Anyone who has played the board game Risk knows the smartest strategy is capture Australasia before setting out to conquer the world. Risk may have been a powerful metaphor in the past but it doesn’t apply to business in the digital age.
When the product you’re exporting weighs nothing and can travel to its destination at the speed of light, geographic barriers are meaningless.
New Zealand tech companies learnt this early. They latched on the Born Global idea earlier than their Australian counterparts. That’s partly because they are further out on the fringe of the global economy. But they were treading down a tried and tested path.
Global only option for New Zealand start-ups
Unlike Australian firms, New Zealand companies had little choice. The local market is tiny and poor by OECD standards.
Almost every successful NZ business of the last 20 years has exported from day one. The list includes children’s clothes, fashion, biotechnology and booze as well as software and online services.
Most of the economic factors Mark mentions in his post (market size, ex-pat community etc) apply in spades to New Zealand. Here, exports are about 30 percent of GDP. In Australia exports are roughly 20 percent of GDP.
Incidentally, both figures are depressingly low by OECD standards where the average is almost 50 percent of GDP.
Tiny economy, aware of global issues
New Zealand is a tiny economy, but everyone working in it is painfully aware of its relative international insignificance. I’d argue Australian businesses are misled by their seemingly large and buoyant economy and are more complacent about exporting. That Risk strategy looks smarter in Sydney than Timaru.
One significant difference is NZ start-ups don’t tap into overseas investment as much as Australian firms – if this impression is wrong please let me know. Instead our entrepreneurs opt to cash out of their businesses at an earlier stage – in many cases when their business and products are still immature.
I’m not a finance expert, but this tells me New Zealand companies suffer from poor access to venture capital – or if they have access to VC funds, they don’t have access to the right kind of venture capital.