On Friday I spent a valuable day at Black Barn Winery in Hawkes Bay, NZ, attending the Accelerate 2011 conference. (http://0to60.com / #0to60 on Twitter). This annual conference is put together by Rod Drury of Xero (@roddrury) and Sam Morgan (@samfromwgtn):
“Accelerate is the event for entrepreneurs, business owners and Cx0’s to get together and share stories, networks and experience. More discussion than lectures Accelerate provides the forum to talk about what really works and share those anecdotes that really made the difference.”
This year’s event focussed on business models: how do we secure investment and grow NZ businesses? What are the challenges to overcome? Lots of nuggets of useful information sharing throughout the day and the opportunity to network with really high calibre entrepreneurs and investors. My key takeaways below.
Format of the event:
– Informal presentations, interruptions and floor questions expected. Rod and Sam hauled people out of the audience to answer questions off the cuff. Impromptu, interactive, spontaneous, relaxed, although possibly a few of us rather starstruck to be amongst such illustrious company…? 😉
Sam delivered the first presentation of the day: what he looks for in a business when investing. After earning out of the $750M TradeMe deal a few years ago, Sam Morgan is now an active investor, but from what I’ve read in the media he’s not interested in early-stage businesses any more but rather in going for proven companies which are starting their high-growth phase. Basically he presented what he looks for in an investment proposition, and very little of it is to do with the company’s product or technology. In particular, one challenge he puts to any entrepreneur is to envision what the numbers look like when annual revenues are $100M? Also, interesting observation about NZ’s “Zombie companies” which struggle on with near-zero growth rate: “these co’s just don’t exist in Silicon Valley and the talent gets recycled”.
The rest of the morning’s session was 6 back-to-back presentations from high-growth NZ businesses: Snapper (100% owned by Infratil), VoucherMob, Aptimize, Jucy, Sonar6 and Sidhe. Each entrepreneur presented a timed 10-min “pitch” following Sam’s mandated structure, and focusing almost exclusively on the business aspects of their model. (Valuable takeaway #1: if you’re ever pitching Sam Morgan follow his proscribed format). Thereafter there were very interactive Q&A sessions with each speaker, testing their assumptions and going deeper into the details, including financials – the audience was generally gentle but nonetheless the presenters had to work hard to answer some really searching questions, esp. from the experienced tech investors in the room. (Valuable takeaway #2: know your business – not your product – inside out before going in front of the dragons…).
After a superb 2.5- hour(!) networking lunch under the vines, accompanied by really *really* tasty wine from the Black Barn winery (2010 Syrah mmmm…) it was back – lubricated, natch – into the room for the afternoon session which tackled the key issues raised from the floor in the morning. There was also a presentation from Rod and team on the recent development of the Pacific Fibre business plan, and the process which they went through to raise the first round of investment.
It’s all about the team: investors want to invest in talent, and a team not an individual. Not product or technology, although that’s important too. Get the right team together.
– Low capability, high cost, “apathy” of NZ software development : this was a common theme among all of the tech business speakers. Rod identified the main issue I see which is that the NZ software labour market is structured to support the internal IT of NZ’s Govt and largest domestic companies (largely primary industry), and not independent exporting software vendors. Up until now people haven’t thought that they could have a Facebook- or Google- type career in NZ, and this has a major effect on (1) people willing to join an ISV vs. a big IT organisation, and (2) on labour costs because both sectors are competing for the same scarce talent, and the Fonterras of this world have more money to spend. (For comparison: NZ .NET developer rates are about 4x those in Indonesia, although our games developers are still half the cost of USA).
How do we solve this? Firstly the ISV sector needs to shout loudly that NZ is where any self-respecting developer can have a cool career in tech without needing to go overseas. Secondly ISVs need to get coordinated on overseas talent recruitment – possibly jointly with Govt like NZTE and (in my neck of the woods) Canterbury Development Corporation. Thirdly we need to look at alternative rewards for staff than cash: lock in key talent early on with staff incentive and share ownership schemes. (Although experience from the floor called out that “Gen Y” just don’t want to be locked in at all and want to take cash instead. Fair enough).
– Advantage of being in NZ: you HAVE to operate like a SaaS business when selling: you can’t go door knocking in the US.
– Subscription-based businesses are great: you start the year with X% of revenue ALREADY LOCKED IN.
– Marketing, marketing, marketing: Mike from Sonar6 went into arcane detail on how they operate their targeted email marketing campaigns: really impressive. Jucy is all about the brand. SEO is damn expensive if you want to own a market segment: instead, put your brand out there and get people to Google that. Also, bit of advice when choosing a brand, try to start with an “A” so you’re top of the list. (Like Xero, you mean? :-))
– IPO on NZX: why aren’t more people doing it? Basically you get the advantages of a low liquidity stock and committed investors. However, it was pointed out that in order to go IPO you need a track record with a successful Exit first. There will be a seminar about the whole NZX IPO process at the NZ Hi-Tech awards in March this year.
– Expansion overseas into the USA: getting a beachhead into the USA is pretty hard, and employing a business development manager / sales team is high-cost and high-risk. (Going rate for a good BDM is US$250K apparently.) Things may get a bit easier for NZ businesses however as Rod and Sam outlined their plan to lease some space in a building in Silicon Valley, which will include the possibility of some hotdesks for NZ compnanies: nice one.
NZ Capital shortage: This wasn’t really mentioned, perhaps in the spirit of the event: could it be that there isn’t one – just a shortage of investable opportunities?
Elasticity of Pricing: Putting your prices up 50% can double profit. Are you sure you can’t do it?
And the day was topped off with more networking drinks, burgers and a top band (from Nelson?): Minuit.
Good stuff, thanks Rod, Sam, Odette and team for organising a really enjoyable valuable day.