues, although related, tend to become intertwined in the minds of the public as politicians desperately seek to gain a foothold.

A capital gains tax on business sales would discourage investment and accelerate the loss of talent offshore by taking away one of the key competitive advantages that we have over other developed economies. It may also have a negative impact on New Zealand’s standing as an innovative and business investment friendly destination.

Speaker presentations from the Ice Ideas conference are available here.

You can follow the author on Twitter @GeniusNet

Brand Value + Cashflow = Win

Posted on by

Despite some over cooked fund raisings causing a few ripples recently . A couple of high profile trade sales underline the value that a great brand brings to a business.

There’s been a lot of talk recently about whether there’s another tech bubble forming, but I see two separate themes emerging. On the one hand there’s companies like Color and Pandora that raised funding purely on the strength of an idea and a solid team. Neither company has revealed how or when they will generate revenue. There was much hand wringing after Color’s VC round and Pandora’s share price crashed almost immediately post IPO. These are worrying signals in a market where entrepreneurs are being told to go out and raise as much cash as possible, whilst times are still good.

On the other hand, there are solid companies with good revenues and little debt that are cashing up through trade sale opportunities. The Go Daddy transaction was a case in point. This deal had been in the making for some time and looks like a win-win for both the founders and the institutional investors in terms of timing. Obviously it was of great interest to us at iWantMyName because GD are the largest domain registrar on the planet, with around a quarter of the entire global market.

Closer to home, the $139M buyout of listed drinks maker Charlies by Japan’s largest brewer Asahi also looks like a big win. What all of these companies have in common are great brand assets. Where they differ is that some of them not only do not generate profits, but in some cases the value proposition is less than clear. Even a great brand cannot compensate for these failings. Winning companies have recognisable brands, high performing systems or technologies and a means of generating repeating revenues. You’d have to be a right Charlie to invest in a company that didn’t have these attributes.

You can follow the author on Twitter @GeniusNet

AMD Opens Doors For Fingertapps

Posted on by

Unlimited Realities is living up to its name. Last year the company inked a deal to provide its gestural interface software for integration into Dell manufactured computers. Now the door has been opened by computer chip maker AMD. Fingertapps was showcased this week at the AMD Fusion Developer Summit in Seattle ahead of its rollout with AMD’s next generation of chips for Windows based PC and tablet devices.

The company, which has development offices in Wellington and Palmerston North recently appointed former Kiwibank CEO Sam Knowles as chairperson. It now seems to be on a rapid growth trajectory, having been one of the earliest providers of computer touch screen technology. We saw the “unlimited potential” of the product back in 2008 when we invited Unlimited Realities business development manager Ben Wilde to show off Fingertapps at Wellington to the World.

New Zealand companies are becoming increasingly adept at forging relationships offshore and the U.S. computing market is generally the most obvious first port of call. Fingertapps is yet another great example of high flying Kiwi technology going global from New Zealand.

Entrepreneur Bedtime Stories

Posted on by

“It was a dark and stormy night”. That’s how my Grandad used to begin his bedtime stories when I was a little lad. He was both a technology innovator and an entrepreneur, so hopefully some of it rubbed off on me. There’s certainly a lot to be said in favour of story-telling and narrative as a means of passing on knowledge.

Tuesday this week the Bright Ideas Challenge team from Grow Wellington are putting on Entrepreneur Storytime, an evening of anecdotes and stories from a diverse and successful group of local entrepreneurs. Speakers include Mark Clare – investment banker and web entrepreneur, Rachel Taulelei – founder of City Market and chairperson Wellington On A Plate, also Geoff Todd – CEO of both Trinity Bioactives and Viclink and CreativeHQ chairperson. Other speakers include Trent Mankelow who is a highly successful graduate of the CreativeHQ business incubator and Derelee Potroz-Smith, a finalist from last year’s Bright Ideas Challenge.

I’m particularly interested to hear Geoff’s story since he is a man with a foot in the camps of both academia and business, a rare and important breed of individual that New Zealand urgently needs at present. But it looks like an inspirational lineup overall and everybody is welcome to attend this free event. Registration essential.

 

 

Cutbacks Sour Sweet Taste of Success

Posted on by

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

Posted on by

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

Posted on by

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.

Fantastic Plastic

Posted on by

Plastic Logic, a company founded to commercialise research from Cambridge University recently secured one of the largest venture capital funding rounds of any company globally. But it has not always been plain sailing for the business which aims to devise and manufacture consumer applications for plastic semi-conductors based on organic polymers.

The US $700 million investment was led by Russian interests who plan to establish a production facility on the outskirts of Moscow. The funding was a lifesaver for Plastic Logic which almost tanked in 2010 due to production delays and intense competition from Apple’s highly successful iPad. Like many technology companies, there will continue to be challenges; but the upside is enormous considering the possible applications of its polymer research such as ultra-thin screens.

Ironically, although research and development was performed in Cambridge, the company initially moved quickly to establish a facility in Germany, in order to capitalise on Euro zone incentives that were unavailable to it in Britain. It makes for an excellent case study into why blue skies science research should receive substantial public funding and why regionally targeted economic development aid should not.

The foundational research behind the company has a New Zealand connection. The research team is directed by Sir Richard Friend a British physicist who currently occupies the Cavendish Professorship in Physics at Cambridge. New Zealander and Nobel laureate Ernest Rutherford occupied the same position from 1919 to 1937. Professor Friend visited on a speaking tour recently at the invitation of the Royal Society of New Zealand and the MacDiarmid Institute for Advanced Materials and Nanotechnology.

Bank You Very Much!

Posted on by

Over the last year or two I’ve learnt a lot about banks and especially the ways in which they don’t serve their customers. When are we going to build a technology that solves this pain?

Managing an online e-commerce platform means you simply cannot avoid the bureaucracy that is the global banking system. You have to fill out endless forms, pay extortionate fees and generally play their silly game or get cut off. After two years of trading we took the step of opening a foreign currency account for iWantMyName. Six weeks down the track we are finally in a position to accept our first U.S. dollar transfer from our payment gateway. That’s not all. It turns out that I have to actually go into a branch each week to physically transfer money. There is no online banking facility (at least not for small businesses or individuals). It shouldn’t be that hard!

Economists and business commentators have been urging us to participate in the “weightless economy” and go global. Banks on the other hand have no interest in uploading risk by dealing with more small companies. Banks and financial institutions have a vested interest in the status quo and are reluctant to allow a frictionless flow of capital across international borders. Of course if you are a large enterprise, the banks will bend over backwards for you. I’m sure the financial controller at Fonterra doesn’t have to pop down to his local branch to sign a form to transfer a few million Euros in proceeds from the latest global milk auction.

Amazon, PayPal and even TradeMe gave us a taste of what a universal payment system might look like; but these services remain heavily dependent upon the existing banking system because your credit card or bank account is involved at some point. But it’s a starting point at least. Notably, there are increasingly vocal calls for a completely new value system involving the Internet that enables easier payments and that excludes banks altogether. For example, with some services you can perform virtual tasks to earn bartering credits. But that won’t pay my rent or buy me dinner – at least not yet.

Money is a deeply ingrained social institution around which economic commerce has conveniently been constructed. It has no inherent value in itself yet leads to huge inequity in society. Creating a safe, universal online payment system that not only circumvents the banks, but also engenders trust is possibly the greatest challenge facing developers and entrepreneurs today. Let’s do it!

Touch Tech Turntables Triumph

Posted on by

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.