Opinion & Analysis
The United States is sometimes referred to as the "the land of the free and the home of the brave". Having recently returned from an international study tour of the United States, I gained an appreciation as to why this saying could quite aptly fit the Silicon Valley approach to business and it left me wondering whether New Zealand business would also benefit from being less risk adverse and more willing to invest in innovation.
Despite the Global Financial Crisis, America is still a land of opportunity where people believe that through natural talent, hard work and a bit of good luck, they can achieve the American Dream of success and prosperity. Success is therefore not a dirty word but something to be celebrated because success is the pursuit of many budding entrepreneurs.
The Silicon Valley has long been an incubator for tech start-ups and venture capital investment. This area's rich infrastructure of talent, ideas and capital has attracted many ambitious entrepreneurs, who unashamedly want to be successful. These individuals often have multiple start-up businesses as they recognise that not every one of their ventures will be profitable but they operate on the basis that they need only one of these businesses to be really successful in order to achieve their personal American Dream.
While there are a high number of start-up business failures in the Silicon Valley, these failures are not taken personally, but are rather treated as a learning experience for future business ventures. These entrepreneurs would prefer to pursue an opportunity and have it fail than to miss a profitable opportunity. Therefore the objective is to minimise missed opportunities and learn from what hasn't worked.
Venture capitalists are willing to invest in entrepreneurs who have a good business track record, have an "A" team of individuals around them and have a business model that has potential. These investors also acknowledge that not all of the start-up businesses that they back will be successful, but work on the assumption that those that are successful will provide them with a sufficient return to more than offset the failures.
The Silicon Valley business model has proven itself over a number of years to consistently produce economic growth above the American average. For example, last year the US Bureau of Labor Statistics reported that the GDP of the Silicon Valley had grown by 13.4 per cent; whereas at the same time America's total GDP was struggling to recover from the Global Financial Crisis.
If New Zealand were to adopt a similar business model to the Silicon Valley, it would need to gain access to a bigger venture capital market to fund start-ups and investment into research and development.
However, equally as important New Zealanders would need to change their mind-sets around what constitutes failure. Is it not better to pursue opportunities that may have a higher risk but if successful are likely to provide a higher return, than being so risk adverse that the fear of failure results in mediocrity? Business failure should be redefined as the failure to maximise opportunities rather than merely being the inability to make a profit.
The American Dream can be the Kiwi Dream, if we can free ourselves to look for the opportunities, and be brave enough to take calculated risks. New Zealand needs to change its mind-set so as to celebrate success rather than knocking those that have ambition to create wealth for both themselves and ultimately New Zealand but fail. If we can change our mind-set then maybe we can say that for business New Zealand is the land of the free and the home of the brave.
Kevin Turner is the general manager finance of Pascoes group and sits on the board of Farmers.