Sam Altman and Scott Nolan: A Roadmap for NZ's Entrepreneurial Ecosystem
Sam Altman and Scott Nolan visited New Zealand in December 2014 to explore pathways for New Zealand to play to its strengths, and create a vibrant entrepreneurial ecosystem - one that sees Silicon Valley as a peer.
Sam Altman (president of Y Combinator) and Scott Nolan (partner at Founders Fund) have been involved in some of Silicon Valley’s most successful technology companies, including Dropbox, Reddit, AirBnB, Spotify, SpaceX, Palintir Technologies, Yammer and Facebook. To date, 716 companies with a combined worth of over US$30 billion have been funded by Y Combinator, creating more than 40,000 jobs globally. Kiwi startup GlassJar was accepted into the programme this year, representing the kind of high-quality startups that are coming out of New Zealand.
It is a testament to the collaborative spirit of the New Zealand startup ecosystem that half a dozen organisations came together to help make Sam and Scott's trip a success.
In Wellington, the community hosted a panel discussion with Altman, Nolan, Xero founder Rod Drury, and Kiwi Connect co-creators Matthew and Brian Monahan. The Auckland event allowed for a more in-depth exploration with the addition of feature presentations. Joining Altman and Nolan on the stage in Auckland were Vend founder Vaughan Rowsell, Peter Beck of New Zealand’s space agency RocketLab, Sean Gourley of Quid, and Ezel Kokcu, co-founder of STQRY. [Videos of presentations at bottom of this page.]
Mixing The Old And The New
It is well recognised that technology is New Zealand’s fastest growing sector. The central theme around Altman and Nolan's visit was to explore how the country could reach a tipping point and be as attractive to entrepreneurs as Silicon Valley currently is. Altman expressed that New Zealand already has a strong foundation to be a thriving entrepreneurial hub.
Nolan encouraged the community not to look up to California, but to see it as a peer. He also stressed that Kiwis should focus on the areas in which we already excel.
Traditionally leaders in agriculture, over the past few decades the worlds of Kiwi ingenuity and high-impact technology have been merging. The Number 8 wire mentality has been supplemented with wireless, flooded paddocks replaced by precision irrigation, and the once-humble dairy shed often has more bells and whistles than a Queen Street Santa Parade. The continued intersection of primary industries with technology is a huge opportunity for New Zealand.
Nolan advised that one of the ways Founders Fund assesses investment opportunities is by looking not only at how large a specific market is, but at the rate at which that market is growing. Ag-Tech is an sector that is of huge importance globally, and it's only going to be more significant in the coming years. With several growing segments in the Ag-Tech space, New Zealand is well positioned to lead in this industry and have a competitive advantage over Silicon Valley. Already dairy and technology are our highest and 3rd highest export earners, respectively. Imagine if we were to strengthen the link between regenerative agriculture and technology, and focus on exporting not only raw materials but also technology and IP?
The Community Matters Most
Altman attributes the success of Silicon Valley to personal networks and the critical mass of smart people sharing ideas and advice with each other. He refers often to the success of Y Combinator companies being due to the fact that the alumni companies help each other out.
On the New Zealand business community, Nolan notes that in a country of just 4.5 million people, the transparency and access that "2 degrees of separation" brings is a distinct advantage. In a self-imposed cultural balance of sorts, Kiwis make up for Tall Poppy Syndrome in their friendly openness towards competitors and would-be rivals.
The reputation of New Zealanders as down-to-earth and humble also plays to our favour. A nation of people who quietly focus on building their businesses can be attractive to international entrepreneurs and investors. The right balance for Kiwi entrepreneurs is to embrace the confidence to be ambitious and dream for global impact, while looking to thrive within our communities. You don't have to take yourself too seriously to make a serious contribution to this world - in fact it can be an advantage not to.
A Place For Impact Technology
Both Altman and Nolan believe that great technology startups can move society forward. The startups they find most attractive are those with the potential to solve large global problems. Altman explained at the Wellington event that most startups tend to adopt either a missionary or a mercenary culture. He recommends aiming for a missionary culture, as this motivates the best people. Talented people will gravitate towards something they believe in.
The trend towards impact technology is evident within our biggest tech exporters. Fisher & Paykel Healthcare, NZ’s 3rd largest tech-export earner, has developed world-leading respiratory care and acute care products that fundamentally improve quality of life. Gallagher Group, ranked as our 5th biggest tech-export earner, excels in Ag-Tech and fuel systems. One of their innovations has been to develop vapour recovery technology for fuel dispensers at petrol stations, which convert vapour back into usable fuel.
On the ground in the startup scene, Wellington co-operative Loomio is developing collaborative decision-making software that is being used by groups all over the world seeking to redefine collective governance. Kiwi crowd funding platform PledgeMe has transformed the way New Zealanders think about fundraising. They have seen large boosts in revenue now that the New Zealand Government has regulated to allow for equity crowd funding.
What Are The Missing Ingredients?
After spending a few days with Altman and Nolan, along with some of New Zealand’s brightest entrepreneurs, a few themes have emerged around what New Zealand can do to improve our startup ecosystem and pave the way for sustainable growth.
It's true that New Zealand doesn't have the same access to capital as Silicon Valley. However, globalisation and the Internet age have flattened the globe considerably. Altman considers that it is easier to raise money online than ever before, and there is no reason why New Zealand companies can't access big international capital markets. Y Combinator has invested in several Kiwi companies including custom t-shirt makers Teespring and more recently Glassjar, a Canterbury startup who is helping flatmates and other groups of people pay bills together.
Altman is quick to point out that face-to-face human connections matter. With organisations like Kiwi Landing Pad helping orient New Zealanders in the Bay area, it's becoming more common for Kiwi companies to head across the Pacific for a short time to raise money, and then come back to New Zealand to nurture an idea in a place where rents are more affordable.
Improved Immigration Pathways For Entrepreneurs
Altman and Nolan both emphasised that entrepreneurial ecosystems thrive when critical masses of determined, talented people have the chance to bump into one another. Part of New Zealand's strategy should be to make the country more accessible to entrepreneurs and provide greater freedom to launch innovative ventures in New Zealand.
New Zealand already has an Entrepreneur Work Visa Category, but many entrepreneurs find the "one-size-fits-all" approach restrictive. The requirements are inflexible and often filter out qualities that are hallmarks of the world's most successful entrepreneurs. Entrepreneurs who drop out of university, bootstrap their startups, keep a lean team early on, or those who focus on building a great product before driving profits may find it a challenge to qualify for this visa category. By way of a hypothetical example, Mark Zuckerberg would have found it challenging to qualify to move to New Zealand through this visa category, when he was in the early stages of building Facebook.
Removing barriers for international entrepreneurs to be able to build a business in New Zealand, while traveling more freely, would help us attract and retain dedicated entrepreneurs on our shores. After all, we issued more than 30,000 working holiday visas over the past year for young workers to come to New Zealand. It would beneficial to allow some of the more talented and dedicated young professionals the opportunity to build a business in New Zealand, to create jobs and capital value that feeds back into local economies.
Improved Government Support
At the Wellington event, Xero CEO and founder Rod Drury observed that there are plenty of companies doing great things in New Zealand, but we are in need of an overarching technology strategy. The Government has shown some recent support towards the technology industry in New Zealand. The Ministry of Business, Innovation and Employment and the Ministry of Education launched an action plan earlier this year to encourage engagement with science and technology.
Yet, if we are to embrace our potential, and turn ideas into a thriving economy, we are in need of a more cohesive plan for growth. The NZ Technology Industry Association is calling for a Ministry of Technology with a dedicated Chief Technology Advisor reporting directly to the Prime Minister. Given that we have a Minister for Primary Industries and a Minister of Tourism, the time has come for our third biggest export industry to have stronger representation within government. With wages and salaries roughly twice the New Zealand average, investing in the technology sector is a no-brainer in terms of raising our economic prosperity.
Larger Accelerator Programmes
Great ideas flourish in the minds of Kiwis, yet too often we do not have sufficient support structures in the form of mentors and early stage investors. New Zealand’s eight business incubators all draw from the same $140 million funding pool that Callaghan Innovation distributes. As New Zealand’s tech sector becomes firmly established, more incubators and large accelerators like Y Combinator will be essential, to not only support entrepreneurs and startups, but to also attract top mentors, advisors and investors to New Zealand.
It is clear that international investors and entrepreneurs are starting to take serious interest in New Zealand. Our reputation as world-class innovators who get things done gives us a competitive advantage, and we would be wise to strategically build upon this. We have a unique opportunity to develop technologies that can impact the globe, provided we create the right enabling environment.
Scott Nolan’s takeaway message in Auckland was to dream big and ask yourself early on, “Where do you want to end up?" Investors, partners, clients and employees recognise that where there are big problems, there are big opportunities. If it sounds crazy, and you're dedicated enough to see it through, you may just succeed.
One thing we are certain of is this: New Zealand has good friends in Silicon Valley. Nolan and Altman showed interest in getting more involved in the New Zealand startup ecosystem and supporting Kiwi entrepreneurs. They weren't shy to show their excitement about the opportunities in our country. When meeting with representatives from the New Zealand Government, the main question they asked everyone was:
Articles from the media:
New Zealand has elements to be like Silicon Valley, say US experts (New Zealand Herald)
More than sheep, trees and honey bees (The Wireless)
New Zealand: The next Silicon Valley? (HRM Online)