Here are some stats on the overall size of the Canterbury Tech industry - I think it’s fair to say overall 2012 has been a challenging time for us all, but at the same time it's been an exciting year for the Canterbury Software Industry generally. After all of the earthquake-related disruption during 2011, our software companies have still carried on with the hard work of exporting great technologyand we've seen some amazing achievements during 2012 - releasing new products, taking on new customers, some really innovative research and development and growing into new markets - all the while needing to address the challenges of temporary office space, keeping staff morale high when the recovery is taking so long and ongoing shortages of skills. The rest of country - indeed the world - remains amazed at the resilience that the Canterbury economy has shown since 2011 - and continues to show. And our software industry is a key part of that.
I thought I’d briefly put the spotlight on Mergers and Acquisitions this year as we’ve seen a few companies change hands: Sungard acquired Asset Finance solution company Northern Arch, GE Energy bought Commtest and accounting software firm Acclipse is now part of CCH WoltersKluwer. Plus recently SaaS inventory company Tradevine was bought by Trade MeMore recently a couple of our services firms:Clarus and Egressive have joined forces with Auckland based Assurity and Catalyst IT respectively.Any the big news that everyone knew but no-one could talk about is hospital management software player Emendo has been recently acquired by McKesson and this will kick off a new round of investment in the Emendo product development team here in Christchurch.None of these deal sizes have been published but 7-8 figures would be a good estimate.It’s good to see confident inward investment in our local software companies, helping these businesses grow to the next stage as part of a larger parent. It’s also essential component of building a successful startup community: shareholders need to know that there is a precedent for a successful exit – and also we need investors to be able to recycle capital locally.Hopefully 2013 will see some more successful inward investment and realisation of shareholder value – watch this space.
Our aim is to continue growing, and creating a youthful, vibrant and better organised tech sector with firm roots here in the South Island.
This year we held a fantastic Software Summit event – we filled the venue with over 500 delegates, 16 speakers and three separate streams: Business, Technology and Agile.Feedback was overwhelmingly positive and Minister Joyce went back to Wellington with a strong understanding of the strength and vibrancy of our local industry here in Canterbury.
Here are some of the members of the Software Cluster which continues to grow in membership: since this time last year we have seen over 50% increase in our corporate members - this year all the logos wouldn’t fit on one slide! Perhaps most exciting is all of the startup activity that’s bubbling away in Christchurch - there are lots of small software innovators with great ideas surrounded by commercial acumen. I know that we have a lot of startups in the room!And it’s worth noting that the Cluster is here for everyone in the sector: not just the exporting ISVs and developers, but also the software ecosystem companies: consultants, lawyers, accounting and marketing organisations who work in the technology sector and help software companies be successful in many ways.
Looking forward, I’m sure that you’ve all heard by now of the initiatives to build new centres for our technology industry.The building we’re in - “Sanctuary” - is right in the heart of the new planned Innovation Precinct. Founders WilMcLellan and Colin Andersen have great visions for EPIC Phase 2 which I hope they’ll be able to share with us today. Technology leaders Tait have also announced a new campus development out near the airport.Last month the new Advanced Technology Institute was renamed Callaghan Innovation after the late Sir Paul Callaghan, and this $166 million funded organisation will have a significant base here in Christchurch.All of these initiatives provide unique opportunities for Kiwi technology firms to congregate together and deliver stellar IT sector-led export growth for the New Zealand economy – driven by the colocation synergies that come from knowledge sharing, skills development and better business networks. These developments are crucial to retaining and attracting technology businesses to locate in Christchurch. I’d encourage everyone to get involved here and help to shape the future of innovation in Canterbury.
So... we do have a few challenges other than geology...
Speak to any software company CEO in New Zealand what their biggest issue is right now: it’s getting the right talent.It’s been identified as a critical issue and there are groups working on the problem right now. Fundamentally it’s an issue shared by most Western economies (USA, EU) that not enough of our young people are being trained up in the latest technology and industry skills. However if we look across to Asia it’s an entirely different story: India, Taiwan, Russia: these countries have been investing in their next generation of technologists.First off, to continue to build and develop the Talent Pool for our local industry. There are a number of initiatives around education, skills, encouraging more links with universities, increasing the visibility of software jobs and – I think crucially - helping to facilitate more overseas recruitment to address skills shortages.New Zealand – and Canterbury – definitely DOES have software Talent. We need more...
Secondly, we want to increase the visibility of New Zealand software companies as an investment class.I’ve just put some examples up here of two of New Zealand’s NZX-listed software companies: Xero from Wellington and Diligent who have continued to grow their development centre here in Christchurch. Both companies floated in 2008 and have delivered 4 to 8X shareholder returns since they floated.After Xero announced their interim results a couple of days ago their share price went up to $8 and they recently listed on the Australian Stock Exchange as well. Just look at that shareholder value generated during the global downturn! I know that there are lots of privately held companies as well which are generating spectacular returns for shareholders. We need more! Let’s make the NZX the NASDAQ of Asia Pacific.
So... If you build it they will come, right?Event though our industry has proven as a sector that there it can generate wealth at a lower level of risk than giving your money to South Canterbury Finance, investors still aren’t queueing around the block. I think as an industry – and a country - we need to learn to speak the vocabulary of technology investment fluently. And that’s what today’s about: learning from the Silicon Valley investors who are here today about what they are looking for in an investment and taking this information to improve our investment pitch.
Our 3rd – and possibly most fundamental – is around our attitude to risk. New Zealand’s investment– and entrepreneurial – habits are conservative.This is a great quote from Max Levchin: you can’t succeed until you’ve failed. Many times.Think big, don’t be afraid to fail, and keep trying!
Thank you for your attention, and please enjoy the rest of today’s event.
• Christchurch – the $30Bn startup• 2012-2013 Immediate focus on rebuild and construction• Investment momentum towards Wired, Smart City, Innovation, Health Innovation, Technology sectors• Blank sheet of paper!
Christchurch & Canterbury Technology Sector • Contributes approximately $880 million to Christchurch GDP • Accounts for around 6% of GDP in Christchurch • Around 870 business units are based in Christchurch (2011, StatsNZ) • Has around 6,000 employees (2011, StatsNZ)Source: Infometrics / CDC
Christchurch & Canterbury Technology Sector - Markets • Medical and medical devices • Augmented reality • Accounting and procurement • Agri-tech • • Human Resources Online and web based services Global. • Telecommunications • • Aerospace GPS and location services Niche. • Networking • Mobile Applications* Paul Callaghan 2011: Sustainable economic growth for New Zealandhttp://youtu.be/OhCAyIllnXY
Building a startup scene where you live 1. A strong pool of Tech 7. Alumni Outreach Founders 8. Wins 2. Local Capital 9. Recycled Capital 3. Killer Events 10. Second-Time 4. Access to Great Entrepreneurs Universities 11. Ability To Attract a 5. Motivated Pool of Engineers “Champions” 12. Tent-pole Local Tech 6. Local Press / Companies Websites / Organizational Toolshttp://techcrunch.com/2012/09/27/12-tips-to-building-a-successful-startup-community-where-you-live/
Why startup in Christchurch?• Established world class software and tech R&D capability• Australasia’s newest, most modern, most wired boutique city• English speaking• Overlap USA / AsiaPac timezones, overnight EMEA• Best* place in the world to: – start a business – protect investors• Distance less and less a factor with continually improving internet connectivity• World class outdoor lifestyle destination for employees, investors A place where talent wants to live*World Bank, http://www.doingbusiness.org/rankings
Challenge 3: Attitude to Risk• Small country, reputation follows you• Generally not accepting of “failure”• We need to be more accepting that inorder to succeed, you must first fail.Multiple times."The very first company I started failed with a great bang. The secondone failed a little bit less, but still failed. The third one, you know, properfailed, but it was kind of okay. I recovered quickly. Number four almostdidn’t fail. It still didn’t really feel great, but it did okay. Number five wasPayPal."- Max Levchin, Paypal Founder
What can we do to help Silicon Valley Investors?• Differentiated niche market investment opportunities• Strong, established R&D capability• No capital gains tax• NZ Government co-investment• Organised local software industry• Best* place in the world to: – start a business – protect investors• Parallel cultural with US A place where investors keep coming back to*World Bank, http://www.doingbusiness.org/rankings