What Does the Future Hold for New Zealand’s Promising Tech Sector?

New Zealand: a model student on COVID response, but where does it leave the tech sector?

As COVID-19 continues to ravage global economies and keep most countries squarely indoors, citizens of New Zealand today emerge, bleary eyed, into the first day of (mostly) free commerce. The island nation has claimed to have contained the virus from its peak on April 5, to hovering just above zero new cases per day today.

New Zealand’s impressive handling of the virus, heralded by many international commentators as the most effective example in the world, has brought our attention to other parts of the economy too, namely the tech sector. On Tuesday The Org published a Top 10 list of the most exciting startups emerging in New Zealand, and today we zoom out to look at how the broader industry might fare in these uncertain times.

‘No.8 Wire’ and innovation in a crisis

The history of NZ’s innovative streak stretches far before the tech sector began and even has a fond local nickname; No.8 Wire. No.8 Wire refers to a versatile piece of fencing wire, often coiled up in the back of farmers trucks, which proved indispensable for feats of small innovation; be it fixing machinery, building pest traps, or even crafting some makeshift jewellery for a handsome farmhand.

No.8 Wire has since evolved into a governing philosophy, describing the art of creative problem solving with limited resources.

It makes sense then, that it was the Global Financial Crisis - a time when pockets zipped shut and the market nosedived - when some of NZ’s most significant tech brands got their start.

Aerospace disruptor, Rocket Lab, and cloud accounting company, Xero, first opened their doors for business in 2006. A year later and the world was embattled in a global recession; a particularly tough era for idealistic startups with no profits in sight. Fast forward to today, and both companies are valued far north of $1billion apiece.

“Out of the last recession we saw some local companies really separate themselves from the pack,” said Robbie Paul, CEO of IceHouse Ventures, an investment group focused on early-stage Kiwi brands.

The outlook for NZ’s burgeoning tech sector is still unclear, but after years of aggressive domestic and international investment, it’s almost guaranteed that the industry will take a hit.

“There are going to be a few trailblazing companies that are going to not just survive this, but establish themselves at the top. They’re going to have better access to great talent, diminished competition, and as a result will build something important that can stand the test of time,” said Paul.

Some companies have been quick to rise to the occasion, building on their existing technology to form solutions for the new realities of the COVID era. During the lockdown LearnCoach rolled out a complete, government accredited online classroom for the droves of kids stuck at home. Local micro-mobility startup, Flamingo Scooters, has designed a revenue neutral food delivery service to help keep profits on New Zealand soil, and car-share Mevo introduced UV-C guns to help sterilise their vehicles.

Although each company has developed starkly different ways of dealing with the hardship created by the pandemic, the common denominator has been a No.8 wire, ‘on the fly’ approach, which has transformed a dreadful situation into something a little more promising.

Who will benefit from the next wave of NZ’s innovation?

Although they got their start in New Zealand, Xero and Rocket Lab both list among the many New Zealand tech success stories which have had to seek international investment in order to properly scale their companies.

New Zealand has historically been pretty good at looking after the new-entrants with various ‘angel’ funds, but the country has struggled when asked to cough up the money to support these companies into their next stage of growth. As a result, time and time again the country’s best budding startups have had to head overseas to meet investors with deeper pockets; meaning money leaving the local economy.

The government has highlighted this as a major problem, made more urgent as the country's largest exporter, tourism, is decimated by the global pandemic. It’s hoped that the recent creation of the government-backed ‘Elevate Fund’ will go some way towards fixing this. The $300m ‘fund of funds’ intends to eventually stimulate $1billion in series A and B investment over the next 15 years — a bold goal in these uncertain times.

COVID-19 will undoubtedly mark the starting point for the future Xeros and Rocket Labs of New Zealand tech, but the real focus should lie on the readiness of the ecosystem to bring these strange, exciting ideas into life. With clear government investment, a burgeoning domestic VC community, and a handy roll of No.8 wire on hand, the sector is looking well equipped to weather the storm.

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