American Focus on New Zealand Start-Ups

Rod Drury has revealed his secret for New Zealand’s start-up success: “global from day one”.

Xero founder and entrepreneur Rod Drury told the Wall Street Journal that New Zealand’s small domestic customer base means the country is dependent on international trade, and in order to be competitive, Kiwis must have “a global from day one” mindset.

This philosophy is the backbone to New Zealand’s most successful industries. The focus on getting new, global customers helps offset competitive disadvantages like distance, he says.

This mindset gives Kiwi entrepreneurs a huge advantage in the tech industry, Drury believes. Cloud computing means the industry is not location dependent, and when software services are developed and delivered in cyberspace, new products can come from anywhere at any time.

“In essence, start-ups rise or fall based solely on their ability to innovate and scale quickly.” Drury says.

But Drury also talks of isolation being an advantage. When Xero started in 2006, they were a small newcomer in the accounting software industry and were able to fly under the radar of some of the industry’s monoliths, like Intuit.

Cloud computing was what allowed Xero to change the rules of the game, says Drury. They were able to bypass the constraints of outdated technology platforms, retail distribution, old world sales and support models.

“Scaling at the right time and at the right speed is a key component for startup success,” he adds. “To scale quickly, we have looked beyond our borders and hired operating specialists from the U.S. Today’s tech businesses have to be truly global from day one to succeed.”

New Zealand’s technology startups are founded on value propositions envisioned for the global market, but starting in New Zealand itself is an inherent advantage.

“We are able to take advantage of the low risk of starting a business in New Zealand,” says Drury. “New Zealand is regularly first or second in global rankings on metrics such as cost and ease of starting a business, transparency and low corruption.”

Raising capital for startups can be challenging in New Zealand however, and quite different to the US, Drury explains.  New Zealand’s focus on providing enterprise tech solutions was driven as a large market where the heroics of the founder could sell the first early sales.

Xero used early revenue (rather than angel investment) for capital to help fund operations. Another advantage is that New Zealand entrepreneurs tend to be older — it’s common for serial entrepreneurs to only be on their third or fourth business in their 40s or 50s: “You can’t beat the experience and confidence you gain from building a business using your own capital.”

Xero is growing and there are more incoming investment opportunities, he continues.

For instance, Paypal founder and Silicon Valley venture capitalist Peter Thiel has launched venture capital funds specifically dedicated to New Zealand technology companies, including Xero. Vend, a New Zealand cloud-based point-of-sale payment provider recently raised $20 million in Series B funding from Valar Ventures and Square Peg Capital to expand its business to the US and Europe.

Today, New Zealand’s tech industry is the country’s third-biggest export earner behind dairy and tourism.

Outward competitors are often collaborators in New Zealand.  Rather than poach staff, Xero looks to fellow enterprise tech counterparts for ways to grow the market for high-tech talent overall, says Drury.

““Global from day one” is more than just a Kiwi start-up mentality: it is a critical way of thinking and doing business,” says Drury. “As more U.S. tech start-ups see overseas opportunities essential to growth, New Zealand’s experience can provide insights on how to successfully innovate and scale on a global basis — and may even encourage the best in U.S. tech to come to New Zealand.”

Mr. Drury is CEO of Xero, online accounting software and services for small and medium businesses.

Original article by David White for the Wall Street Journal.

Tags: business entrepreneurs  cloud computing  Rod Drury  Wall Street Journal  Wall Street Journal (The)  Xero  

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