NZ Startup Ecosystem, you’re doing it wrong.

By Dominic Geddys-Cook from Bay of Plenty.

I started Mum’s Garage to solve a broken system. To begin with the broken part was the fact that entrepreneurship was really only accessible for a small group of people. Most New Zealanders don’t have the networks, money, education or confidence to take the first steps to develop their ideas, and there was no option or organisation that addressed this issue and made entrepreneurship accessible or less “elite”.

But the more time I’ve spent in this space, the more I’ve come to realise how broken the system really is. It’s not just the starting point that’s causing a problem, it seems there are holes and tangles in the whole system.

Here are my thoughts on a few of the things we seem to be doing wrong, and what we should be doing better. These thoughts are supported by multiple interviews I have had with founders over the past year. Thank you to everyone who has contributed to this thought process in some way or another.

1) We’re trying to build another Silicon Valley.

We can learn a lot from SV, but we shouldn’t focus on trying to recreate it.

We don’t have the right fundamentals, which I’ll touch on later, and NZ lacks capital and high-quality advice which is best sought from outside of NZ. To attract offshore interest and investment (particularly from SV investors), we should be focusing on what we can do differently, or better.

We need to utilise our unique value as a country to create unique companies that can hold their own of a global scale. Agriculture, horticulture, biotech, forestry, tourism and other industries where we have regulatory or cultural advantages.

“What valuable company is nobody building?” Peter Thiel, Zero to One

What valuable ecosystem is nobody building? This is the question we should be thinking about.

We can take a lot of learnings from SV, but the focus should be on how we can create an ecosystem that plays to our strengths and creates the companies that SV does not. This will give us better access to global funding too.

2) Our ecosystem is built by investors for investors, not founders.

Silicon Valley is a great ecosystem great because it’s a self replicating founder network. Founders receive investment and mentorship from people who are ex-founders themselves and have an acute sense of direction and understanding to the challenges they face. Founders run the accelerator programs, investors are founders, and the ones that are the best are the most founder focused (enter Y-Combinator).

Investors who were founders themselves, understand the intrinsic factors that go into building a great business in the current environment. They have a better understanding of what to look for in a person, rather than just what to look for in an idea. This is because they understand the personal development journey necessary to build a great company and the power of a vision. They also know the founder is the best person to make the decisions for their business, and their job is not to tell them what to do, it’s to provide them with guidance so they are able to make the best decisions.

In NZ, startups are still largely funded by old school money and with that comes old school expectations. We have a scarcity mindset and everyone is out for a piece of the pie. There is a big gap between the reality of some investors and the reality of founders, in the sense that investors (or their representatives) don’t seem to understand founders or how to help them build successful companies in this current environment.* It’s been on more than one occasion that I have heard high quality founders say that there are not many investors in New Zealand who they would take money from.

The focus needs to shift from making returns to building better companies. You build better companies by growing better founders (and teams) and enabling them to make better decisions.

*there are obviously exceptions to this.

3) Too many advisors, experts, investors dictate what start-ups need to do.

No one knows what an individual company needs to do better than the founders. The worst people are those who pretend they do. The best people are those who asked the right questions to help founders filter through their own thoughts and reach the right decision on their own.

4) The startup space is institutionalised.

The same money keeps getting pumped into the same places, which keep doing the same things, which doesn’t seem to be working.

“Insanity is doing the same thing over and over again and expecting different results” — Albert Einstein

To be funded you need to conform to a standard, which by nature pulls you into the structure and you too become institutionalised.

The people with the purse strings should be talking to start-ups and the people on the ground to find out what needs to be done in the space, rather than giving the money to the people who put together the best proposal on paper. People who care about helping their customers are focused on just that, generally they don’t have time to put together 50 page applications.

This will change when the “second wave” of entrepreneurs emerge, people who have made a lot of money recently from building a start-ups and don’t need government funding to survive.

5) New Zealand’s biggest problem when it comes to developing our start-up culture is that most people don’t have the mindset or the start-up acumen to start a business.

This is the big fundamental problem.

There are only a very small proportion of people who are actually involved in the startup space, and they’re all situated in small pockets in Auckland, Wellington and Christchurch. What about everyone else?

There are a lot of kiwis with brilliant ideas, but no idea how to take the next steps to turn it into anything. No one teaches start-up business on a large scale and we don’t have a culture favourable to starting a business.

Our modest kiwi mindset is great for some things (making friends with other countries), but it’s not great for building large-scale businesses. We don’t talk about our great ideas or big visions in the way that we need to actually make traction. We’re also terrified of selling — we don’t sell ourselves very well and we don’t sell our products very well either.

This makes starting a business hard. It means that a lot of work needs to be done at the start of the journey, to help people take the first steps and talk about their idea, talk to customers and make something people want. This is probably the area where we are the most different from the U.S., yet it’s the area that hardly anyone talks about.

So we’re trying to build another Silicon Valley, by creating the infrastructure, accelerator programs, and investment incentives, but we don’t have the fundamentals right. America has American Exceptionalism, the mindset for building great businesses, they have the training ground for teaching people how to build high growth tech startups (San Francisco Universities and a city full of startups). We don’t and we have a lot of work to do to get there.

We can’t recreate SV, even if we wanted to. We can more create amazing companies lead by world class entrepreneurs, but we just need a slightly different approach.

What we need to do to fix it:

There are a number of things that need to be done to fix out ecosystem if we want NZ to be pumping out highly competitive companies.

Mindset, talent, funding and networks are the big problems that need to be solved. We need more people who have the capabilities to start high impact, high growth companies, more money to pump into them when it’s needed, and more connections to the best people in the world when it comes to building startups.

Here are a few of my thoughts on what could/should be done:

1. More capital is the obvious one, and the area where I have least experience. There is a lot of money sitting in the pockets or corporates and corporate employees that could be invested in startups if the right channels were made available. Offshore investment, or offshore accelerator programs is another good solution, but we need to help founders and NZ startups get to the stage where they can compete globally for investment, then hope that they come back post exit to re-distribute their wealth (money and knowledge) into the NZ ecosystem.
2. Universities and schools encouraging entrepreneurship by engaging with entrepreneurs who can teach (the two don’t necessarily go hand in hand). Have entrepreneurial programs run by entrepreneurs who understand the current landscape. AUT have done a great job with the CO.STARTERS program — we need more of that. Let founders use university facilities and equipment and encourage them to engage with the ecosystem.
3. Investors offering more than money. They need to offer relevant, quality advice and connections when needed. Founders are more empowered than ever and capital is more accessible than ever, so to get deal flow in the future, investors will need to start providing more than just money.
4. Experienced entrepreneurs becoming engaged in the “new” ecosystem. The one that is less bulls#@tty and more about connecting with quality people, sharing knowledge and creating awesome companies. There are some quality founders coming through that would really benefit from your guidance and advice. If this is you and you’re interesting in mentoring, or something of the sort, please get in touch.
5. Get the right people involved in making decisions around how the ecosystem is shaped. People who understand what kiwi founders (or kiwis who should be founders) need to create the types of companies that will put us on the map as an awesome place to build a startup.
6. Stir up entrepreneurship at the grassroots level. Teach more people how to turn their ideas into something and give them the confidence and support they need to do it. Then make sure they have the pathways to emerge themselves in a high performing environment, with access to the mentorship and funding, when the timing is right.
7. Founders need to be investing more in themselves. Unfortunately, as a default setting, not many of us are equipped with knowledge, mindset or environment to be able to get something off the ground with much chance of success. Unless you have access to some high quality networks, you have to get out there and invest in leaning opportunities — courses, programs, books, e-learning, personal development, mentors. Get yourself to a level where you have good startup acumen, you are confident in your ability as an entrepreneur and you have paying customers! Then doors will start to open up for you.

Myself and a number of other entrepreneurs who care about helping other founders are working to plug some of the gaps. If you would like to be a part of the community we are creating, to collectively make a dent in the ecosystem, please get in touch.

Now is an exciting time for NZ as there is a strong entrepreneurial hum that is only going to get louder. Let’s collectively shape the ecosystem into something we’re proud to be a part of.

Again, I’d like to thank the people who’s thoughts and feedback have helped to contribute to this article in some way or another.

Natalie Robinson

natalier@mumsgarage.com