Craig Heatley's Rainbow connection
As a boy, Craig Heatley would flick straight to the business section of a newspaper. By 17 he’d turned a few hundred dollars of paper round money into $17,000 through property development. The boy had instinct.
His next venture was a mini golf course in Taupo, with business partner John Sheffield. Joining forces with entrepreneurs Margaret Tapper and Margaret George, the four established a similar course on Auckland’s Tamaki Drive and formed Rainbow Corporation, which went on to develop the Rainbow’s End amusement park in South Auckland. When Rainbow merged with Brierley Investments in 1987 it had a market capitalisation of more than $600 million. Heatley’s also famous for co-founding Sky TV. His Wikipedia page says he began the pay TV channel with a personal investment of just $1 — but that’s a myth, he says: “our investment in Sky was significant”.
It’s a phenomenal entrepreneurial story all the same. Getting Kiwis to pay for something they’d always got for free took longer than Sky’s founders thought; at one point the company was losing $1 million a week. Now Sky is so ubiquitous it’s become our generic term for pay TV, with a market cap of $2 billion and nearly 1000 employees.
Heatley hinted at his involvement in a new venture when accepting the Ernst and Young Entrepreneur of the Year award in October. He won’t give detail until the new year, but says he won’t be running the show. “I don’t want to be 24/7 on top of a new volcano, which is what it’s really like when you’re starting a business.”
You had great success as an entrepreneur from a very early age, didn’t you?
I’d had a paper round since I was about 11 and I had a few hundred dollars. I got my driver’s licence the day I turned 15 and I’d taken my mother to visit her parents in Levin. I ended up in Foxton and was wandering around the stock and station agent, which also had a real estate section, and in the window there was an advert for this block of land quite near the middle of Foxton, near the racecourse. It was residential land and they wanted $10,000 for it and it was subdivisible, so I went and had a look at it. I realised then that I didn’t have the money, obviously, so I wasn’t in a very good negotiating position. I offered them the asking price, which is unheard of, but on the basis that I only had two or three hundred dollars to put down and the rest would have to wait until titles and all the rest of it [came through].
People must have felt sorry for me. Either that or they thought it was only worth about $6000 and they thought, well who’s this mug and I’ll keep his few hundred dollars anyway. But it all went well and I managed to cobble together enough people to help me without having to pay them. Then we had an auction and people paid a third of the purchase price by way of deposit, which I got to use for services — road and power and so on. I think by the time I was 17 I turned about $300 into about $17,000, which seemed like a million of course. From an early age I was never intimidated by those sorts of things. I can remember when I was about 12 years old, literally with paper round money, finding out who was the biggest broker in those days. I rang them up and asked who was in charge and he took my call. I don’t know if he ever realised how old I was, but I used to chat to him quite a lot about the sharemarket. He must have realised I was a kid because I was investing $30 or $40.
Where did that interest in business come from?
Every time I got the newspaper I’d go to the business section, when all my mates would go to the sports section — and don’t take that wrong, because I enjoy sports a lot. I don’t know where it came from, it was just there. I was trying to make money. I was in Upper Hutt and I didn’t want to get stuck in Upper Hutt and I realised that even as a 12-year-old. I was looking for a way out and that was one that just sort of spoke to me.
So money was the primary motivation?
I wouldn’t have said it was money so much; it was a desire to improve my opportunities. I wanted to get an education, I wanted to travel, I wanted to have opportunity, but obviously those things are more difficult if you don’t have any money. I was trying to learn about how one might ever be able to do that. It was a journey of discovery. I was interested in talking to people who’d made money and I always wanted to know how they did it.
What do you think made you successful?
To me it’s an instinct thing. I’ve learned that in the battle between the head and the heart you follow the heart and that’s served me well. That’s not to say I don’t make mistakes. I have and I’m sure I will continue to, but I don’t get carried away with potential and upside. I focus on downside actually. My philosophy has always been that if I focus on the downside the upside will look after itself. Deals are easy to get into, but often hard to get out of. When I get into one I’m quite keen to know how I’m going to get out of it. I want to know what the risks are. Maybe that’s slightly different to the way other people think. That’s not to say when we started Rainbow I was thinking, ‘how are we going to get out?’ That was a journey that started and grew like a snowball. When we first started we were focused on building, completing and operating a mini golf course in Taupo and that was the extent at that point in time of our vision. Your vision changes as you see other opportunities open up. Then we decided in New Zealand, at that time, there were very few, if any, leisure activities that people could avail themselves of other than what you’d call the natural things that New Zealand offered. We saw an opportunity there.
That wasn’t easy because prior to 1982, with exchange controls you had to get a permit from the Reserve Bank to take more than $4000 out of New Zealand. So you couldn’t just go and buy bumper boats and things. We had to look at ways of making them in New Zealand. Money was certainly a lot more difficult to come by.
But it ended up being quite a ride?
We did the mini golf course on Tamaki Drive, found the site in South Auckland, built Rainbow’s End stage one — that was 1980 — and in ‘81 built stage two. It became a reasonable business and someone said to us, ‘you’ve got the makings of a little public company here’. It wasn’t massive; I think our first prospectus forecasted profit of about $600,000. Even that was a pretty big jump from where we’d been in 1978. We floated that company in May 1984. It had a capitalisation from memory of $6 million. [I saw] an article in the paper recently that showed the market cap of Rainbow at December 1986 at $680 million, which sounds about right. So that was a pretty big few years.
Then came Sky. It’s been called one of New Zealand’s most successful startups, but you’ve talked about it losing a million dollars a week at one point.
That’s not to say we were losing $52 million a year. But at one point our losses were a million dollars a week. That was at its worst. That gets your attention; that focuses the mind. The concept behind Sky has proven to be valid — more valid than we ever thought — but it just took a bit longer to get going than we thought.
In your Entrepreneur of the Year acceptance speech you talked about the important things in your life, namely love, family, friends and experiences. How do they influence the choices you make in business now?
Life’s a balance, right? So when I was 30, because I had pots of money — way more money than I thought I’d ever have — I thought, I’m going to retire, life’s going to be great. That lasted about three months. All my mates were working so I didn’t have anyone to play with, the phone stopped ringing and I got bored. I’m free to make choices a lot of people aren’t and that’s a blessing. On the other hand I’m interested in opportunities if they’re out there as well. I’d be bored if I was just sitting around reading books all day.
What’s your take on the current state of entrepreneurship in New Zealand and do you have any advice for budding entrepreneurs?
My take is that entrepreneurship is alive and well in New Zealand. We’ve got it in our DNA. Courage is an important element. If you want to be an entrepreneur I promise you you’re going to face more than your share of adversity. You’ve got to know that up front and be prepared to deal with it. Most people want predictability, but I guess for entrepreneurs, for whatever reason, predictability’s a bit dull.
As New Zealanders we do tend to have a bit of an inferiority complex about ourselves and our ability to take things to the world. There are so many examples of New Zealanders who have done it that we need to have a little bit more self-confidence. There have never been more opportunities than there are now. We live in a world where we’re all interconnected, all our economies are interconnected, the tyranny of distance is gone. A good idea can just as easily be taken out of here to the world now as anywhere and I don’t think that was the case before. That said, incumbency is not worth what it used to be. Today businesses can’t remain fat and happy because someone will be coming out with a better product at a cheaper price. No one is standing still — you’re either going forward or you’re going back.
2012 Entrepreneur of the Year category winners
Services: Cilla Hegarty, NZ Tax Refunds
Technology and emerging industries: Barry Payne, BayCity Communications
Master Entrepreneur: Craig Heatley
Young Entrepreneur: Dr Sam Hazledine, MedRecruit
Commendations for outstanding commitment to entrepreneurship
Kat Gee, Kagi
Chris Dobbs, Working Style