New Zealand's tech scene is a hidden gem, quietly producing an impressive array of successful ventures. With a combined value of NZ$133 billion, these companies are a testament to the country's innovative spirit. However, there's a catch: many of these ventures, despite being founded in New Zealand, eventually move overseas, taking their economic benefits with them. This raises an important question: how can New Zealand ensure it reaps the full rewards of its thriving tech sector?
The issue goes beyond just the value of these companies. It's about the talent, expertise, and capital that are generated and then potentially lost when companies relocate. Successful startups create a ripple effect, fostering an ecosystem of experienced managers, engineers, and investors who can drive future growth. But when these companies move abroad, New Zealand risks missing out on this crucial cycle of knowledge and capital recycling.
The Double Loss
The report highlights a 'double loss' when Kiwi founders build major companies offshore. New Zealand not only misses out on the initial value creation but also on the subsequent benefits that come from a thriving tech ecosystem. It's a vicious cycle: without the right support and incentives, New Zealand risks becoming a mere breeding ground for ideas that eventually benefit other economies.
Beyond Venture Capital
More venture capital is part of the solution, but it's not the whole story. New Zealand's tech sector needs deeper pools of finance, specialist expertise, and global networks to truly thrive. Scaling up often means expanding internationally, which can shift the focus and value creation away from the country. A study found that a significant portion of venture-backed startups relocate, taking a chunk of their value with them.
However, it's not just about the money. Foreign investment brings new connections and markets, which can influence a company's growth trajectory and location decisions. It's a delicate balance: New Zealand needs to attract international capital while ensuring these companies remain rooted in, and contribute to, the local ecosystem.
Retaining the Benefits
The key lies in encouraging successful firms to continue building local capability. This means conducting research and development, nurturing senior talent, and recycling knowledge and capital into new ventures. It's about creating a self-sustaining cycle of innovation and growth. New Zealand should aim to retain its economic centre of gravity, even as companies expand globally.
The True Value of Tech Success
Ultimately, the greatest value of a successful tech company is not its valuation, but the capability it leaves behind. This legacy increases the likelihood of future successes and ensures a thriving, sustainable tech ecosystem. New Zealand's innovation policy should focus on this long-term impact, supporting the productive capability of successful firms and encouraging them to give back to the local community.
In my opinion, New Zealand has the potential to become a global tech hub, but it needs a strategic approach that goes beyond mere financial incentives. By nurturing and retaining the talent and expertise generated by its successful ventures, New Zealand can ensure a brighter, more prosperous future for its tech sector and the country as a whole.
