Kiwi entrepreneurs investing back

Last updated 05:00 05/12/2014
Trade Me founder, Sam Morgan.

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They've been there, they've done it, and now the likes of Sam Morgan are backing a new generation of Kiwi entrepreneurs to build thriving businesses. 

The idea of success begetting success is one of the strongest themes in this year's Deloitte Fast 50, which features a number of startups that have either been launched or backed by individuals who have already enjoyed a taste of success. Think Vend, the promising point-of-sale software outfit whose backers include Trade Me's Morgan. Or consider the case of Seeby Woodhouse, who in 2007 and barely into his 30s sold his successful internet service provider Orcon and then cooled his heels under a restraint of trade, before bursting back onto the scene with Voyager Internet, the country's fastest growing company in 2014 with a spectacular expansion rate of 1391 per cent. 

Is this evidence that the New Zealand investment and high growth business community has finally reached some threshold of maturity? Deloitte partner Darren Johnson thinks so. "We're getting into second and third generation startups now. We've got people who've done it in the past, who understand the startup game and are now reinvesting in the next generation. It's making the entire ecosystem much bigger."

It should be noted, too, that the 2014 Fast 50 is made up of companies enjoying greater growth than ever, with a threshold of 200 per cent compared with 162 per cent last year. 

Given the historic lack of investment in New Zealand, these are promising signs, Johnson remarks. "A lot of people feel they need to go the US to chase capital, but I also think that if you've got a sound business model then there's capital here now that understands that startup space. Our maturing investment community is starting to understand the benefit of having a portfolio with these higher risk investments."

Wellington-based investment firm Movac was one of Trade Me's earliest backers. More recently, Movac has thrown its weight behind regenerative medicine startup Mesyntheses (number 12 on the 2014 list). Movac managing partner Phil McCaw says the investment in the life sciences venture, which has also been supported by Sir Stephen Tindall's K1W1 fund, was a leap into unknown for Movac. 

"We really made that investment in behind [founder] Brian Ward. We liked the space and the way the company was positioned, but fundamentally we saw Brian as a mature entrepreneur with scientific and business expertise. He convinced us he was backable."

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Progress has been slower than had been anticipated, but Mesyntheses now has a head of steam, with a first product launched in the US. 

McCaw characterises Movac's support for Mesyntheses as symptomatic of a maturing ecosystem. It's been nearly ten years since the Trade Me days, so good things clearly take time, but he can sense momentum building. "It's somewhat sexy now to get involved in startups, and entrepreneurs who've already enjoyed some success are seeing that they can help out. Most of these people are interested in continuing their business experience. They don't want to ride off into the sunset or play golf."  

Attitude is certainly part of it: successful business people seemingly want to invest back in "NZ Inc". But BNZ chief economist Tony Alexander sees a decade-long trend at play. "Overseas, people who've made money expect to partake in new ventures where they could easily handle a loss if it all goes wrong. Historically in New Zealand a lack of depth of individual wealth has limited that particular risk-taking. But we have seen some prominent Kiwis do particularly well over the last few years and they're now willing to take some risks.

"In the past, too, wealth may have been built up in the farming sector and it tended to stay in that sector. But we are now seeing people who have made their wealth outside of farming and who have more of an open attitude to other industries and ideas. So long as it continues it could lead to some diversification of the economy."

Seeby Woodhouse says he never expected to get back into the IT space. After selling Orcon, he concentrated his energies on building a commercial property portfolio. "But I just kept seeing opportunities. And after owning your own ISP, having to be a customer was a frustrating exercise. I thought 'God, if companies still haven't got this stuff sorted maybe I need to do my own again'."

Voyager's selling point is speed, including connections fast enough for high-definition video conferencing. The company is a more complicated beast to manage than Orcon, but Woodhouse has the advantage of a decade's worth of experience on his younger self, if not quite the same relentlessness.  

He enjoys seeing the likes of Sam Morgan staying involved in the IT startup space. "But I don't think we can rely on the old guard to keep driving growth," he adds. "You need a balance between youthful energy and ideas, and experienced people who can help them mature."  

- Unlimited

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