Maybe it’s our blue skies that produce out-of-the-box thinking, but New Zealand has given birth to some pretty promising technology over the years.
As Sir Peter Jackson has shown, it’s perfectly possible to do things on a global scale from New Zealand. But the big money, support and collaboration with other scientists overseas can be a powerful lure, and it’s often to the United States that they go.
In the tech sector, it often begins with a sales office in the US, close to potential customers. Next, it can lead to a partnership, then perhaps its sale or a shift of headquarters.
Here are four promising Kiwi companies which either got snapped up by a major US player or shifted to the bright lights of the USA.
One of the most successful exits in the tech sector recently was PowerbyProxi, which was bought by Apple last October for a confidential sum.
The company was set up by Auckland entrepreneur Fady Mishriki in 2007, who began his work in wireless charging at Auckland University.
PowerbyProxi’s work mirrored Apple’s own desire to charge everyday devices like mobile phones without having to plug them in.
Mishriki is still involved in the company and its base remains in Auckland.
One of the brightest Kiwi stars in terms of solving the world’s waste problem, LanzaTech started out in IRL’s Parnell labs, now a “deep tech” business incubator called Level Two.
Founder Sean Simpson pioneered an amazing microbial technology that could convert industrial gases containing carbon monoxide into useful by-products, such as aviation fuel and chemicals.
After conducting a successful trial creating ethanol at NZ Steel’s Glenbrook steel mill, LanzaTech started appearing in global “most promising” lists.
High-profile early stage investors were also attracted, like Sir Stephen Tindall’s K1W1 fund and leading Silicon Valley venture capitalist Vinod Kosla.LanzaTech. In 2012, it raised more than US$55.8 million ($67.5 million) from international and local investors
But the company’s science was expensive and lengthy. Even though it reportedly won $14 million in government funding, the US beckoned and in 2014,.LanzaTech moved with 30 staff to Illinois.
According to its website, it is making good progress towards providing Virgin Atlantic with commercial quantities of biofuel.
Wolfgang Scholtz, director emeritus of HERA, the Heavy Engineering Research Association, says LanzaTech’s move was “awfully disappointing”.
As a commentator, he urged his members to get in behind the environmental potential of LanzaTech “because it was so important”.
“But to be honest, there was very little appetite to go into the research space. Our typical company in New Zealand, they are not innovation-focussed enough to see a long-term investment coming from that company.”
Scholtz understands LanzaTech’s leaders were also reluctant to leave, and felt unsupported by the contestable funding system of the time.
He’s pleased to see that the model for research funding has changed and the spending goal on R&D has been lifted to 2 per cent of GDP.
“If we want to do better with R&D, then we have to spend a lot more and change our targets.”
However, Level Two’s general manager Imche Fourie says “at a certain stage, within certain industries, you kinda have to go offshore to grow”.
“That’s just part and parcel of it, people shouldn’t see that as a negative thing.”
“It’s always a good thing when companies get sold, or companies exit, because that means we’ve got smart entrepreneurs who have been there and done that who can then come back and start something new.
“And that’s something that New Zealand doesn’t have a lot of.”
LanzaTech also spawned three businesses now based at Level Two. All were set up by ex-staff: e-waste-to-gold firm Mint Innovation, quiet drone technology firm Dotterel and Avertana, which extracts minerals from industrial waste.
GreenButton started out as a little start-up in Wellington which helped clients tap into much bigger computers to process their data.
In 2006, cloud computing was still a new technology. Scott Houston, who had been chief technology officer for Weta Technologies, had already been used to tapping into super-computers for Lord of the Rings.
He founded InterGrid and four years later it took the name its flagship service, GreenButton, which let users number crunch their problems with a single click.
The following year, GreenButton formed an alliance with Microsoft, and partnerships followed with animation company Pixar, Nasa, Boeing and financial software company Numerix.
Finally in May 2014, GreenButton was bought by Microsoft which folded the technology into its cloud platform Azure.
Proudly headquartered in the US these days. this space “unicorn” hailed from the same labs in Parnell as LanzaTech.
The company is beating off nearly 100 other companies in the race to provide a regular commercial service delivering payloads into space.
Staff are split between both countries, and Rocket Lab retains a big factory in Mt Wellington which will control all its launches. It has launch pads at Mahia on the New Zealand East Coast and Virginia, USA.
Notably, both Tindall’s K1W1 fund and Vinod Kosla are investors.
Making it there
Even though their horizons are now considerably broader, neither LanzaTech’s Sean Simpson nor Rocket Lab founder Peter Beck have forgotten their roots. Both are on the advisory board of Level Two.
Greg Shanahan, managing director of Technology Investment Network, agrees there are times when a company needs to go offshore, to be close to their customers, main shareholders, or to be registered in a country for grants.
But he’d love Kiwi firms to consider growing larger here. Mid-sized to large companies that are still going strong here include F&P Healthcare, Datacom, Xero, and Douglas Pharmaceuticals.
Shanahan says Kiwi tech companies are going to the US earlier than they used to, often bypassing the traditional first port of call, Australia.
“There’s a lot more investment coming down from the US into New Zealand. The amount of money going into early stage tech companies from outside New Zealand is equivalent to that being invested from New Zealand sources.
“So the business links and investment links from the two countries have grown considerably in the last five years, and the real strength of export growth from New Zealand to the United States has been post-GFC.”
Kiwi tech firms tend to gravitate to English speaking destinations.
“And also for the US, it’s so proximate in terms of the frequency of flights and ability to get into the market quite quickly. So New Zealand’s quite well placed in terms of the United States, especially the west coast.”
TIN’s top 200 index of New Zealand tech exporters shows our tech sales in the US have reached $2.4 billion, with revenues up by 13 per cent, and close to 7000 staff in the US. They collectively employ 47,000 people.
And one of the outstanding things about these companies is a big shift in profitability early on, Shanahan says.
Micro companies are adjusting their costs to make a buck, weaning their reliance on outside investors.
“What that means is, those companies become more attractive to investors who judged them on normal metrics that you would for any regular business. It’s a sign that that tech sector is becoming more mainstream in New Zealand.”