Start-ups showing high sales

Some start-up companies are creating high-value jobs with revenues a third higher than average Kiwi companies, but a leading scientist says we need 10 times more world-class hi-tech firms in New Zealand.

Wellington business incubator Creative HQ says 22 companies which have come through its doors are now generating average sales of about $168,000 an employee and most of them are profitable.

Scientist and New Zealander of the Year, Sir Paul Callaghan said the Wellington region had great potential as a centre of creativity and innovation.

"Clearly we are capable of building world-class hi-tech businesses based in New Zealand. We just need to grow more, about 10 times more," he said.

Creative HQ chief executive Steve O'Connor says a couple of the best alumni companies were now earning more than $500,000 per employee.

For each $1 of funding from the incubator, successful companies were producing about $20 in revenues, but the question remained if the success could be replicated at a bigger scale.

"To drag ourselves up the OECD rankings we need hundreds of these (successes) that go well and go global," Mr O'Connor said, especially with many big corporate head offices moving out of Wellington over the years.

"For Wellington, greater (business) diversity is critical.

"There is a certainly a wealth of capability in the region with technology that can help drive that ... but it takes time," he said.

Since 2003, the Creative HQ has helped more than 70 firms and is at present in partnerships with 22 ventures. Of the 70 starters, 50 to 60 are still trading.

Some of the best performers who have gone through the Creative HQ are in the "weightless" sector, such as information technology, and web-based companies.

An example is Starnow, which is like Trade Me, but connecting TV producers and directors with "talent" for anything from vampire movies to to swimwear models.

It has become a global company, with millions of customers, and is run from New Zealand.

"Like Trade Me, there were four web jocks who wondered how TV producers find their talent and discovered it was still done by little black books," Mr O'Connor said. Starnow was first to do that online.

It was important for a company to think global, rather than grow locally and then think whether they could export, he said.

There was a high failure rate for innovative or new technology companies, early stage start-up companies and new exporters.

Often firms failed because of a lack of capital and cashflow.

The Creative HQ turns away hundreds of applicants looking for help and after a more formal process of vetting, only one in five may be accepted.

The Creative HQ now takes a typical 5 per cent equity stake in companies that it helps. It also charges a fee for firms that work from Creative HQ offices.

There are seven business incubators in New Zealand with funding from NZTE, which is due for review next year.

- © Fairfax NZ News