Category Archives: Investment

About Face on Brokering FDI

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Economic development Minister Trevor Mallard last year announced an about face in how Investment New Zealand will operate in the future. Investment NZ is a government agency currently involved in attracting foreign direct investment (FDI) capital into the country. But a recent review of the organisation showed that it spent $60 million over four years to attract a net additional investment of only $155 million.

It is not clear from the review whether this result speaks more about the lack of “greenfields” opportunities than it does about any shortcomings in competency. However, it has been decided to refocus instead on encouraging New Zealand firms to grow through investing offshore. The theoretical net result should be more dividends returning home, exposure to new markets and networks, greater access to capital and acquisition of new technology. In principle it sounds like a great road map for adapting to a globalised world – create a few more Fonterras.

But shouldn’t we also still be facilitating new inwards investment – especially in the tech sector? Just because Investment NZ underperformed doesn’t mean we should stop engaging with offshore investors. It just means we need to find a better way to do it. And just because we are currently at about the OECD average for FDI doesn’t mean we can be complacent. Now you see what I mean when I discuss lack of economic leadership and the price of political expediency when it comes to government funded initiatives. It also underlines my point about the inappropriateness of having risk averse government agencies involved in facilitating business. Investment NZ needs to be tweaked for sure, but it doesn’t need to be completely nobbled.

Funding Commercialisation of RS&T a Balancing Act

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Throughout 2007 we heard from a number of scientists and business-people imploring the government for much greater assistance in funding research and commercialisation of technology in New Zealand. Universities and CRIs have demonstrated the economic potential through generating some modest additional revenue streams and investments from technology enterprises spun out of research projects over the last decade or so. There has been a modicum of job creation, some upskilling through technology transfer and even some export revenue as a result. All good news. But is it the stuff that “economic transformation” springs from? Perhaps not quite yet.

Mindful that resources are scarce, the “Trilateral Engagement Project” (TEP), a joint effort by FRST, NZTE and TEC, has been tasked with boot-strapping a handful of homegrown technology industries judged to have the potential to grow into high value, global enterprises. This inter-agency collaboration marks a departure from the silo mentality noted in a recent OECD report that criticised New Zealand’s innovation policy.

Having identified these key new industries, the TEP has produced an RFP seeking consultants to research the potential economic impact of each. That seems a little like putting the cart before the horse. What if the reports find that the industries concerned are untenable? Notwithstanding that point, I think it’s a great idea to focus where big economic gains are achievable and around which related industries can cluster. In the past there has been a tendency towards a shotgun approach to economic development in which it was assumed at least a few winning ideas would emerge and thrive if supported with public funds.

In fact, there is no shortage of good ideas. The real issue for the NZ tech sector is access to capital. Because global capital tends to gravitate towards the most bankable ideas, it is important to expose our intellectual property to offshore scrutiny in a sophisticated manner. There is simply insufficient seed capital in New Zealand prepared to wager on high risk technology propositions. You could literally count on one hand the number of early phase tech businesses that received substantial VC funding in NZ last year. Besides that, offshore investors tend to bring a useful network of well-connected deal-makers in their wake. Let’s address that fact openly and help our high tech businesses go global with a mix of local and foreign investment. But at the same time if public funds are to be invested in this process, we need to ensure that founders are fully committed to returning some of the economic gains back home rather than selling out for a low return.

It’s a very narrow tightrope to walk across.

ION e-Letter Nov/Dec 2007

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Welcome to the ION e-Letter.

Leadership Resource Goes Live

A new multimedia site is offering personal insights from business leaders prominent in the area of technology commercialisation. Supported by the Royal Society of New Zealand, leadership researchers have captured a rich collection of video clips in which New Zealand innovators and entrepreneurs talk about how they built their careers and their businesses. The aim of the Leadership Pathway project is to to take young people on a journey of reflection that, through the use of role models, emboldens them to consider a future in business or technology as an attractive choice.

http://leadership.rsnz.org

Instinct Exports Wikipedia App

Wellington based Instinct Entertainment scored a coup recently by getting their mobile Wikipedia application onboard at Singapore Telecom, the island nation’s largest telco. Instinct director Dan Millard says Wikipedia were happy to agree to the idea which allows mobile users to interrogate the site and receive an abbreviated query response directly to a mobile handset. The company are still looking for a local provider to host the product in New Zealand.

U.S. Firms Looking to Buy Up Kiwi Tech

ION has been approached by an intermediary acting for U.S. companies seeking to purchase rights to proprietary ICT. The contact is well connected through his writing and lecturing on technology and is willing to act on behalf of any company with technology patents to sell. Email ION for an introductION.

Offshoring Opens Access to China Market

A software developer in China is looking to provide outsourcing services to resource constrained industry peers in New Zealand. The Beijing based firm specialises in Java/PHP and .Net development for mobile and enterprise applications. Run by a young Canadian educated Chinese chap, the firm has a sound project track record with a number of multinational companies. The developer is also offering to assist NZ firms by tailoring existing applications to the China market. Email ION to make the connectION.

Vaulting to Success

Emergent business consultancy Vault is leaping to the defence of businesses with big plans for growth. The firm offers a tailor-made service to small and medium sized businesses dealing with financial, strategic and organisational issues during start-up or periods of high growth.  “It’s much like having an oncall executive cheer leading team of business and financial experts at your fingertips”, says Vault director Marie-Claire Andrews. As a former advisor to an economic development agency, she helped dozens of small businesses take their first steps.

www.vaultconsulting.co.nz

What’s Happening at ION

At the start of 2007 we completed the Immigrants Online project and wrote up a report for the Asia NZ Foundation. The project looked at how recent migrants make use of online communities to form networks and garner information. Assisting migrant entrepreneurs was an important part of the project. Flowing on from this we are currently considering developing a proposal to identify migrant investors and channel them toward local business opportunities.

At the present time ION is essentially unfunded, hence there has been less facilitation on offer to the community this year. However we would like to acknowledge the ongoing support of the University of Auckland Business School who provide hosting for the ION website and forum. Also thanks go to Revera who assist with broadband. Greatly appreciated.

Best wishes for a Happy Christmas and a safe and profitable New Year.

Paul Spence – ION Executive Officer

www.ion.net.nz

contact  [at]  genius . net . nz

Silicon Valley Challenges Auto Makers to Think

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A brainstorming conversation held at Google’s headquarters has led to VC investment in a new kind of electric car. Think, a Norwegian based manufacturer of next generation electric cars, is pitching the project as foreshadowing a paradigmatic shift in the logic around personal mobility and connectivity. Not only does their concept vehicle have green credentials, but it is marketed entirely via the Internet and is itself web enabled with communications and self-diagnostic tools. In an article in Business 2.0, Think CEO Jan-Olaf Willums outlines just how the company intends to compete against the huge car manufacturers.

But the technology is not without issues of its own. One glitch is that the kind of battery you need to provide energy for a small car still comprises about half the capital investment of such a vehicle. To solve this problem, Think plan to set up battery leasing and reconditioning franchises to support vehicle owners. There is also the question of the environmentally sound disposal of battery components when they reach life’s end. With input from other tech firms in Silicon Valley, these and other problems with the batteries will no doubt be addressed over time.

The only real question is about what uptake will be like in the world’s largest car market. But given growing unease over climate change and uncertainties around oil supplies, it seems like quite a good time to be revisiting the electric car idea. Traditional car manufacturers have struggled to innovate around finding greener solutions for transport. In fact they have struggled to redefine their industry at all despite huge financial losses.

But liquid fuels (of one sort of another) seem likely to remain a major part of the mix for a long time yet and electric vehicles may still struggle against the prevailing marketplace until there are further stepwise break-throughs in the technology.

[tags] cleantech, sustainability, technology [/tags]

Is NZ Missing Out on the “Clean Tech” Investment Wave?

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There was an excellent interview with Nick Gerritsen on National Radio this morning. Nick is a unique example of a Kiwi innovator and entrepreneur who has leveraged both his technology start-up expertise and some deep connections into the U.S. venture capital community to kickstart Marlborough based biofuels company fuels company Aquaflow Bionomics.

The company is reportedly negotiating with aircraft manufacturer Boeing to run an airborne trial involving aviation fuel derived from algae and using his firm’s technology. The ramifications of such a project are mind-boggling. Incidentally, Nick is also a director of Celsias a blogsite and virtual initiative that looks at issues around global sustainability and renewable energy. Celsias invites people to submit projects aimed at “global cooling”.

It was interesting to hear his comments about how truely disconnected New Zealand remains from global capital, especially in regards to the surge of investment in “clean tech” or technologies aimed (in particular) at transforming energy production and usage. Gerritsen reckons that NZ has a natural advantage in this area and claims to already have investors from Silicon Valley in close contact with his own venture. Yet local investors to have overlooked the project.

Why then is the NZ investor community standing off from participating? He thinks that the economy has become distorted to the point where domestic consumption and investment in property far outweighs interest in  industries that generate real export revenues. Hence our distance from capital markets does make a difference in terms of constraining investment in local technologies. Since there is little capital available locally, only a fortunate few who have the skills and networks to tap into substantial offshore investment can really make it big, says Gerritsen. He argued that government moves to cultivate venture capital investment have yet to deliver in any meaningful way.

I have already alluded to the potential that exists for New Zealand technology in renewable fuels. Is New Zealand at risk of missing out on the next big technology investment wave?

[tags] technology investment, biofuels, cleantech [/tags]