I am writing this post somewhere over Nebraska, returning to Whangarei from a week at the Advanced Invention to Venture boot camp in Boston, MA. The AI2V was a sobering experience. Kiwi Entrepreneurs who want to take their innovation to the world are up against some rather stiff competition.
It’s not that American entrepreneurs are smarter or more tenacious or better educated than their Kiwi counterparts. That isn’t the case – Kiwis are great at coming up with innovative solutions to market pain.
Let’s assume you have a killer one-in-a-million idea. That means maybe four people in New Zealand are having the same idea. But the chances are, you’ll be the only one of those four to put the hard yards in to implement. We all know that great ideas are ten-a-penny, and what really counts is the ability and resources to turn that great idea into reality. So let’s say that only one in a hundred folk with your great idea will put in the massive effort required to make any great idea into a reality.
So chances are there will be three people just like you in the USA – folk who share your one-in-a-million idea, and are also part of the one in a hundred who will back themselves and execute.
No problem, right? Surely a Kiwi entrepreneur can compete with three Americans and come out on top? Maybe. But here’s what I have seen this week which makes it not that simple:
Government Incentives. The federal and state governments bend over backwards to help their entrepreneurs with support and cash. For example, the federal government doles out US$100 million each year to provide funding to small businesses with early stage ideas that, however promising, are still too high risk for private investors. State governments compete with each other with generous tax credits or benefits such as free office space to attract start-ups to their state.
Presence of Capital. The Venture Capital system is alive and well – and provides investment to early stage ventures that need cash to expand and dominate their target market. For example, despite the current decline in VC funding, the software industry alone received US$614 million (around NZ$1 billion!) VC funding in the first quarter of 2009.
Good People. The USA attracts the cream of talent worldwide. If you’re a start-up in the Silicon Valley or New England and need to hire a talented CEO or tech guy who knows the ropes and has done it before, that person will be available. Try finding such a person in Whangarei – or even Auckland.
Presence of Customers at Home. It’s trite but true to say that the US market is huge. The advantage is more than that; there is a culture amongst US corporates that is normal to purchase and deal with small companies. Often US corporates make a conscious decision to “outsource” their R&D by dealing with entrepreneurial start-ups in the course of developing leading edge solutions in their industry rather than maintaining an in-house team.
Of course, there are fantastic examples of Kiwi entrepreneurs taking on the world. But the competition is stiff and the playing field is not level. We’ll talk more about this.
Fraser Hurrell is one of three directors of Elevate CA Limited, Chartered Accountants & Business Advisors in Whangarei, New Zealand.