Too many drivers on the NZ startups rally course

OPINION: Last week a few old mates and I joined about 250 of the automotive faithful, racing in the Targa road rally.

Based around the Bay of Plenty, it featured 16 sections of public road closed and marshalled, with a temporary speed limit of 200kmh. From the tight and twisty to the open and fast, the two days offered up a smorgasbord of macadam.

After a disastrous outing in last year’s Targa we were back with a new car. And we did OK – finishing second in the modern 2WD two-litre category, not terrible given we were in a 20-yearold Honda 1.6.

Apart from the privilege of racing on public roads, one of the best things about the Targa is the diversity. There is everyone from greybeards ticking off a bucket list event with a $5000 car, to millionaires racing exotica with $500,000 engines (and writing them off).

But the most interesting team was 29 Japanese students from the University of Tokyo and the Honda Technical College who spent the last year preparing two 40-year-old Honda Civics and an old Levin.

While they failed to win the rally, they won the hearts of competitors with their engineering skill, gracious demeanour and cool cars.

The Japanese students weren’t just engineers, they were also businessmen negotiating support and funding of everything from parts, to freighting out three race cars and a five-ton truck.

I suggested it was a good effort for a bunch of varsity students. They replied that they were proud of their efforts, but also noted that Japan had a clear ecosystem for such ventures.

The idea of clarity around ecosystems struck a chord with me as I recently got asked to explain the New Zealand technology startup and early-stage support ecosystem to some entrepreneurial migrants. It’s a subject I have some passing familiarity with, but listening to myself explain it I realised it was as clear as mud.

The good folks at Creative HQ, Wellington’s startup base, tried to chart Godzone’s startup universe. Their map has over 115 participants – from funders to educators, accelerators and capital investors.

And there’s the first problem. New Zealand has the population of a small American city but an ecosystem bigger than Texas. We’d be better off with a third of that number.

It’s hard enough to productise great technology and sell it, it’s a lot harder when you’re trying to navigate an ecosystem of 115 players.

Within this ecosystem some groups are over-represented – accelerators for one. There’s more accelerators than you can poke a stick at and with too little money behind them.

Other players are underrepresented. Venture capital providers are at the top of that list. There’s solid support sources available for expansion capital and growth capital, but real venture capital is pretty thin on the ground, as articulated recently by Movac’s Phil McCaw.

At a government level there are three big support outfits – or more accurately two large organisations and a network of regional ones. The two organisations are Callaghan Innovation and NZTE.

The former offers a range of funding focused on subsidising research and development costs. The latter helps exporters accelerate growth in international markets.

Both invest alongside the companies 40/60. Alongside this, regional government offers a range of programmes through entities like ATEED, WREDA and CDC.

Trying to work out who does what across these three groups isn’t always clear and can result in random outcomes as to which companies get funded and which don’t. And that’s my last gripe.

Too much of the current narrative is narrowly focused on getting cash. As Creative HQ’s Nick Churchouse once told me, anyone who walks in asking where they get the money is asking the wrong question.

A good ecosystem is not just an ATM. More important is a plan, some hard-won wisdom, some irresistible functionality and a monetisation model.

Its time we rewrote the narrative here. It needs to be simpler, with fewer but deeper options and it needs to be bucketed around life stages. And we need eco-participants that focus on those stages.

Bucket one is two folks with an idea and a working beta. They need a warm room, UFB and the ability to tap a couple of longtrousered types.

Bucket two is a company actually trading, albeit with revenues of less than $1 million. They need to scale.

Bucket three have started to scale and probably have 15 or 20 bodies and $2m or $3m of unprofitable revenue.

Bucket four have stepped it up and are ready for the next step. They’ve got more than $3m of revenue and are getting ready to employ staff overseas.

The trick to getting great times in rallying is having a simple narrative around accelerating, braking and turning. You can’t do all at the same time.

Right now New Zealand needs a simpler narrative when it comes to supporting our tech export industry. And that means doing a better job of doing less.

❚ Mike ‘‘MOD’’ O’Donnell is a professional director of technology companies and a very amateur rally driver. His Twitter handle is @modsta and being from Timaru he likes simple narratives.