Going Global - The NZ Challenge

An excellent article on the NZ Herald website this morning. So much so that I am going to reproduce parts and then comment.

"It is widely agreed that New Zealand's future economic prosperity rests on our ability to carve out larger global markets for innovative and technology-driven products and services. How we achieve this goal has been the subject of numerous talk-fests and reports over the past few years.

Internet technology company Cisco is the latest organisation to organise a brainstorming session on the topic. In Auckland last week, Cisco mustered specialists with different perspectives on technology innovation for a roundtable discussion on the topic of "Inspiring New Zealanders to Innovate".

And now the interesting bit.......

New Zealand has historically had a problem when it comes to funding high-growth companies, says IT entrepreneur, angel investor, and former Intel New Zealand managing director Scott Gilmour.

"That will always be a reality. The size of our economy simply cannot sustain many high-growth companies," Gilmour told the forum.

"Also, high-growth companies need not only money, they need market access and market knowledge.

"So most of our companies should transplant to the West Coast [of the US] or Europe, or wherever the market is.

"That's not a problem. The problem comes when we don't retain any substantive ownership here," he says.

"You can't be a globally successful company based here, I don't think.

"So let them go, encourage them to go - just like our kids go on their OE - but try and retain more and more significant ownership stakes so that as they succeed and generate a capital return to shareholders, those returns are invested into further companies, so that cycle keeps repeating."

And now for the comment.

Scott has nailed Pingar's challenge and opportunity very neatly with these comments. They mirror pretty much exactly our approach to engaging with the global market.

By establishing a significant operational presence in the UK, we are moving closer to our chosen market. That is where the sales revenue is going to come from.

By working closely with Waikatolink in NZ, we can generate R & D and IP in New Zealand.

By working with local investors, we can keep equity ownership in NZ hands even though longer term, there will almost be some dilution through further offshore funding rounds.

As Scott said very bluntly, "You can't be a globally successful company based here, I don't think."

I have fought that notion, but the challenges I have faced over the past two years tend to support the basic theory. I understand the arguments around the SaaS model, but even that requires substantial sales and marketing spend offshore to build brand awareness and sales.

I expect a lot of discussion around this theme at Morgo next week. It really is one of the great challenges facing innovative businesses in NZ.

I remember well a discussion I had at the Pasadena Technology Centre in LA last year. The very concept of 'export' was something that tenants in the Centre did not comprehend. A small share of the LA County market was sufficient to generate significant revenues. Selling into the San Fransisco / Valley market was as close to export as they got.

So NZ business's have got to develop a whole different series of skills to expand. 'Going global' looks good on paper. Having the management skills on board to manage that process just one more challenge we face.