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What is a (NZ) tech company?

Sarah Putt, Contributor. 01 October 2019, 11:32 am

The changing fortunes of US-based office sharing company WeWork, which at one time had a valuation of US $47 billion, is making a lot of people thoughtful about what it means to be considered part of the tech sector.

WeWork has just scrapped its IPO (it's been a rollercoaster ride) but the question, 'what is a tech company?' remains an intriguing one. Ben Thompson, who runs the site Stratechery, provides a fantastic analysis, which you can access it here. He offers the following 5-point definition of a true tech company:

  1. Software creates ecosystems.
  2. Software has zero marginal costs.
  3. Software improves over time.
  4. Software offers infinite leverage.
  5. Software enables zero transaction costs.

By his definition Atlassian and Salesforce are tech companies. WeWork is not.

What about NZ tech companies, how would they measure up? The following is a 'back of the envelope' analysis, but I thought it might be fun to look at three so-called tech companies on the NZX and apply Thompson's analysis. I've chosen Vista Entertainment, Pushpay and EROAD because they all listed in the same week in August 2014.

Vista Entertainment

Provides software solutions to the global film industry

  1. Yes - you could claim a 'software created eco-system' of cinemas and film distributors
  2. Possibly - depends how bespoke the system is for each cinema business
  3. Yes - continual innovation either through in-house development or acquisition
  4. Yes - Vista solutions installed in over 60 countries
  5. No - enterprise sales approach

 Score - 3.5/5 on tech company scale

Pushpay 

Donar management system, with main market the faith sector in the US

  1. Yes - there is a software created ecosystem of churches and church-goers
  2. Yes - classic SaaS model
  3. Yes - Pushpay's product improves over time
  4. Yes - 98% of revenue from US churches, but assume model can be adopted for other markets
  5. Yes - as noted above, classic SaaS model

Score - 5/5

EROAD 

Electronic solution to manage and pay Road User Charges and support regulatory compliance and provide value-added commercial service to heavy vehicle industry.

  1. Maybe - software between heavy road users and regulatory agencies
  2. Maybe - cost of entering a new territory would be high
  3. Yes - EROAD's offering improves over time and use
  4. Not really - hardware and the need to configure for different regulatory regimes, means that the company has to make a strategic move into a new market, currently in North America, Australia and New Zealand.
  5. No, enterprise sales approach

Score - 2.5/5

According to the Stratechery rating system (and my interpretation of it), Pushpay is a true tech company, Vista is mostly a tech company and EROAD is a mix of tech and 'real world'.

Tech, or hybrid-tech these companies are to be congratulated for clocking up 5 years on the NZX. The rules of continual disclosure mean that we get a glimpse into their strategy, performance and efforts to scale into international companies that boost our economy, raise the number of skilled jobs available and show that Kiwi smarts can foot it on the world stage. 


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