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Judging by incoming mail, press releases and social media, technology start-ups think we care about their money-raising.

They often spend precious resources telling us how much they have raised or expect to raise.

Start-ups also want to tell us they or were mentioned in an important publication or were invited to take part in an event. I’ve seen press releases boasting about some allegedly famous venture capitalist, who no-one in New Zealand has heard of, making a passing comment about a start-up.

So what?

None of this is news. Almost no-one cares. That’s not media rudeness or arrogance. That’s what access to web stats tells us. We know readers don’t click on those stories. They are not interested.

They don’t care much when the start-up is in their own town and involves people they may know. They care less if the boast comes from a start-up based halfway across the world.

And yet still the deluge of press release material and assorted marketing hype continues to flow.

Bubble

The world of venture capital and start-up finance exist in a bubble. One that rarely connects to the real world.

Things that matter inside the bubble have little resonance outside.

No doubt the latest funding round is of utmost importance to everyone involved in the start-up.

But until there is something tangible to show, the press releases are just so much noise and wasted public relations effort.

They can even harm the business, because journalists will see them as attention-seeking time-wasters and ignore the start-up when there is something worthwhile to say.

For the rest of us, start-ups only become interesting when a product or service ships. The product has to useful or fun. It has to have a real market. It has to be better, cheaper or otherwise different from what has gone before.

Now tell me something interesting

Now here’s the curious thing. Most of the time the product or service being developed is interesting. The idea that kicked-off the start-up may also be interesting. Far more interesting than much of the banal waffle the public relations types push our way.

If you want to create a buzz about a new product, service or other business, tell us why it is better than what went before. Explain how improves lives, saves time, entertains us or boosts productivity.

Don’t bore us with dry financial details, save that stuff for your investors. Instead get us excited about the proposition.

There is a time and place to talk about money. Rod Drury has made some important points in the past about Xero’s war chest and spending strategy. That information is only interesting because we already care about Xero.

Drury and his team told us all the key who, why, what stories years ago. We’re hooked. So when he talks about the money raised and what he intends to do with it, it’s a message worth hearing.

Rain, Steam and SpeedLast month Economic Development Minister Steven Joyce issued a report on the state of New Zealand’s technology sector. It says the sector is “strong” and “fast growing”.

In other words, the NZ tech express is leaving the station.

What the report didn’t say is that the engine pulling that train is a single company: Xero.

Xero on track

Yesterday Xero announced it now has 500,000 customers. At the last count the company had about a quarter of a billion in the bank.

These two numbers tell us New Zealand could soon be home to a global technology giant on the scale of Apple, Google or Microsoft.

Xero’s brand is already well-known around the world. Forbes magazine ranks Xero top of the World’s 100 Most Innovative Growth Companies.

New Zealand wins

That success is good for New Zealand. We’ve long had a reputation for developing quality software.

Thanks to Xero, we now have a reputation for developing and selling world-class technology.

We’re on the map as a nation of innovators. The world is taking notice.

Ticket to ride

If we’re smart, we can all hitch a ride on Xero’s success. The company’s emergence on the world stage gives us a once-in-a-lifetime opportunity to transform and diversify our economy. This is our chance to position New Zealand for the 21st century.

Technology engines like Xero don’t pass by often.

Growing the NZ tech sector

While there’s no room for complacency, we’re doing well. Overall New Zealand’s IT service exports grew 14 percent year-on-year in the six years ended 2014.

MBIE reports total IT exports are now $930 million. Software exports increased from $166 million in 2012 to $300 million in 2014.

Research and development spending grew at an annual rate 14 percent during the last decade. Technology related employment was up 6.5 percent.

Companies listing

New Zealand now has more than ten listed technology companies. Those tech companies now make up 10 percent of the NZX by market cap. They all export.

It’s a success story by any standard, yet New Zealand’s outstanding technology performance has a narrow base.

Xero accounts for about half of the New Zealand tech sector by market capitalisation. Last year it was behind one-quarter of the sector’s export earnings. It makes up 20 percent of the research and development spending and created one in ten of new tech sector jobs.

The fresh capital raised by Xero in 2014 was five times the total amount raised by all young NZ technology companies in 2013.

Leadership

Beyond raw numbers, Xero is showing younger New Zealand tech start-ups how to tackle problems such rapid international growth from a relatively remote base. It has put New Zealand on the map for international technology investors.

Savvy investors come to town to see Xero, that gives the next generation of entrepreneurs an opportunity to showcase their ideas to the people with money. It’s an opportunity that didn’t exist five years ago.

AWS Summit Auckland Rod Drury
Xero CEO Rod Drury at the Auckland AWS Summit

Xero’s marketplace

A sub-set of smaller start-ups is directly dependent on Xero. They are part of a vibrant marketplace that has grown up to develop products and services around the company’s accounting software-as-a-service business.

There are some 400 app partners trailing in Xero’s wake. Many are New Zealand-based.

By building tools that work with Xero, they get immediate access to ready-made customer list. That’s half-a-million potential customers from day one.

Inspiration

There’s another effect. Xero acts as a training ground for the next generation of software entrepreneurs and as inspiration for future generations.

High school students and university undergraduates can see for themselves that building a world-class technology business in New Zealand is not unrealistic. Our young entrepreneurs now know they don’t need to fly to Silicon Valley to get started.

That will please Mum and Dad. It will also please the so-called Mum and Dad investors who’ll have access to growth stocks to help fund their retirement.

If we act sensibly now, Xero’s surge today could have an effect for years to come.

It could reboot the entire economy. That’s vital. The recent fall in the dairy price underlines how important it is to move away from depending on commodities.

Beyond tech

Xero’s pay off goes well beyond the technology sector. More than one-in-five small businesses in our nation of small businesses use Xero’s software. That already makes us one of the most advanced business cultures anywhere in the world.

Thanks to Xero our panelbeaters and plumbers are online and in the cloud. They will be reaping huge efficiency gains from this long before their counterparts overseas.

Xero spin-off benefits will accelerate. Having a large slice of the nation’s companies online and in the cloud means government can move fast to modernise the way it interacts with business. We’ll be among the first wave of countries integrating our tax system with cloud accounting. We could even be first.

We’ll have experts here who can teach the world how to become more effective business owners and managers.

Leverage

Likewise New Zealand’s large business-to-business suppliers are finding ways to leverage Xero. Among others, Warehouse Stationery links direct to Xero making things easier for customers.

Paymark is working with Xero to end paper receipts. These are great for productivity. Finally we are in sight of the promised ‘frictionless commerce’.

Xero has already changed New Zealand. It’s galvanised our technology sector, inspired a generation of entrepreneurs and eased the load on small business.

There could be more. More Xeros or Xero-like companies would mean more export earnings, more high quality investment and more great, well-paid jobs. It would mean we would keep our brightest talent and attract the best brains from around the world.

New Zealand tech companies don’t come much bigger than Datacom. The company is also old by industry standards. It started in the 1960s. For years Datacom deliberately stayed out of the public eye. It prefers to keep its own counsel and communicate directly with customers.

Despite that, there’s nothing staid or complacent about Datacom.

My interview with CEO Greg Davidson for the New Zealand Herald Innovation feature focussed mainly on the company’s datacentres. Davidson says Datacom took a bold punt pouring money into a huge Auckland facility just as global economies were tanking.

He says the company deliberately fosters an internal innovation culture. In effect he said there are virtual start-up teams and there are competitive events where Datacom developers work start-up style.

Big technology companies often claim they support internal entrepreneurial activity. Often it’s a matter of paying lip-service to the idea. Partly it is a way of keeping developer teams happy.

Datacom workers innovate outside work hours

Davidson made it clear Datacom’s entrepreneurial culture is more than skin deep. He told me the events often take place outside normal work hours. They are popular and well attended. Although he didn’t say so, it was also clear the company’s senior management stands squarely behind these activities.

Tech feature writing works best when you focus on one or two big ideas, throw everything in and it gets hard to follow. So I left this material out and made a note that it could be worth a follow-up later.

Then I spoke to Mohit Singh for a story about Garden Genie. The team won top prize at the Auckland Startup Weekend in November. That’s an achievement. But it went on to win the global ecommerce prize. Team members are now in Austin, Texas working in an incubator to get their idea ready for market.

Singh works as a developer for Datacom. Moreover, he works on phone apps.  You’d think that might mean a conflict: a motivated, smart entrepreneur delving away in a tech giant. Singh told me he has nothing but encouragement from his managers – presumably including time off work to take up the prize. Nothing serves as a better illustration that Davidson means it when he talks about fostering an internal innovation culture.

One of my more enjoyable writing jobs is working on the The New Zealand Herald’s annual Innovation report.  It’s a subject that’s close to my heart and it means I get to talk to interesting people about fascinating ideas.

In one story, Microsoft cloud seeds next start up wave, I look at the Bizspark programme which helps technology start-ups by giving them free software, free cloud computing and advice. The results speak for themselves:

To date some 655 New Zealand companies have joined BizSpark and 212 have graduated. The graduate roll call includes some of the brightest young stars in our tech sector, among them are: Pingar, GreenButton, Find.ly, TranscribeMe and Timely.

If New Zealand can spawn a handful of start-ups of that calibre every year, we’re on track to becoming a technology superpower.  

Microsoft New Zealand is generous with the Bizpark offer. In effect, it means start-ups don’t need to pay for technology infrastructure or software until they have money coming in. There were times in the past when I’ve involved with tech start-ups and could have done with similar help.

It’s also clever, getting the next generation of successful technology firms hooked on Microsoft’s software and service infrastructure from day one. That’s going to be a hard habit to break.

And there’s something else. Publicly Microsoft talks about moving from being a software giant to becoming a software, services and devices company. It’s not a bad plan. But the reality is that, for now at least, Microsoft’s greatest strength lies behind the scenes.  It supplies a lot of important plumbing and stands behind a vast array of other people’s innovation and success.

That’s every bit as worthy and possibly more lucrative than being centre stage. Standing behind the next wave of innovators is a great way for an elder statesman like Microsoft New Zealand to stay relevant and in touch.

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Sean Gourley addressing the crowd at TechEd.

How does Silicon Valley view New Zealand’s technology start-up scene ?

I asked San Francisco-based New Zealander Sean Gourley after he gave the keynote address at this year’s Microsoft TechEd conference in Auckland.

Gourley says if I asked two years ago, there wouldn’t be an answer. New Zealand didn’t exist as far as those working at the sharp end of the technology business were concerned.

Enter Peter Thiel

He says three things changed that. First was Peter Thiel. Gourley says the entrepreneur has a huge influence in the tight-knit world of Silicon Valley.

Thiel’s Valar Ventures has a partnership with New Zealand Venture Investment Fund.

Everyone watches everyone else, so when Thiel started taking note of New Zealand so did other investors and entrepreneurs.

New Zealand’s second appearance on the Silicon Valley radar is thanks to Xero. The emergence of a cloud accounting software company from nowhere – or at least nowhere as far as people in the Valley are concerned – saw eyes cast across the Pacific. Now those eyes are looking at other New Zealand cloud computing ventures.

Hobbits help too

On a lighter note, Gourley says people in the valley also woke up to the creative digital movie work coming from Wellington. They see Peter Jackson and his team as genius-level creatives.

Physicist by training, Gourley is the co-founder of data analysis company Quid. He was a New Zealand athletics champion and a Rhodes scholar. At TechEd he told the audience how augmented intelligence can cut through complexity to improve decision-making.