As New Zealand’s tech sector grows into a major economic force for NZ Inc, there have never been more options to raise money for innovative businesses with global aspirations across the technology industry – including software, software-enabled, hi-tech manufacturing and biotech businesses.
Tim Wixon, BNZ’s head of technology industries, says: “We’ve gone from a relative scarcity of capital alternatives to an increasingly diverse range of investors, global and domestic, interested in the New Zealand ecosystem, from high-net-worth individuals and family offices to institutional investors such as venture capital and private equity, to various non-dilutive options, and even other tech companies – a growing trend.
“From our vantage point, we believe this is all good news for founders. Increased competition and options should give founders the opportunity to choose the right investors for their business and timing rather than risking just taking what is available.
“There’s a real buzz around the technology industry in New Zealand. There have been some notable recent exits and there are some really interesting exponentially-growing technologies globally that are enabling more and more interesting and high potential businesses and business models based from New Zealand.”
During almost seven years with BNZ, Wixon has seen NZ’s tech industries grow from a handful of global-profile companies and lots of promising, high potential, start-ups – to a strong pipeline of scaling and successful companies operating and growing globally.
“The New Zealand technology industry has strong foundations for long term growth. We’re excited by what we are seeing and are very focused on supporting it.”
Many personalities involved in early successful and high profile tech companies, are now giving back to the industry and helping the next generations of high potential tech businesses grow and succeed, Wixon says.
“A lot of these people went on to seed venture capital funds, invest as angels, join boards, lead investment rounds, start other ventures, mentor founders and much more. As more and more successful businesses grow out of the New Zealand ecosystem, this dynamic is accelerating. This must be good for the future of New Zealand’s technology industries.”
Wixon talks about that expertise, the high profile successes out of New Zealand, increased global capital availability and a progressively better understanding of the unit economics of tech businesses in the New Zealand market as just some of the reasons investors are increasingly looking to the New Zealand technology industries for opportunities.
And what about banks?
“Today, we have over 30 bankers focused on tech businesses across the country and it’s one of our key growth focuses. This is a long way from 7 years ago.”
The start point context for banks can be challenging. Banks have been around for a long time and certainly before the age of the internet and tech businesses. Adapting to new business models is key.
“This is an over-simplification but I think of two fundamentals, other than character – cashflow and collateral. And collateral meaning security over assets.
“Traditionally banks tended to focus on assets first and cashflow second. Assets had always been something you can see, feel and touch and visible on a balance sheet.
“That’s challenging for financing tech businesses, where the key assets are not likely something you can see, feel or touch and are unlikely visible on a balance sheet.
“These days, cash flow is a primary focus, which works better for tech businesses, but assets are still important.
“Understanding cashflows in both the traditional accounting sense and unit economics sense is important, as well as understanding those few metrics that really matter for a particular business and signal future performance and cashflows.”
While cash flows may be relatively easy to understand, Wixon sees progressive understanding of assets and economic value drivers as a huge opportunity for founders and tech businesses attracting capital from banks and investors (at higher valuations).
Wixon thinks about assets as any resource owned or controlled by a business that has economic value whether it is on a balance sheet or not. It is not just tech businesses where you cannot see most assets or the value of businesses on a balance sheet, notes Wixon.
“Resource can mean almost anything, so we focus on those things a business owns or controls, that have economic value. The actual economic value is not always easy to precisely quantify, but making sure a business owns or controls that economic value is important whether that be strategic partnerships, supply chains, mixes of contracts, processes, systems, software, client bases, business models, recurring revenue, algorithms or another mix of various resources.
“Thinking about what assets you are growing is important, not just for banking”.
If you look at it another way, it’s always challenging to purchase, finance or invest in a business that relies on an individual or a handful of people. The assets you grow are those things that separate the business from those people and build the value of a business.
Wixon says the Bank has learned a lot by working with their growing technology industries’ client base over several years, as well as taking the time to build foundations for a long term approach to supporting the technology industry through capital, connections and expertise. The breadth of BNZ’s activity may surprise.
“We’re moving quickly, are open to ideas and want to do a lot more for the industry.
“We see the potential of the technology industries for the New Zealand economy,” Wixon says, “And for New Zealanders to have a meaningful global impact.
“We think there is a large and growing role for the bank to play. There is a lot of capital and talent in the Bank being applied to the technology industry. Banks also have large networks and strong underlying industry knowledge, such as in energy or agriculture, to pick just two examples.
“As technology is utilised more by such industries and new business models emerge in agritech and cleantech, we are thinking ahead to develop deeper sub-industry knowledge and leadership to match the needs of the market. So developing leaders in the likes of agritech and cleantech makes a lot of sense, leveraging our overall knowledge in different sectors and how to finance technology industry businesses.”
Wixon is enthusiastic about the healthy state of the technology industries in NZ, despite some concerns around the availability of skilled employees for our growing businesses and some gaps in commercialisation talent for earlier stage ideas.
“There’s already lot of expertise around the NZ market and this is only increasing, with a lot of people that want to give back to the industry and grow NZ Inc. It’s a very collaborative and collegial environment. It’s an exciting space to play.
“We aim to play our part.”
Any views expressed in this article are the personal views of Tim Wixon and do not necessarily represent the views of BNZ, or its related entities.
This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser. Neither BNZ nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation or omission, whether negligent or otherwise, contained in this article.
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