How do we keep young talent?

20:25, Oct 22 2012

Starting an internet company seems to be a good way to make a fortune at a young age, but in New Zealand do you already have to be a "rich kid" to aspire to be a technology entrepreneur?

Aucklander Carl Thompson, who moved to Singapore to set up a software firm that may now be on the brink of success, reckons it does help.

He says the country isn't doing enough to retain its young talent and labels the occupants of Auckland's premier technology incubator The Icehouse "trust fund babies", admitting his views may "ruffle some feathers".

Thompson and brothers Cameron and Bradley Priest, all in their late 20s, moved to Singapore in January with less than $5000 each to their name after winning a place on a business accelerator programme, JFDI.

Now, Thompson says they are in the final stages of raising just under $900,000 for their cloud-based inventory management company, TradeGecko, whose software is being trialled by 40 businesses.

Thompson says he saw the need for its product - which aims to fill a gap between spreadsheets and top-shelf software products such as SAP - when he became bogged down with administration running a designer clothes label, Crowded Elevator, which at one time supplied clothing to 50 retailers.


The three Aucklanders would have preferred to base TradeGecko in New Zealand, he says. But in a world in which countries are competing to get a slice of the startup action, he believes not enough is being done to keep people like them in the country.

In Singapore, the three entrepreneurs received a $50,000 grant on arrival, help with living expenses and top-notch mentoring from people who had sold and listed businesses for "hundreds of millions of dollars".

Just as important, the government will invest S$5 for each S$1 invested in startups by approved venture capital funds, Thompson says.

He argues the assistance is "extremely attractive" but still a good strategy for Singapore, which was attracting venture capital funds from around the world to move to the region.

"Everyone wants to create the next Facebook or Instagram and New Zealand seems way behind the ‘eight ball' in supporting that environment. Trade & Enterprise told us they weren't interested in startups."

Thompson says The Icehouse draws a different crowd from business accelerators such as JFDI because it charges members.

The only programme he found worthwhile was networking group Kea, founded by Sir Stephen Tindall and Kiwi expat Professor David Teece in 2001, but it was "under-resourced and under-funded".

The Icehouse chief executive Andy Hamilton says he admires TradeGecko for getting into the JFDI programme, which he says is a great launchpad into Asia.

But he says The Icehouse has already been responding to the trend for entrepreneurs to try to tap into global markets faster.

He says it would be "bull...." to claim young technology entrepreneurs needed family money behind them to get on the starting blocks.

The Icehouse charges $6000 for three to four months' assistance.

"There is a trend here where founders expect to get everything for free and we have always had a view we want the entrepreneurs to be committed and that requires them paying."

But he says The Icehouse provides free help to some "exceptions" who can't afford that.

Raising the initial capital for startups is "difficult wherever you are" but the statistics show it is a lot easier in New Zealand than Singapore, Hamilton says.

"There are 50 to 75 early-stage deals done each year in New Zealand, which is a pretty big number. My Singaporean friends tell me there is a lot more activity down here."

Business accelerators such as JFDI, which run competitions for entrepreneurs to join short-term programmes, are a global phenomenon but have a different model to The Icehouse and other Kiwi incubators, he says.

Nevertheless, he says a new accelerator in Wellington, Lightning Lab, would run along similar lines to JFDI. It is being part-funded by the Business, Innovation and Employment Ministry.

Another accelerator would open in Auckland within the year with likely involvement from The Icehouse.

Early Trade Me investor Rowan Simpson, who says he is watching TradeGecko with interest, believed there were lots of ways to succeed in New Zealand without having rich parents.

But he pointed to a blog in which he said a common mistake he had seen was entrepreneurs thinking that they needed to qualify to get on a plane.

"If you think that you'd benefit from being part of a programme like Y Combinator or TechStars in the US, or something like JFDI in Asia, then apply."

The problem with business accelerators, which aimed to "fast-track" new ventures to get investors in just a few weeks or months, was that was "a volume game", he blogged.

"Accelerator programmes attempt to mass assemble start-ups in the same way as manufacturing companies in China mass-assemble electronics.

"To make it work you need a lot of capable people interested in start-ups to put into the top of the funnel and a lot of investors willing to pick them up and fund them once they graduate. In New Zealand, our competitive advantage is not in mass assembly - we just don't have the population to support it."