Category Archives: Investment

Can Web 2.0 Save the World?

Posted on by
3

Last year Umair Haque, a Harvard University technology commentator, vented his annoyance about the fact that the new wave of Web 2.0 start-ups being funded out of Silicon Valley mostly contribute very little towards solving the world’s really big problems. I’m inclined to agree. So are New Zealand’s online ventures providing anything of real social value?

I’m not saying that simply selling stuff and making a profit is not an admirable goal in itself, because it is. Such activities generate taxes and contribute to the fabric of society in a variety of ways. But it would be great to see some more initiatives that have purely social or environmental goals, but with a sustainable business model. So I drew to Haque’s attention a New Zealand venture called Celsias.com. This is a community site that aims to “solve global warming one project at a time”. The site so far has no fewer than 126 global projects listed in which organisations or individuals commit to changing the environment for the better. Celsias also aggregates recent articles on green issues and has a discussion zone where users can initiate conversations on topics of their choosing.

Celsias looks great and makes a tangible contribution to society and probably doesn’t get the attention it fully deserves. Every workplace should have an account on their site. As Ben Milsom CEO of Nexx points out in this well considered blog article, for the most part we haven’t really progressed from simply being online consumers. After all, the sites with the most traffic in NZ are actually Web 1.0, simply replicating real life activities online such as banking and selling consumer goods. As Ferrit discovered, there is not a lot of upside left in this business model. We need more innovative online services that actually solve real problems.

Very few of the most highly trafficked websites offer true interactivity or provide an opportunity to be creative. As a nation, we are possibly not as digitally savvy as we might like to believe. However Ponoko is one site that simply shines because of the way it pools and leverages talent. Ponoko won’t save the world but it does allow its community of users an unusual creative outlet, one that has garnered global interest. It also facilitates collaboration and provides lots of advice and guidance on designing and selling. It is good to see new online business models emerging. Recently launched TribeHQ also takes a fresh approach to online knowledge sharing and, by acknowledging network effects and cluster theory, looks set to redefine white collar recruitment.

But ventures like Nexx, Celsias, Ponoko and TribeHQ can change the world, if for no other reason than that they remind us that the economic order is changing. Unfortunately there is a great deal of inertia out there. The battles with bureaucracy encountered by Nexx and other “social lending” platforms are instructive. The gatekeepers haven’t yet realised that we are in the midst of an economic, technological and social revolution. If a platform like Kiva can be allowed to facilitate micro-financing to clients in developing nations, why can’t we have a peer-to-peer lending platform in New Zealand? If we can get a project like Nexx underway perhaps it would expedite some much needed capital flowing into the technology sector too!

Got any other online ventures that have social, creative or environmental objectives? Let us know.

Prime Time for iPredict

Posted on by
Reply

I was so pleased to see iPredict’s Matt Burgess fronting up on the TV3 Leaders Debate this week with a demo of a political market trend forecast using their software product. Getting their website address in front of a few hundred thousand eyeballs won’t have done them any harm at all.

I’m pleased for two reasons. Firstly, Matt is a good guy, with an intriguing product and is doing a great job as CEO of iPredict in getting the company market recognition through media, events and the web. Secondly, it validates our decision to select him as one of the presenters at the Unlimited Potential Wellington to the World event on Friday. iPredict fitted our definition perfectly in that they had a novel and scalable global opportunity but still with a relatively low profile. Moreover, iPredict is a great example of academic research that has crossed over into the mainstream business arena.

In fact the first half of our show on Friday is devoted to linking academia with entrepreneurs and investors downtown. It’s an area that we have traditionally struggled with in New Zealand. Academics normally deliver to other academics and are focussed on building a body of research during their careers. Commercialisation of research is generally a secondary consideration. That’s a shame, because more than ever we need to be moving away from selling milk fat and instead moving towards selling knowledge to pay our way in the world.

It’s a cultural issue. In southern California smart post-graduate technology students are queuing up to attend seminars on how to structure their start-up businesses and court investors. Sure, the days when even a half decent business plan would get some crazy 20 year old funding for his pet project are gone. But that’s a good thing. Money migrates to value in the end and that’s where New Zealand creativity has an advantage. But we first need to overcome the barrier of distance to major capital and consumer markets; which is why we’ve partnered with KEA to take the event global.

It’s perfect that iPredict is a successful Victoria University spinoff company. There are other interesting projects emerging from Vic that could go the same way if we can help attract entrepreneurs and capital in that direction. That is why we are taking some first steps with W2W to strengthen bridges between academia and business here in Wellington.

For an entertaining forecast of the election outcome from our friends at iPredict and a look at some other cool ICT projects around town, make your way to the Wellington to the World event from 3.45pm on Friday 7th November at the Town Hall in Wellington. Registration essential.

NetValue Makes the Connection

Posted on by
Reply

Waikato technology group NetValue have recently demonstrated that New Zealand companies can connect with investors and major global players in the Northern Hemisphere. So why isn’t more being done to replicate this kind of success story?

That was the question we asked ourselves when we started thinking about delivering an event that would actually link innovative New Zealand technology firms with investors, mentors and new partnerships offshore. I don’t care what some people say about the “weightless economy” being the new economic paradigm. It is still bloody hard work engaging in markets that are a day’s flying time away from our little islands, especially so in the current investment climate.

NetValue is actually an umbrella for a number of different technology enterprises acquired progressively over a number of years. These include a software developer, hosting and web design services, a search technology venture and a company offering a genomic research tool. The latter arose out of research work into DNA sequencing conducted at Genesis Research which was originally spun out into a company called Cartesian Gridspeed. Bioengineering experts have described this astounding technology as “one of the most significant advances in sequence search technology to date”, although the company initially struggled to gain recognition despite its claim of a 10,000 fold improvement on processing speed over other systems on the market.

I remember seeing Cartesian Gridspeed company founder Leonard Bloksberg speak at a conference a few years ago and I figured his company would make it big one day. Let’s hope that their new found partnership with Microsoft will allow them to develop the product without altogether giving away the intellectual property to offshore interests. Unfortunately that is the quandry that all successful tech companies eventually face because of the lack of depth in the technology investment market at home.

I’m interested in NetValue’s progress for another reason. We’ve adopted a similar organisational model at ideegeo Group Limited. We are leveraging a core set of skills under one roof, with the aim of spinning out and commercialising new project ideas from R&D as resources permit. Mind you – our journey would be a lot more fruitful if we could spend more time on commercialisation and less on red tape. Dealing with the various government agencies that are supposedly supporting technology innovation and intellectual property protection is a bit like wading through treacle at present.

Wellington to the World to Showcase Local Tech Innovation

Posted on by
Reply

I’m currently project managing Unlimited Potential’s Wellington to the World Event (W2W) to be held on Friday 7th November. There are so many really neat tech firms that are just bubbling below the surface that we thought we would create a great event around launching a few of them onto the world stage. If you are a technology firm based in the Greater Wellington Region and focused on growing through engaging with global markets, you need to be at W2W. With the support of its sponsors such as 920, Grow Wellington and Gen-i, Unlimited Potential are hoping to make this important event an annual fixture.

 

W2W involves live networking with angel investors plus business pitches from local technology companies that will be video-cast to a global web audience of innovators, entrepreneurs, mentors and investors with the assistance of KEA the Kiwi Ex-Pats association. KEA now has over 27,000 members globally, many of whom are in business and want to help New Zealand businesses go global. There will also be some presentations of cutting edge ICT research from Victoria University that has commercialisation potential. The Wellington City Council, Wellington Convention Centre and VicLink are to be applauded for getting behind the initiative.

 

We are looking for new faces! Emerging technology companies wishing to raise their profile, can articulate their message well and which have the capacity to scale up and go global – now is the time to step forward.

 

Contact me directly, if you are an emerging technology venture with a great story to tell.

Developing a National Innovation Blueprint

Posted on by
Reply

Corporates such as Intel and Cisco naturally want to promote us becoming more e-enabled because there’s a buck in it for them. But large multinationals are the natural born enemy of innovation, when you think about patent litigation costs and the detrimental effects of technology cartels. So I take it with a grain of salt when I hear that they have been filling conference halls on the topic of innovation. 

Notwithstanding my cynicism, the idea of a national innovation blueprint is a good one. Improving broadband infrastructure would help, but even if we could open an electronic super-highway to the world tomorrow, it’s not a panacea on its own. The primary choke on opening up the commercialisation of technology in New Zealand is lack of capital, not lack of ideas or lack of broadband. There’s plenty of evidence to suggest that geographical proximity has a lot to do with investment decisions in the tech sector and for that we suffer. Hence the plea for high growth ventures to get offshore quickly.

Kiwis also hate divesting control and this is an additional barrier to growth. In fact we’ve already had this debate amongst the founders of our new venture as we begin to develop a product suite with global reach. The antidote is better education, more mentorship and good role modelling by other entrepreneurs who made the leap and succeeded without selling their souls. You can build a great business whilst still enjoying the lifestyle New Zealand has to offer.

Lastly, the vast majority of businesses will not receive any venture funding and may never grow beyond 5 or 10 employees. Yet, they pay tax regularly and put bread on the table of families. There is no certainly no shame in this. Perhaps one focus of a national innovation blueprint is that we need to better identify the really hot opportunities from amongst those hard-working small businesses and provide intensive practical support to build their value proposition and connect to the real world out there.

Start-Up B. Goode

Posted on by
Reply

Paul Graham, from high profile Silicon Valley investor Y-Combinator, extols the virtue of “doing good” in this clip as he speaks to an audience of young entrepreneurs at the Start-Up School ’08 conference held recently at Stanford.

Graham is the kind of guy you sit up and pay attention to. His company currently funds and mentors over 50 start-ups, many of which are Web 2.0 ventures. He believes projects that do good gain a lot more traction when it comes to attracting customers and winning funding.

He cites Google which launched in 1999 as a hacker response to the lack of search functionality on the Internet. When Google began it had neither revenue nor customers, but it was those early years that saw the fastest appreciation in its share value.

By the way there is a whole bunch of stimulating material from the conference featured on Omnisio a very cool video presentation sharing site that is being backed by Y-Combinator and was co-founded by Ryan Junee. Seriously, I could happily spend hours surfing Omnisio which, unlike YouTube, actually hosts informative material worth watching.

 ————————————————————————

X|Media|Lab Event – Commercialising Ideas – Fri 30th May – Wellington

Don’t forget that the XMediaLab event hits town on Friday. If you are involved in anything remotely connected to mobile content, virtual worlds, Web 2.0 or digital media innovation in general, then you really need to be at this event. At $99 a head it has to be the best value outing of the year. Attracting global leaders in innovation to engage with NZ firms is one way we can overcome our remoteness. GeniusNet supports this event because we strongly believe that a lot of creativity and opportunity arises when you cross fertilise between different disciplines such as film, animation and software. See you there!

————————————————————————-

Entrepreneur’s Epilogue

We hit our first speed bump this week. It was bound to happen. Our office server fell over for several days meaning we had no internal email and we lost our virtual whiteboard facility. With our people currently spread around Munich, Melbourne and Wellington, these tools are essential. So everything simply stopped happening. Very frustrating.

Then on Thursday night I made the mistake of venturing into the central city at 5pm. It was gridlock. As an organisational researcher I’m always interested in analogies between business theory and real life and it didn’t take me long to make the connection. In project management terms it’s called event chain methodology.

So I quickly realised I needed to find a sub-critical pathway to get my damn car out of the middle of the Willis Street / Manners Street intersection! The point is that we had encountered the exact same problem within the business. A critical feature had failed, leaving us with flow-on effects and time delays. Back to the drawing board to find a way around the problem. All good learning.

Research Profile: Vietnam – A Nation on the Cusp

Posted on by
Reply

After repelling foreigners and enduring wars for the last 150 years Vietnam is finally at peace and enjoying an economic renaissance that may well surpass that of its neighbour China. Therein lies some opportunities for New Zealand businesses.

When I visited Vietnam in 2005 it was obvious that the country of some 84 million inhabitants was on the cusp of something big. Rapidly industrialising and with a young and highly motivated population, the South-East Asian nation has recorded consecutive GDP growth rates of around 8% for many years since the economic reforms of the mid-1980s. An example of this growth was the recent announcement that Samsung will build a plant for manufacturing mobile handsets with an eventual capacity of up to 100 million units. But manufacturing is not the only economic growth driver.

The mighty Mekong river basin, which fans out from the south of the country, is also the food basket in a region renown for its delicious Eurasian fusion cuisine. With a huge output from intensely farmed field crops and fisheries that are managed under a centrally planned system, the Mekong directly supports about 18 million farmers and fisherman and their families and provides food for at least 60 million.

Vietnam continues to move towards full market economy status and has benefitted from substantial inflows of capital from neighbouring states and the U.S. since the lifting of trade sanctions by President Clinton. total foreign investment was around $US 20 billion in 2007. As well,  Vietnamese dispora who left as refugees are now returning newly educated and with new capital and fresh ideas. There are many challenges remaining however, particularly in the areas of environmental sustainability and infrastructure.

Work is about to commence on a $US 8 billion project to build a new airport for Ho Chi Minh City (Saigon) at Long Thanh for example. Although the existing airport was recently upgraded, it sits amidst the low-roofed shacks within the Ho Chi Minh city limits and is constrained from further growth. The new airport is expected to become a regional hub of some significance.

New Zealand exports to Vietnam grew by a whopping 62% last year. Dairy products and educational services are leading the charge; but there are a multitude of other opportunities for small businesses who can find smart ways to partner locally and secure access to the region.

Vietnam is a nation of huge contrasts. On the one hand a booming economy and beautiful scenery on the other tremendous environmental challenges and horrific human legacies from the war. But with a sound strategy and local partners there are rich pickings for those that can stay the course.

Contact GeniusNet for business research and connections into emerging global markets.

Scaling Up the Innovation Ecosystem

Posted on by
Reply

Thomas Nastas is an American venture capitalist based in the heart of Moscow. A recent blog post nicely condenses an article of his in which he explains how technology firms need to leverage success in their home markets before moving up the value chain.

Although writing about Russian and Eastern European SMEs, one immediately draws some strong comparisons with the New Zealand situation as he reflects on the role of government in national innovation systems. Like New Zealand, both Russia and Hungary have set aside funds to kick start a public-private partnership to co-invest in technology start-ups. But unlike New Zealand, Eastern Europe and Russia has a huge and largely untapped domestic market for technology products and services. Russia also has the benefit of an extensive programme of university research funded by government and the military.

Nastas prescribes a formula that involves SMEs targetting domestic customers and refining their product offering prior to approaching investors for cash to support tackling global markets. He quotes the example of Israel’s cleantech industry of water purification that grew up, with government support, around addressing a vast domestic need for fresh water. Exports of this technology alone are expected to reach $2 billion by 2010.

He also has some praise for New Zealand as a remote economy grappling with the need to diversify globally. By focussing where there already existed a competitive advantage, he notes how New Zealand’s exports of high end wine and meat products have grown substantially over the last decade or so, based on investment in technical innovation.

It’s a salutary lesson probably not lost on the architects of the Fast Forward programme. But we must not forget that agriculture isn’t the only game in town. High tech exporters like Endace, Rakon and Weta Digital sell their wares almost exclusively in offshore markets. The natural competitive advantage these companies enjoy is the ability to attract and retain an intelligent and highly creative labour force. Focussing only on food and beverage innovation within the agricultural sector would be a mistake.

Thomas Nastas first published his article in the Eastern European edition of the Harvard Business Review. A full version can be found here.

Fast Forward Fry-Up

Posted on by
3

The government’s announcement of a $700 million “Fast Forward” fund for the food and pastoral industries is a long awaited boost to the research sector, but does it signal a strategic withdrawal from other technological arenas?

Crown Research Institutes (CRIs) are naturally ecstatic at news of the investment because it provides much greater certainty for their businesses going forward. The CRIs have been struggling with recruitment, retention and planning issues in the face of historically low levels of investment in a demoralised agricultural research sector.

But the Prime Minister Helen Clark, speaking on National Radio, emphasised that without recharging the investment in food and pastoral research, New Zealand was at great risk of falling ever further behind on the global stage. With agriculture still comprising almost half our national export income, it was imperative to invest in areas where we had a sustainable competitive advantage.

Clark then poured cold water on Opposition Leader John Key’s comments that the Fast Forward Fund was a grandiose overstatement of the government’s committment. Industry heavy hitters like Fonterra have reportedly already signed up to contribute matching funding and the plan is to draw down on both the interest and capital over a 10 to 15 year period. This would release up to $30 million in the first year, eventually climbing to over $100 million, said agriculture minister Jim Anderton.

Perhaps the only real downside from the deal is that it confirms a mood swing away from stimulating other technology sectors. Prof. Jeff Tallon, who only last week headed up a group of concerned scientists that wrote to the government pleading for more research funding, said that even after this investment, New Zealand still only has about half the RS&T spend of its high tech competitors. Tallon says that although food and pastoral research is important, we need to continue to diversify away from our heavy reliance on agriculture.

I have to admit, Fast Forward does seem more like “Back to the Future” to a time before the government was championing ICT, biotechnology and creative sector as the three planks for high tech based economic growth. However, on the up side it does show that government is listening; and by using a public-private partnership model it also focuses industry to engage fully in the project. One hopes that this will not be the only research funding announcement come Budget time.

Legislation Framed to Address Investment Anomaly

Posted on by
Reply

The Limited Partnerships Bill, which will be enacted on 1st April 2008, looks set level the playing field for foreign investors considering participating in new ventures here in New Zealand. Whilst the legislation covers all kinds of businesses, it should especially assist higher risk technology ventures looking for investors.

According to an article by legal firm Chapman Tripp, although New Zealand already ranks highly as a safe and attractive investment destination, we have been out of step with other countries in which partnership structures are the chief vehicle for equity capital investment. Harmonising the law around such structures should streamline the investment process however.

Under a limited partnership the liability of investors (in the limited partner category) is no greater than the amount of capital they have placed to acquire equity. Upon exit the first $50,000 in capital gain is non-taxable and the balance is assessed based on each individual investor’s liability, which may vary. Unlike a company, the partnership itself is not taxed.

In a recent article I argued that we need a mix of both local and foreign investment flowing into our technology start-up ventures. Only time will tell whether or not this new legislation will be helpful. My feeling is that it will not change the fact that we are geographically distant from the leading capital markets of the world. At a time when there is a question mark over how Investment NZ has performed historically, I believe we need a fundamentally different model to attract and retain productive foreign capital, especially in the technology sector.

Angel networks are emerging as successful sources of seed capital. But very few angel investors would be looking at investing sums over $1M. So for larger projects and second tier funding we still need to be able to tap into offshore sources of capital. These are challenging times for equity investors globally. What is the best way to go about it?