April 2023 - Bay of Plenty Business News

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12 BAY OF PLENTY BUSINESS NEWS April 2023 Growing unicorns – NZ’s changing start-up and VC landscape By PHIL TAYLOR – PARTNER, TOMPKINS WAKE Entrepreneurs may be the commercial heart of New Zealand, with the start-up sector poised for hockey stick growth, but by international comparison, we still have a long way to go. Thanks to our ability to bootstrap ideas and disrupt stagnant industries, New Zealand has witnessed some remarkable success stories in the last five years. Some starts-up have gained unicorn status by surpassing the market capitalisation mark of $1 billion dollars with a few possibly reaching dragon status – surpassing $1B in a single raise. These include Predict HQ, Timely, Archi- Pro, AllBirds, Harmoney, Red Shield, Petlife, Soul Machines, Hnry, Crimson Education, Vend, Vital, Xero, Unleashed and Rocket Lab. But compared to other countries, such as the US, Germany, the UK, Australia, Israel, and India, NZ is still in an emergent phase when it comes to how we support, fund, and develop new commercial ventures. New Zealand hasn’t seen the enormous wealth from successful start-ups that many of those countries have enjoyed over the last 20 years. So how can New Zealand foster new commercial ventures better and create more unicorns? What’s holding us back? • The Downturn – The current economic downturn is driving venture capitalists to cautiousness and conservatism. We have seen an end to the ‘easy money’ and the seemingly limitless supply of readily available capital of the last few years. The New Zealand start-up sector is well-positioned for significant growth, but there are now likely to be more checks and balances before an investment is made. The onus is on start-ups to get their house in order and demonstrate why they stand out from the crowd. People and emotions will play key roles in investors’ decision making, so getting the right advice is crucial. Fortunately, there is a wealth of accessible and affordable help now available. • Experience and awareness – Many early-stage companies don’t have a firm grasp on how the VC process works or how to attract the right investors, particularly during seed, series A, series B, and series C funding rounds. We have an opportunity to grow founders’ awareness of venture capital and private equity by making it easy and affordable for them to access information, support, and advice. • Misconception – We also need to challenge some of the preconceptions and stereotypes people hold about venture capitalists and demonstrate the valuable role investors play in helping entrepreneurs and our economy. Gone are the days when investors were out to beat founders down, and exercise control as quickly as possible. To be successful in venture capital today, investors understand the need to be a founder-friendly partner who can invest, incubate, and incentivise their entrepreneurial partner. However, more recently, we have seen the balance swing back slightly towards investors. Venture capitalists recognise that terms need to be favourable for all parties. They understand the need to preserve incentives for founders, typically through a healthy shareholding. • Attitude – A lack of ambitious aspiration also hamstrings many Kiwi entrepreneurs. Many are quite happy to sell out for $20-30 million, buy their bach, boat and Ford Ranger ute and retire early. You must be pretty extraordinary to be the leader of a billion-dollar unicorn. But the reality is many institutional VC investors aren’t looking for a start-up that will just do well. They want unicorns. Market growth & maturity Despite all the challenges, now is the perfect time to establish Phil Taylor a start-up. The venture capital landscape has changed over the last four to five years, influenced by growth in the number of venture capital funds and increasing maturity in the market. And it’s been good news for start-ups. In 2002, the New Zealand Government issued funds through New Zealand Growth Capital Partners NZGCP, making $300 million available to the start-up market. This was a real tonic for the sector and made it easier for start-ups to find investor money in New Zealand, rather than looking offshore. Today, we have more than 65 active funds, which has seen investment in the start-up market grow by more than five You must be pretty extraordinary to be the leader of a billion-dollar unicorn.” times over the last 20 years. NZGCP’s funds gave the market time to grow and mature to the point where it is now self-supporting. The influx of international funds that have come into New Zealand combined with investment by homegrown funds demonstrates the durability of our start-up ecosystem. Our talent and innovation will continue to be drawcards for foreign VCs, as will our high education standards and ‘no corruption’ status. We have seen several large venture capital funds mature from a typical initial size of say $10 million fund size to up to $250 million. They now have cash to reinvest and appreciate the benefits of their previous experiences, particularly during tough times. The need for ‘Smart Money’ While venture capitalists are looking for the right start-up, entrepreneurs also need to make sure they’re partnering with the right VC. We call it ‘smart money’, and it is largely about being satisfied with the following three things: • Knowledge & connections: VCs with a deep knowledge of their particular sector. Think of someone who can facilitate connections with suppliers, help recruit the talent the business needs, and offer structured training and support. • Deep pockets: VCs with deep pockets and the ability to help with follow-on funding. This could be through their own fund or other funds they can tap into. As we head further into an economic downturn, start-ups will need larger cheques at later stages, and funds to tide them over to the next round. • People first approach: VCs who know how to put people first and can help avoid founder burnout. Successful VCs understand the importance of putting people first. Forget the accounting and finance metrics. It’s all about the people – looking after them is not just the right thing to do, it’s good business. At Bayleys, we believe relationships are what businesses are built on and how they succeed. We understand that to maximise the return on your property you need: Professional property management A business partner that understands your views and goals Contact the Bayleys Tauranga Commercial Property Management team today. Bayleys Tauranga Commercial Property Management 07 579 0609 jan.cooney@bayleystauranga.co.nz SUCCESS REALTY LTD, BAYLEYS, LICENSED UNDER THE REA ACT 2008 ALTOGETHER BETTER Residential / Commercial / Rural / Property Services
April 2023 BAY OF PLENTY BUSINESS NEWS 13 Out of time? HOW TO SOLVE YOUR TALENT SHORTAGE CRISIS MINING BUSINESS WEALTH > BY FREDDIE BENNETT Guinness World Record Holder, podcast host and bestselling author, Freddie is known as ‘The Profit Hunter’. He helps business owners enjoy more time, money and freedom by discovering and extracting hidden profits in their companies. Freddie@conqueryourmedia.com Many hands make light work. Not very helpful advice for thousands of short-handed Kiwi businesses who feel trapped under a low-capacity ceiling. However, there is a surprising solution for leaders who are bold enough to think differently. Success in business is straightforward. Not easy, but straightforward. Business owners need to get from where they are now, to where they need to be – ideally in the most direct way possible. Now you might accuse me of pretending business success is easier than finding a parking spot at The Mount on a Saturday afternoon in January, but it’s true. Leaders also learn an uncomfortable fact of business and life – when you add other people into your company, then the problems (and the dramas) start to add up. Many of my clients say to me, “we are stretched waferthin by a skills shortage”, and then in the next breath they proclaim, “I really should do some of that staff training ‘stuff’, but I’ve just been too busy”. Ah yes, the ‘b-word’. You’d have these talent gaps filled and skills shortages sewn up… if only you weren’t so ‘busy’. I have some uncomfortable news for you. You don’t have a skills shortage, a talent crisis or a capacity problem … you just have a bunch of decisions that you’re too scared to make. A problem vs a decision You don’t have a ‘problem employee’ – you’re refusing to make and communicate a decision about their performance. You don’t have a ‘capacity problem’ – you’re not making a decision about boundaries and saying ‘NO’. You don’t have a ‘talent shortage problem’ – rather than treating the recruitment of talent as a 365-days-a-year top business priority, you decided to only start searching for a replacement once the previous employee was halfway out of the door. Note (just to prove my ‘tough love’ point), you don’t have a ‘weight problem’, you’re just deciding to put the wrong foods in your mouth. Make different decisions, and the problem goes away. My slightly crazy exploits of hot-footing it across the Sahara Desert, becoming a Michelangelo (a very busy man) had a block of marble. But he took a chisel to it. He removed 80% of what existed. But what remained was the statue, David – a timeless, priceless masterpiece. Guinness World Record holder and running 160-km ultramarathons non-stop mean I am often invited to speak to businesses who have a ‘motivation problem’. But using motivation to ‘rally the troops’ will not fix your talent problem. Motivation is a short-term sugar rush that feels good for a day then leaves you feeling empty. I should know, I tried to ‘motivate’ myself off the couch, the booze and the drugs for years, and I can say with some authority that ‘motivation’ alone is about as impactful as adding yet another traffic cone to Cameron Road. What will fix your talent problem is a bold decision, followed by bold action, followed by the courage of your convictions to keep taking the same action time and time again. The action you must take? … Well, you might not like it…. A key takeaway The self-styled gurus of the business world will proclaim the answer to your talent conundrum is more productivity, and better time management. After all, how else would they create the mental bandwidth to write all those painful LinkedIn articles? I must admit, I prefer to spend my time having fun and making money, but each to their own. A talent and capacity shortage – by the definition of the word ‘shortage’ – leads us to believe something is missing. So, what do we do? We shovel more work into our agendas in a fruitless attempt to fill the gaps: to-do lists, complicated prioritisation activities, weird and wonderful triage approaches and ‘do it later’ piles. At this point, things become emotional. We deliberate, weigh-up pros and cons, and allow ourselves to be sucked into the draining, black hole of ‘tough choices’ – deciding which tasks should be allowed to live another day. So much time wasted; so much emotional currency used up. And you wonder why you feel overwhelmed. Multiply this feeling by each team member, every single day. As if by magic, you’ve created a highly talented sub-industry that’s busily devoted to deciding what tasks to accomplish today, due to the fact that everyone is so damn busy. The solution? Do the opposite. Don’t add. Remove. Think of your time (and your talent) like a rough block of marble, dug out from the ground. If you keep excavating chunks of marble, all you’ve created is a heavy, messy, expensive pile of rubble. Michelangelo (a very busy man) had a block of marble. But he took a chisel to it. He removed 80% of what existed. But what remained was the statue, David – a timeless, priceless masterpiece. Create your masterpiece A fruitless search for ‘more’ will not fix your talent shortage crisis. Capability problems can only be solved with a decision of ‘less’. You and your team are only ‘too busy’ because you refuse to say ‘NO’ to distractions, time-wasters, deliberation, people-pleasing and procrastination. Remove your limiting beliefs. Stop putting things off that you don’t ‘feel like’ doing. Chisel away all thoughts about kicking that project a little further down the road until it lands in the big, scary realm of ‘the future’. Teach your team that ACTION is the answer. There is no ‘triage’, no ‘to-do-list’, no “I’ll see if I get round to it this week”… you have only two options: now or never. If your talent adopts this approach, exciting things happen. They move out of ‘crisis’ and into ‘creation’. If you want to create an amazing team, running an amazing business, focus on creating an amazing day. Today. The best way to predict the future is to create it. Or waste another week listening to the time management gurus. Your decision. Global thinking supports local causes As this edition rolls off the press, I am somewhere between Paihia and Invercargill in a classic mini in the Pork Pie Charity Run. This biennial event raises funds for charity and the 2023 event will again be supporting the wonderful and incredibly important work of KidsCan New Zealand. Before we rolled out of Paihia, we had raised over $30,000 for Kids Can. A significant proportion of these generous donations have been from franchise systems, franchisees and businesses associated with the franchise sector. We cannot thank them enough! In 2019 I wrote Use the force for good – https://bopbusinessnews.co.nz/franchising/use-the-force-for-good/ addressing the misconception that franchises are purely big business, highlighting franchising as a significant force of social good. The collective power of mostly small-tomedium businesses provides social support ranging from creating employment through to direct donations and support of a huge variety of social causes. The Franchising New Zealand 2021 survey provides an excellent insight into the size of the sector’s social contributions. An estimated 590 franchise brands operating in New Zealand operate an estimated 32,357 business units. In addition to employing over 156,000 people and generating revenues of an estimated $58 billion, community support is significant. The survey data identified the median value contributed by franchise brands to community support and sponsorships was $30 000 per year. This figure was up by 46% from the 2017 survey, “highlighting higher levels of community support among franchises. 90% of franchise brands return profits back to FRANCHISING > BY NATHAN BONNEY Nathan Bonney is a director of Iridium Partners. He can be reached at nathan@iridium.net.nz or 0275-393-022 the community. While franchise brands contribute a median of $30 000 a year to the community, 62% of the franchise brands contribute more than $20 000 per year.” That adds up to approximately $18 million in contributions to the community. Closer to home in the Bay of Plenty Auckland is home to the majority of franchise support offices, but Tauranga is a growing regional hotspot with at least nine franchise brands based here. One of those brands is Exceed Franchising. They have a fantastic record of supporting local causes including being behind the efforts to have defibrillators placed on Mauao. For our Pork Pie Charity Run campaign Exceed were behind the challenge to get other franchises to support KidsCan as well as donations from both the corporate office and franchisees. Others such as The Coffee Club and BurgerFuel have a long history of supporting KidsCan and VIP Home Services and Streetwise Coffee have Matt Woodley (left) and Nathan Bonney with their Mini – currently somewhere between Paihia and Invercargill. supported the Pork Pie Charity Run many times. Most of the brands that have supported our campaign and made donations have franchisees operating in the Bay of Plenty. So, please join us in thanking them for their on-going social contributions and support them when you can.
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April 2023 - Bay of Plenty Business News

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