ION e-Letter April/May 2008

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GeniusNet is proud to host the ION e-Letter. ION is New Zealand’s leading virtual community of innovators, entrepreneurs, mentors and investors.

The ION e-Letter is kindly supported by Revera
– High Integrity I.T. Infrastructure –

NZ Angels Reach for the Stars

Angel investing is enjoying somewhat of a renaissance in New Zealand as cashed up entrepreneurs look to the marketplace for their next project. NZAngels.com has emerged as an informal discussion space and deal brokerage site whilst business incubators in both Auckland and Wellington have established their own angel networks.

Angel investors generally bring both cash and expertise to early stage ventures prior to the business trading profitably. The networks themselves are not investment funds or advisors and usually only admit experienced, high net worth individuals. Whilst many angel investors are looking for high technology business opportunities, this is not exclusively the case. The chief problem is finding quality deal flow for the investors. That is partly why we are developing the Tech ConnexION event.

TechConnexION Event for Wellington

New Zealand is rich with talent in the gaming, CGI and online /mobile business applications arena. ION and GeniusNet are currently in discussions with several parties around developing a live event  for Wellington later in the year, aiming to bring investors and entrepreneurs together. The proposed theme is “Connecting Through Virtuality” and the format will be along the lines of a half day of seminars on new venture development followed by a demo session and networking drinks for entrepreneurs and serious investors. Confidential expressions of interest from technology entrepreneurs, investors, speakers and potential sponsors are welcome at this time.

Please email: ion [at] genius [dot] net [dot] nz

Or call: +64 27 47 373 14

PlanHQ Hits Business Planning Sweet Spot

Tim Norton and the team at PlanHQ have developed a unique service offering that allows any business to easily create, action, track and achieve business planning objectives. The secure web-based application gets your entire team focused on execution, completing actions, achieving goals and tracking progress against financial projections. With Tim’s boundless energy driving the project, PlanHQ have moved mountains in a very short space of time. In 2007 they launched the product, began signing up dozens of paying customers, presented at DEMO, hired a US VP Marketing and connected to VC and business coaching client companies globally. They’ve also received $300K in angel funding to date and are currently engaged in a second funding round to assist with moving into the U.S. market. Business coaches and advisors are now being invited to become PlanHQ affiliates. 

Webfund Gets You Going

Speaking of innovative web-based businesses – have you ever had a brilliant idea for a web based business of your own, but didn’t know where to begin? Maybe Webfund can help. Established by Stefan Korn, himself an experienced serial e-commerce guru and entrepreneur, Webfund is like a one stop shop for virtual enterprises. The company evaluates and develops your business proposal, helps to find investors and then goes about setting up the technology.

Webfund chairman Dave Moskovitz says he’s thrilled to be working with and backing web-centric innovators in developing new and disruptive online technologies. Webfund has already launched an impressive array of clientele such as Bookhabit, DIYFather.com and Celsias.com.

SimDeck Motors Ahead

Auckland firm SimDeck is finding that its Formula One racing car simulator is a hit whenever it goes out for a spin in public. SimDeck deploys a huge digital daytime screen to project racetrack images to patrons who drive a real scale model, custom built Formula One car. The simulator is being marketed to global franchisees and as a corporate promotional events attraction. SimDeck is close to replicating its F1 success with a highly detailed F16 jet simulator that is sure to set pulses racing when it goes live.

Connecting with Cockatoo

Cockatoo is the mouthpiece for an international group of consultants, think-tanks and business advisors. The indefatigible, Canberra based Rod Brown edits this rich report that deals with global best practice in regional economic development, clusters and investment attraction.

April/May Events

The NZ Wireless and Broadband Forum have a couple of great events coming up later in April.

The Angel Connect Network across the ditch are holding their annual event on 17th of April in Melbourne.

Online games and simulation developers may be interested in this 21st April talk at Auckland University on developing software agents that play games as humans would.

24th April sees the Auckland ICT Cluster’s networking event at which Prof. Sylvie Chetty, will speak about innovation, internationalisation and the role of networks. 

The GCC Small and Medium Business Conference will be held in Dubai on 29-30 April.

Unlimited Potential and 9-20 are hosting the IT Rockstar final on May 21st, 5.30pm @ Top Floor of the Majestic Centre (Wellington Chamber of Commerce).

Singapore’s Wirelesss & Broadband Week and GovTech are both on 27-28 May.

AngelHQ has an investment evening planned for 5th of June. To enquire about registration as an investor contact Marie-claire Andrews.

And if you are interested in global conferences and expos featuring “clean-tech” or green technologies, you might like to check out this listing.

ION Forum Activities

Don’t forget there is a wealth of information and support for innovators and entrepreneurs still available on the ION Forum site. And if you need a place to hold a community forum discussion we’d be happy to make space on the forum available. Password controlled access can be made available if a private and secure area is required.

High Growth Hangs, Digital Forum Sprouts

Click here to read and contribute to an online discussION about the new ICT industry body. Can it implement the refreshed Digital Strategy and successfully build on the work of High Growth, despite industry politics? And now that the Digital Strategy v2.0 has been released, you can read about it and make submissions here.

More About ION

ION is a knowledge sharing community of New Zealand innovators, entrepreneurs, mentors and investors. Membership is FREE. If you want to find out more or to share your projects and events – click HERE.

ION is an Ecosynergy Project

The Great Wall

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It’s hard to separate last week’s contrasting media images of scuffles by pro-Tibet protesters from those of a proud NZ government delegation kowtowing to the beaming Chinese trade mandarins. So does anyone really believe that the freshly inked free trade agreement (FTA) will bring a flood of economic opportunities to the doorstep of the average New Zealander? China’s determination to protect the image of the Olympic flame at the cost of other nations’ sovereignty is instructive. They built the Great Wall for a reason didn’t they?

I’m not surprised that details of the agreement were kept under wraps until the day of the signing ceremony, some of the concessions made are real shockers. For starters the dairy products component is phased in over 10 years and China even then has an ejection seat clause should they decide that their own dairy industry is threatened. Estimates of the dollar value benefit for New Zealand vary, but appear to be in the vicinity of $200 million per annum, which frankly seems like peanuts in the face of a massive $3.7 billion trade deficit.

Secondly, since when did an FTA ever proscribe rules on migrant labour? “Working holiday” and general category visas for sought after trades are to be broadened immediately for Chinese entering NZ, but there is no reciprocity. Not that I would want to live and work in the most polluted nation on Earth, but tell me how this is fair. However, I look forward to reports of a flood of highly experienced plumbers, hotel chefs and software developers gushing forth from China eager to plug critical gaps in our labour force. The Qualifications Authority will have a field day navigating the rules on equivalency. Given the number of migrant doctors, lawyers and university professors already prowling Queen Street in taxis, one has to wonder where this new influx will actually end up.

So at first glance the FTA looks a bit like it was cobbled together rather more with a sense of urgency than any overriding economic logic. But wait there’s more! It turns out that, having already signed the agreement, our parliamentarians now finally get the chance to discuss it in Select Committee and debate it in The House. What happens if the bill doesn’ t pass? What if the weight of public submissions is against the Bill? Talk about potential for losing face.

The FTA is certainly a historic document and I agree that it will open other doors in the future and (probably) bring a net gain in export trade value to New Zealand, as advertised. As well, a ratchet clause levels the playing field if any other nation negotiates a better deal, therefore going first is not neccessarily a disadvantage. And if the WTO round falls flat, it is highly likely that APEC will set about developing a regional FTA that will now have to favourably include New Zealand. So perhaps I’m being a little unfair. The FTA seems very much like a strategic neccessity. But in our haste to supplicate Beijing could we have possibly overlooked too much detail?

On the technology front, the Prime Minister has curiously fingered software exports to China as a growth opportunity for New Zealand under the FTA. But industry leaders have indicated that the ICT sector is not thinking that way at all. Unless the FTA somehow enshrines and guarantees the protection of intellectual property, China is about the last place I’d be wanting to export software to right now. So if our much hyped knowledge based goods and services are out of the equation, that just leaves us with flogging dairy commodities to China’s burgeoning middle classes. Great stuff, but how can I personally share in that opportunity? Oh right – Fonterra still hasn’t gotten around to listing – bugger!

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New Zealand Trade and Enterprise has an informational website and seminar events planned on the topic of trade opportunities with China. Key outcomes of the FTA can be found here.

Research Profile: Vietnam – A Nation on the Cusp

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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.

Broadbandwagon – Where To Next?

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I just don’t get Stephen Bell’s criticism of the New Zealand Institute’s (NZI) latest report on broadband. On the one hand he complains that the NZI hasn’t come up with any solutions, but in an article only two days prior he reports how industry leaders have approached ICT Minister Cunliffe for help to fund a full economic analysis of the broadband issue.

The NZI report was only ever intended as a discussion document. Industry players and other interested parties have used it as a starting point to prime the debate. Nobody is suggesting that NZI has a franchise on the broadband solution. Even, Rod Drury, who has been a passionate advocate for broadband and has worked closely with both NZI and Mr Cunliffe, accepts that we do not yet have all the answers. But what most people do agree upon is that the way we fund and build telecommunications infrastructure will have to change if we are to keep up with the rest of the world.

I was at a function last week at which Drury gave a quick overview of his ideas on what needs to happen next. He thinks the market should fund the infrastructure through a bond issue and that there should be an autonomous network operator. A national rollout would be coordinated by central government but not neccessarily funded by it. Local government would be involved at a regional level. All of which seems fair.

Rod also makes the point that we need greater diversity in our choice and access to international broadband, in order to secure our “digital trade routes”. I strongly agree, in fact I believe this is a way more pressing issue. Where we part company slightly is that I don’t believe a complete economic case has yet been made for ubiquitous domestic broadband. That’s why we now need a full economic analysis, properly funded by government and which considers both the positive and negative social and economic effects, based on experience elsewhere.

Perhaps the most compelling reason that I read recently, for delivering better domestic broadband, was a story by a returning visitor to the Rep. of South Korea. The North Asian nation is one of the most wired on the planet. It also tops the tables for I.T. competitiveness, maths and science literacy and ranks highly for GDP. But the most persuasive argument for broadband involves how the Koreans have used the Internet to export their culture abroad and turn it into a win for tourism and technology business investment. Perhaps we could learn by their example.

Scaling Up the Innovation Ecosystem

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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.

Grid Network to Support Trans-Tasman Research Collaboration

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With digital storage needs and computational demands by research institutions growing exponentially, it makes sense to get together on sharing resources. So the New Zealand Tertiary Education Commission (TEC) banged some heads together and offered to fund a $2.5 million project to set up BeSTGRID a grid computing “ecosystem” that includes additional storage resources hosted by a third party.

Three New Zealand universities are already hooked up, with the new arrangements which reduce duplication on software expenditure whilst encouraging collaboration and knowledge sharing through use of online tools such as video-conferencing, blogs and wikis. Other institutions are expected to join in the future. Research projects currently making use of BestGrid include linguistics, bio-informatics and earthquake engineering, but the possibilities are endless. BestGRID is part of KAREN the government owned high speed broadband network. The network provides interconnectivity between research and educational institutions in New Zealand, with the ability to deliver up to 10 gigabytes of data per second.

Perhaps the most interesting aspect of the venture is that there will be established a shared identity management protocol based on the Australian Access Federation standard. The Federation is not some inter-galactic peace force, but a technical standard that operates across Australian tertiary and research institutions and allows universal access via a single user identification. That opens up the possibility of including Aussie universities and research institutions in the New Zealand grid by linking to Australia’s own high speed research network AARNET at some point in the near future. AARNET already operates connections to the United States, Singapore and Europe. So the implications for New Zealand research institutions are obvious considering the constraints of the existing commercial service.

New Zealand will be hosting the 2008 APAN event 4-8 August, regarded as the leading Asia-Pacific symposium on advanced broadband networking and applications for research and education. The conference is to be hosted in beautiful Queenstown and themes include sustainability, earth science, medical and agricultural applications, high definition TV and seminars on network security. The event will be preceded by the High Performance Research Symposium looking at e-research projects and tool sets, being sponsored by Bluefern, the University of Canterbury supercomputing centre.

Fast Forward Fry-Up

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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

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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?

Confusion Over IP Guidelines

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The recently released policy on the treatment of intellectual property rights within government ICT contracts may open up downstream opportunities for New Zealand companies who provide software and services to public sector agencies. But industry commentators cannot seem to agree on whether or not it is a good thing.

A few years back a lobby group called ICTX pressed government to change the rules around onselling of intellectual property arising from publicly funded I.T. projects. ICTX cited replication of effort and confusion over copyright as barriers to further commercialisation of such technology. But now that the rules have been clarified, former ICTX members still appear disgruntled.

Others view the new guidelines as an opportunity because it opens the door to vendors retaining ownership of the technology. Under this scenario the developer effectively gets their R&D funded by a government contract, licences out the application and then has the option of pursuing further commercialisation where a wider market exists. That seems like a win-win situation.

But the State Services Commission (SSC) makes it clear that the guidelines are just that. Government agencies still get the final say on what goes into the contract. That’s fair enough, especially in the case where the technology relates to a sensitive area such as Defence, Customs or Police for example.

It is unsurprising that a diversity of views exist on this topic. The ICT sector has still not managed to solve the representation problem, with a myriad of bodies still claiming to speak on its behalf. Now that the SSC has finally responded to industry feedback it seems a little unreasonable to criticise.

Perhaps the best way to resolve the debate is to test the guidelines. Are there any technology applications currently in the pipeline that can be taken down a commercialisation pathway? Having a successful reference site already operating within a government agency is a great selling point after all.

Bookhabit Springs from Webfund Stable

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“E-reading has come of age”, says Clare Tanner director of bookhabit.com a New Zealand website that assists fledgling authors to find a market for their work by employing a “long-tail” approach to demand aggregation. The new site is also a perfect exemplar for why we need much better Internet bandwidth across the Pacific to markets in the Northern Hemisphere.

The venture, which launches this week, allows authors to upload their works in pdf format and employs a graduated reward system as sales increase. Readers can view the first chapter for free but pay as little as US$2.50 if they choose to upload the entire book. The price of a book rises once it passes through certain sales thresholds.

Tanner says the site is ideal for new or unpublished authors wishing to test the market because it instantaneously exposes their work to a global audience and the author receives up to 40% of the sales revenue, compared to around 5-12% with traditional publishers. 

To promote the site there will be a book writing competition with a top prize of US$5,000 commencing on 3rd of March. The ten authors who receives most downloads will go forward to a judging panel for final assessment on merit. Tanner says that the world of publishing is like a mine “full of undiscovered gems” because only a tiny percentage of submitted works ever make it to press.

Bookhabit.com is an early spinoff project from Stefan Korn’s Webfund initiative. Korn, a Wellington based entrepreneur with a strong e-commerce background, started Webfund to aid others in realising their online dreams. Webfund evaluates web-based business ideas, matchmakes projects with investors and then helps to build and implement the ventures cost effectively.

Korn says there is no limit to the creativity out there in terms of new business ideas. Webfund provides a one-stop shop for getting new web-based ventures up and running in double quick time as well as a means for investors to participate at entry level in highly innovative new service offerings.