Brislen on Tech: show me the money
A little over two years ago the Productivity Commission came out with a report into the tech sector of New Zealand (and Australia - it was a joint paper) that basically said don't bother.
At the time of its release in February 2019, the report itself was so slammed by all concerned in the tech sector that it has literally vanished off the face of the earth. No longer does it grace the Commission's website - all links are dead.
(EDIT: The Productivity Commission has supplied a link to the report which can be read here. It still doesn't show up in the site's search results, however.)
All that remains, at the base of the smouldering crater that is the Commission's view on our abilities, is an infographic which lays out the bare bones of the Commission's argument.
Digital technologies, it tells us, have had both good and bad impacts on New Zealand but they haven't broken through the tyranny of distance. The money is still to be found in Silicon Valley and the governments of Australia and New Zealand should give up their attempts to build "digital champions" and instead focus on being technology neutral and nimble.
Two years later we've just seen Vend sold for $455 million - news that would surely have made the industry sit up and take notice if not for the sale of Seequent, the Christchurch-based geoscience software company that nobody has ever heard of, for three times that amount.
New Zealand tech companies can, and do, take on the world and compete on their merits, rather than their "ngawww, look at the little Kiwi who could" branding.
Over at the New Zealand Herald, Chris Keall has a look at 13 such companies which have been born locally, grown and finally flown our shores. Clearly, creating such companies isn't the problem - but keeping them local certainly is.
There are two sides to the story of Kiwi companies being sold offshore. Firstly, could they continue to grow their market share if they were locally owned? And secondly, could they attract the talent and financial backing needed to grow if they remained in New Zealand?
For some it's a no-brainer to look offshore for growth. Rocket Lab has to be owned by a US-based company or it won't get dispensation from the US government to build what are, in effect, cruise missiles. If it wants to hire staff it has to be a company domiciled in the United States and so that's what it is. On the plus side, it has much of its R&D capability and its production centre and (for now) primary launch pad in New Zealand. It's the best of both worlds.
But look at many of the others on Keall's list and you'll see companies that couldn't attract the investment and talent needed to grow beyond their Kiwi roots. They should have been able to stay here and with a more supportive environment they probably could have found a way forward, but it would have been a struggle and for some they would have missed that shot at the big leagues.
Personnel is a real problem, not just for tech start ups but for tech companies in general. We simply don't produce enough graduates each year to make a dent in the backlog and that's true whether they all stay and work here or not.
Years ago I spoke to someone from Google about what it would take to build a centre of excellence in New Zealand. He said they want to hire the top 1% of output from our universities and tertiary institutes and so we'd need at least 1,000 or so a year, preferably more - thousands more. To hit 1,00 grads going to Google each year we'd have to graduate 100,000 IT bachelors or more a year. In 2019 we managed to hit 19,000 IT bachelors' degrees right across the IT board.
But it's the other side of the coin that really slows us down - the finance sector. I have been distinctly underwhelmed by the institutional investors' willingness to look at tech companies in this country. The banks, the big investors on the stock market, the individuals who control these funds all seem to think the only thing worth buying in New Zealand is land. Just look at the NZX and the dearth of tech stocks. Just look at how many could have listed here but didn't, or who did but then moved on. Look at those companies that were bought because there was simply no other way for them to grow.
This is an issue that needs to solved. There are funds that will look at New Zealand tech companies and there are individuals who will help fund start-ups (Sam Morgan famously ploughed some of his earnings from the Trade Me deal into Vend and Xero and in turn Xero founder Rod Drury funds a number of innovation start-ups) but we don't have a culture of engagement around tech. It's hard work getting politicians to take the sector seriously, let alone the money men (and they tend to be men - not surprisingly start-ups like Jeneane Crossan's Flossie has failed to attract money because the men who control the funds don't see the value in a concierge service aimed at women).
We have some great companies in New Zealand and they have the potential to take on the world. For every one on the list of 13 big-name departures there are dozens of Flossies keen to break out.
We need a step change if we're to build the next 13 or we will end up as the Productivity Commission says we should - a fast follower, not a leader in this new tech world.
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I'm wondering if maybe part of the flaw NZ's thinking regarding tech is that it's mostly being modelled on the copying US' approach, i.e. with venture capital. Perhaps there are other, better (less souless) ways to achieve strong, adaptable, compelling NZ-based tech companies that can bring in export $ but won't be sold off shore. I think there are, but not many people seem open to considering it.
Geez, a 100 a year, just how fast is Google chewing people up and spitting them out?
I am not surprised at the view of the investment community here. Land has almost zero risk on it and a pretty assured reward profile. Unlike all that tech stuff.
Whilst the attitude remains "I'll back you if you mortgage your house" (i.e. if you go all in, I'll risk [a small fraction] of my monies too), we will never have any substantial tech investment here. Apparent, we are expected to get on with being a consumer of everyone else's bright ideas and disregard any of our own.
If we fronted up with that attitude at the NZ bans or the agricultural community we'd get kicked out of the meeting room pretty damn quick.
So, if you want to do tech, emigration remains the answer.
That was meant to be "a 1000 a year"