So farewell, then, 2013…

Well we’ve nearly come to the end of 2013 – a *crazybusyrollercoaster* of a year.

As is customary, here are my highlights of the year just passed…

Christchurch Recovery

It’s been over three years now since the first Canterbury earthquakes and there are clear signs now of a new city emerging from the rubble. Since Memia’s been based inside the CBD over the last year we have been witnessing high rise after high rise being “nibbled” away at and leaving flattened rubble or just a hole in the ground. At the same time, the first new buildings are nearing completion and signs of life are showing as businesses slowly return to the city centre. There’s a sense of optimism that things will get back to a “new normal” over the next few years – and clear signs that the local economy is starting to crank forward a few gears.

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IMG_20131122_140526 IMG_20131122_140033

On a personal level, my family completed our house repairs in the first quarter of this year – we’re some of the lucky ones and my thoughts go out to the many people who are still in the queue to be repaired or even to resolve their insurance issues. The waiting and uncertainty takes such a sustained, heavy psychological toll which the rest of the world just can’t understand. Living through these years of earthquake recovery has been life-defining for me.

But…. I’m still confident that the end result will be a city which attracts the best, brightest entrepreneurial talent from around New Zealand and the globe to work hard and play hard. We can be the Boulder of Asia Pacific if we do things right.

One exciting development was Ian Taylor’s spontaneous unveiling at the CECC AGM of a new concept for Christchurch Cathedral Square – although this debate has since been shut down by the landowners (the Anglican Church, jeez) – we absolutely need non-boring iconic architecture to gain global mindshare. So: If this concept doesn’t make it into the central square, why not put it up over Victoria Square as part of the proposed market place, or central to the new Innovation Precinct.


EPIC Living

EPIC is Christchurch’s new central city Innovation Campus and Memia’s home – it was great last week to see founders Wil McLellan and Colin Andersen celebrate EPIC’s first birthday in style. The building has lived up to many of its aims and in particular has become the collaboration hub for the city’s innovation, technology and entrepreneurial communities. EPIC’s central location has meant that every week there are regular events held by Ministry of Awesome, Canterbury Software Cluster and many others. This EPIC  investment in the city’s young innovators and entrepreneurs will pay off long term.

EPIChub.serendipityThumb IMG_20131213_200100 (1)


Christchurch Startup Scene – Class of 2013

The greatest change I’ve seen this year has been the emergence of a new class of startups based in Christchurch. In hindsight I think the earthquakes just pulled the rug out from under any early stage startup activity – this year a cohort of entrepreneurs has emerged which is plain exciting to watch. Here are just a few of the “Class of 2013” startups to watch out for next year.

goroster DriveSoftwarePortfolio  skilitics3
metrisportlogo pozly shuttlerocklogo
linewize glassjarlogo SiteSortedPortfolio
ironclad iComplylogo billboardme
 Square  LogoBlueWhiteOutline  acornrobotics
  tiktaklogo  SuggestionBox  puteko


Tech Trends

2013 has seen the continuation of three core technology trends which have been driving the direction of the IT and Software industry for the last few years. A few major developments that I’ve been watching:

Big Data

“Big data is like teenage sex: everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it.”  Nuff Said.

Cloud services

Cloud services are now ubiquitous in all areas of consumer and enterprise IT- and has now reached the tipping point that on-premise solution deployment is becoming  a rarity. Even the recently published New Zealand Government ICT Strategy ensures that all ICT should purchase IaaS rather than invest capital. The implications of this on corporate IT are raising their heads now with many IT departments needing to rise to the challenge of operating hybrid on-premise and cloud based solutions, maintaining common authentication, security and service levels across a broad application portfolio spread across the internal datacentre and various SaaS / cloud providers. Expect these challenges to get harder before they get easier!

Meanwhile major industry analysts like Gartner will now only include Enterprise ISVs in the Magic Quadrant if they offer On-Premise and SaaS deployment options. Those ISVs who don’t have a core SaaS multitenant architecture and operational capability need to acquire these rapidly to stay competitive in the markets.

Mobile and BYOD

Likewise for ISVs who are still tied to the Windows Desktop, Silverlight or other technologies which don’t translate to iOS or Android: keep up or be prepared to lose share rapidly. While the market share for PC-devices running Windows seems to be holding up, there is a growing demand to provide responsive web applications and native mobile user experience for BYOD users which is just plain hard to do with a legacy codebase. Rearchitect now, before it’s too late.

Everything as a REST API

SOA is dead. Long live REST. From now on, everything is an API – the RESTful HTTP / JSON stack has proven itself to be sufficiently robust, flexible and secure in many consumer, SME and enterprise use cases and from now on these REST APIs rule. Application Management vendors like Apigee and Apiphany provide great capabilities to wrap your enterprise APIs publicly and/or privately APIs and accelerate integration efforts. Still problems with latency for mission critical high usage apps but these will be ironed out over the next few years…


There was a clear winner in emerging web application development stacks in 2013 – Node.js . Although still niche (only 0.05% of global websites run Node at last count) Node’s growth is impressive. I’ve run a couple of projects on Node myself this year and have been impressed with the clean, relatively rapid results. Currently there’s a growing undercurrent of developers adopting the full top-to-bottom Javascript stack – watch this space grow further in the next year.

 Wearable Tech

2013 was the year when wearable technology took off. All sorts of bio monitoring, productivity enhancing, lifelogging devices hit the market or pre-launched. The key point to appreciate here is that all these wearable devices are actually just sensors attached to your Personal Cloud – how to store and what to do with all this data are the next big questions.

As usual I really enjoyed TEDxChristchurch this year – when I joined the ranks of White Men Wearing Google Glass and try out the latest Oculus Rift prototype. Blows your mind.


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Kickstarter Launches In NZ!

Towards the end of the year Kickstarter launched in New Zealand.


quebee_logo  Really impressed by the team at Quebee from Auckland – their mobile digital camera offering has been getting lots of coverage and they’re nearly there on their Kickstarter campaign.

linewize Also, Scott and the team from Linewize had a brief foray into Kickstarter earlier this month.

I’m looking forward to seeing more Kiwi startups using this funding platform to get off the ground next year. If anyone’s interested in “how” – let us know and let’s see if we can get some of the early pioneers and the Kickstarter team themselves to do a presentation in early 2014.


Understanding the SaaS Industry

Perhaps the biggest advance for me personally this year has been the rapid maturing of a common understanding of the core metrics of the worldwide SaaS industry – and recurring revenue businesses in general. This year I’ve put out a few posts on the online literature in this space, but to repeat myself here are the best resources for your Christmas reading!

David Skok – For Entrepreneurs SaaS Metrics 2.0 – (Rewritten Jan 2013) A Guide to Measuring and Improving What Matters

Bessemer Venture Partners – 10 Laws of Cloud Computing

Kissmetrics – The 5 “Must Have” Metrics for Your SaaS Business.

A Smart Bear – COC: A new metric for thinking about cancellations in SaaS business models

Dave Kellogg – What Drives SaaS Company Valuation? Growth!

Tomasz Tunguz – The 10 Most Important Metrics In A Startup’s Financial Statements

Christoph Janz – A KPI dashboard for early-stage SaaS startups – new and improved!

Canterbury Software Summit

Another highlight (as part of my erstwhile role as Chairman of the Canterbury Software Cluster) was to hold yet another successful Canterbury Software Summit event. This year we had to close down registrations once we’d hit the venue limit of 530(!) – over 20 speakers in four streams and great keynotes from Claudia Batten and Wynyard CEO Craig Richardson, a new trade show and it was just great to see our local tech industry in such fine shape! I’m looking forward to serving on the Cluster committee in 2014 under new chairman Geoff Brash – let’s see what the next year holds.




The New Zealand ICT Industry is Booming

And not just in Canterbury but across the whole of New Zealand the ICT industry is booming. The latest TIN100 report reveals that NZ’s IT Export sector is now worth over $5Bn per year – and growing at >3% per year.


This year’s inaugural New Zealand Tech Innovation Week conference in Auckland was fantastic – look forward to the repeat in 2014.

Check out the superb stock market performances of Xero, SLI Systems, GeoOp, Wynyard Group, Snakk Media  (and even Diligent once they sort out their accounting systems….). Also other privately held high flyers like Vend and Vista.

Who’s next? Plenty of new talent coming through but my pick for next year would include ARANZ Geo, makers of the Leapfrog 3D geological modelling system: stellar growth over the last couple of years has led to revenue growth of 42% to nearly NZ$12M in FY13 – with more to come I expect. Also watch out for Christchurch software development superstars Trineo making it into the top rungs of the Deloitte Technology Fast 500 Asia Pacific.


Best Science Fiction of 2013

OK so that’s enough about work. In between it all this year I managed to get stuck in to some great books – mostly sci fi as usual, here are my recommendations.

Nexus by Ramez Naam – great near-future action novel about what happens when you can hook into a group mind…


Alastair Reynolds – Blue Remembered Earth (Poseidon’s Children #1)


The Owner Series – Neal Asher.  Believe me this is not for the faint hearted – a dark, dark future vision of humanity’s near future, but gripping from start to finish.

owner_1 owner_2 owner_3

2013 also saw the sad departure of literary genius Iain [M.] Banks, a local to my previous hometown Edinburgh. Banks spanned both contemporary fiction and science fiction, and has left a huge legacy with the Culture series. His last Culture book, The Hydrogen Sonata, replays common themes and explores the mysterious concept of “Subliming” (basically when an entire galactic civilisation in the Real decides to migrate en masse into the Sublime (the hidden dimensions of the universe…) . Mind expanding.


Best Science Fact

Some may argue with the “fact” bit, but Ray Kurzweil’s book How to Create A Mind which he released this time last year is pretty thought provoking. Do you think of yourself as a massively redundant hierarchical pattern recognition machine? Maybe you will after reading this…



Best TV Drama

Also managed to enjoy some superb TV Drama this year, including:

Game of Thrones Series 3

game-of-thrones-season-3 (but READ THE BOOKS first!!!) a-game-of-thrones-the-story-continues-the-complete-box-set-of-all-7-books


House of Cards – Kevin Spacey and Robin Wright are just fantastic in this Washington re-imagining of the Original British Political Drama from 1990.



And from my wife’s descendant homeland Denmark comes this high quality political drama (although it takes itself slightly too seriously…)  based on the country’s (fictional) first female Prime Minister. Currently just starting Series 2 – Series 3 to come…


Best Movie of 2013

Hardly got to see any films this year, *too busy*. Gravity wins by default.


Coolest Quadcopter Juggling

OK this is one of the coolest things ever – juggling a fleet of quadcopters using a Microsoft Kinekt.

Coolest Johnny Depp Movie about the Singularity coming in 2014

And I just saw the first trailer for next year’s Transcendence movie come out. Bring it on.


Best wishes to all Memia’s customers, partners, friends – thank you all for your business, support and great conversations over a Macchiato at C1 or a quality pint of Best Bitter at CBD.

Have a totally relaxing holiday break and we look forward to seeing you refreshed and ready in 2014!

I’m off to the beach. 🙂



New Zealand SaaS company valuations – something in the water?

OK so Kiwi investors are finally cottoning on to this SaaS game, right? Xero, SLI Systems, Vend, GeoOps, Diligent… – all subscription-based recurring revenue businesses with strong management teams, happy customers  and consistent growth. But often not profitable, no sign of a dividend for years to come – a concept that until recently was just alien to traditional NZ investment community.

Yet Xero is now up there on the market cap leader board on the NZX – recently just over NZ$5Bn – and still hasn’t made a profit. Their most recent interim report states that the company is “continuing to follow a growth agenda focused on creating longer-term shareholder value rather than short-term profitability”.

In all likelihood with businesses like this, there are only three possible options for shareholders to realise their gains:

A) Trade sale to a bigger international player.

B) IPO (if it hasn’t been done already)

C) Hang around until the company reaches a growth inflection point, stops burning cash on R&D and Marketing, farms their customers for 7+ years and starts paying a regular dividend

You’d have to be a very loyal shareholder to wait for Option C. So what’s going on with the valuation?

I thought I’d just run the numbers and see how the – let’s face it, *exuberant* – valuations of some Kiwi SaaS companies compares against recent international (mainly US) research and commentary.

There are three good jumping off points that I’ve found from the last year which discuss valuation dynamics of recurring-revenue (SaaS) businesses. All three point to Revenue Growth Rate as being the primary – but not only – determinant of  valuation multiple:

Dave Kellogg: What Drives SaaS Company Valuation? Growth!

Dave Kellogg is the CEO of Host Analytics, a cloud-based enterprise performance management (EPM) vendor.

Forward revenue valuation multiple = (Growth rate % / 10) + 1


(Source: David Kellogg)

David Cummings: Quantifying the SaaS Valuation Growth Rate Multiplier

Valuation = (2*ARR) + (ARR*(1+(GRM*GR)))

(ARR = Annual Recurring Revenue, GRM = Growth Rate Multiplier (assume ~ 2.5), GR = Growth Rate)


SaaS Capital: What determines your SaaS Company’s multiple?

saascap valuations

(Source: SaaS Capital)

Again, a clear correlation between revenue growth and valuation multiple. (Check out the whitepaper What’s Your SaaS Company Worth that these guys have published as well – a pretty comprehensive framework which includes other factors including Addressable Market Size, Customer Retention, Gross Margin and Customer Acquisition Costs(CAC).

So, given these recent analyses how do the handful of NZ SaaS vendors with publicly available data stack up?

I’ve given it a quick crack and come up with the following figures. Happy to share my workings if anyone’s interested – several guesses made around Gross Margin (not all companies report consistently)  – that may skew things a bit, but nonetheless the numbers tell a story: when it comes to Kiwi SaaS firms (especially those aligned closely with the Xero ecosystem) there’s something in the water. Question is: what is it and who’s drinking it?

Company ARR (NZ$) ARR Growth % Market Cap (NZ$) – Dec 2013 Kellogg Multiple Cummings Multiple Actual Multiple
Xero  $70.6 million (source)  82% $3,900 $4304* million

9.2 5.05  55 * 61
SLI Systems  $19.3 million (source)  25% (forecast) $115 million 3.45 3.61 6
Diligent  $70.3 million (source)(US$58.3 million)  80% $316 million 9.00 5.00 5
GeoOps  $1 million (? 4500 paying users at $20/user/month with churn and discounts?)  100% (? Charitable guess) $53 million 11.00 (?) 5.50 (?) 53 (?)
* (Doh! use NZ$ not US$)

If you’re running a SaaS firm and want to run your numbers through the spreadsheet and see how you compare, get in touch.