On Distant Shores

Shortly after Devcon 2 I had the pleasure of visiting the Sydney and New Zealand Ethereum communities. There I found an entirely different innovation environment with it’s own unique challenges and opportunities. The local drivers of blockchain tech are a hardy group of entrepreneurs, with the ambition, grit and nouse endemic to frontier nationals. They even have their own sell out Ethereum conference. There have been local break out successes in tech before, and governments are creating pathways to fill the gaps left by local investment culture.

There is a term in New Zealand: “Number 8 wire solution”. It’s origins lie in the days when the British government would back a colonist’s claim to any amount of land he could fence around (never mind the current inhabitants). Because of the resultant abundance of 8 gauge wire and absence of other modern materials, it was repurposed to solve any problem it could possibly be put to.

Even today, the relative isolation of New Zealand and Australia leads to a starkly different innovation environment that turns US startup culture on it’s head.

The poster child for Kiwi tech success is accounting software provider Xero($2bn ASX/NZSE). Xero was founded in 2006 and went public on the NZSX in 2007. From it’s position as the first accounting SaaS solution, Xero was able to capture the entire New Zealand market. There it gestated for five years, then attacked the global market through a series of strategic acquisitions. Xero’s headquarters remained in Wellington, where its own weight combined with the Kiwi, mirror-world, Ebay clone, Trademe, has created a home grown software industry.

Agricultural produce and ore make up most of the region’s industry. They are expensive to export but software is free, and the New Zealand and Australian governments would like to see that sector expand.

The question many local startups have to answer is how can they convert trade flows of milk and minerals into software sales. Australian industry insiders are examining ways that food and textiles provenance and AgriFinance might be overhauled using blockchain solutions. Governments are open to new ideas and giving local innovators a leg up. It helps that these are small nations with accessible institutions. Some startups are using this accessibility to take aim at financial and government services.

Tourism, New Zealand’s second largest industry is burdened by credit card and bank fees in the hundreds of millions annually. A similar economic flow generated by expats remitting to their families is subject to similar usurious fees. All ripe for disruption, and local innovators have noticed.

And big business is not afraid to experiment with new ideas. Mining giant BHP Billiton recently deployed a provenance pilot built by ConsenSys using a permissioned Ethereum backbone and IPFS storage layer.

So, you might ask. If there are so many innovators and so many opportunities, then where are all the startups? The answer is simple: Domain experts have found blockchain but they haven’t found anyone who can build their software platforms, and capital is too scarce to turn to the US or Europe markets for skilled developers. Antipodean innovators are stuck between Antarctica and a hard place.

The pain points are education, skilled labor, and capital. All three must be imported but opportunity awaits the first players to move into these fertile lands.