[icu]

Living in London now I've not really kept up with the start up/entrepreneurial scene in New Zealand (actually it's one of the many reasons why I left New Zealand in the first place but New Zealand's start up prospects are a whole other story). While it is amazing that Rod Drury (Xero’s CEO) has built Xero up to a valuation of about 2 billion, it's not a surprise. Rod had a vision right from the start to build a global company that would outmanoeuvre QuickBooks and MYOB with Web 2.0 and from what I know he had the experience (he's a serial entrepreneur) and access to capital to execute.

I've meet him a few times when I lived in Auckland (New Zealand) and approached him for advice when I was fresh out of University. If New Zealand wasn't such a small place getting access would have been impossible but Rod was really approachable and I was lucky enough to meet him over breakfast and get some entrepreneurial advice (this was about 7 years ago).

Some of the most memorable things he said to me at that breakfast was that entrepreneurs are fundamentally unemployable. I inferred from that statement that being an entrepreneur was going to be the only compatible career path for me (at the time I was considering going into investment banking). At the time I didn't heed his advice (well I was an impetuous youth) and I went to work for a discretionary fund manager but with the benefit of hindsight he was quite right. I really didn't like working for others.

The other thing he said was that I was probably too young for entrepreneurial success and that there's a certain element of experience needed for entrepreneurial success. I'm now a bit older and a touch greyer and with the luxury of hindsight I can now understand what he means. Now in my early 30s, my approach to launching my start up is a lot different to what I was doing in my 20s.

[flog]

> Now in my early 30s, my approach to launching my start up is a lot different to what I was doing in my 20s.

Rod has said to me previously that no entrepreneur should have money before they're 30... which has rung true with me. At least from a NZ perspective, we have to suffer for our art, it takes time to earn your stripes.

[icu]

Okay well guess I feel I have to respond to the "from a NZ perspective, we have to suffer for our art". Yes, we do suffer as entrepreneurs in New Zealand (NZ). But I disagree, I think the suffering is self inflicted. An entrepreneur in NZ is up against structural problems and the cultural issues that make it unduly hard on us. Please permit me to explain.

The structural problems:

IMHO the biggest problem isn't distance to global markets but a lack of capital gains tax on real estate which soaks up capital that could otherwise go to new ventures. When I say that, I'm talking about the 3Fs... friends, fools and family. Please don't get me started on the New Zealand Venture Investment Fund (NZVIF), the Seed Co-investment Fund and Kiwi Saver because these are band-aid solutions to the tax problem. And forget about any solution to it. Any political party/coalition that tries to do away with the no capital gains tax on real estate will be committing Seppuku.

Also NZ suffers from a vicious venture capital (VC) Catch-22. With hardly any angel/VC industry there is no quality deal flow (I'm talking about deals where the VC actually has a chance at x1000 returns) which feedbacks to poor prospects for VCs to raise money for their funds from pension funds (they live and die by their returns). So without astronomical VC returns, pension funds just aren't interested in an allocation of their portfolio to VC because it just won't make a difference to their overall fund return. End result, there is no NZ VC.

The cultural issues:

While entrepreneurial tall poppy syndrome was waning when I left NZ thanks to initiatives like the University of Auckland's Spark competition (I was a finalist one year and an eventual winner the next) there are much bigger cultural issues I think kiwi entrepreneurs face that no one seems to talk about. This would be the shame of failure and low aspiration that pervades kiwi entrepreneurs. The shame of venture failure is something I have personally experienced. It took me my 5th time trying to start a venture (between my teens and my early 20s) before I successfully built a company of 30 people. I then got bought out by a co-founder and I went to University. I'm sure that those 4 other failures taught me lessons (the 5th venture did too) but I just couldn't talk about my other failures to people. I always felt that it just wasn't culturally all right to do so and I've seen it cause problems when trying to raise seed/early stage money in NZ. I've found that people keep this silence and project a "I did it on my first go" fantasy. This becomes a feedback loop and the bottom line is that kiwi investors just don't want to invest in entrepreneurs that have 'failed' before. This isn't the case in other places where your venture failure, and ability to keep picking yourself up, is seen as important and needed experience. The low aspiration/horizon thing is also a big problem... I found that on average most entrepreneurs only aspire for the 3Bs... the beamer (BMW), the batch (holiday home) and the boat. Anything beyond the 3Bs and there's this perception that you're just being greedy. And you know what they say... birds of a feather. I remember pitching something (in NZ) to some some high net worths from Silicon Valley a venture idea and then being asked point blank why I want to do it. I was floored, thinking to myself, "isn't it obvious?" I replied, "I want to get rich." To which they replied, "that's the right answer." "We've been travelling across NZ looking for ventures to invest in and not one entrepreneur said that. They all see their business as a lifestyle vehicle whereas I'm interested in a good return on my risky investment." And while they weren't so interested in the opportunity I pitched them, they have become great mentors to me.

My advice to aspiring kiwi entrepreneurs, don't become an entrepreneur unless you are tough enough to handle it... but if you are, then shed a tear for Aotearoa (the Maori name for NZ) and just leave.

I know saying that will ruffle feathers and won't be right for everyone's situation. However after fighting these structural and cultural issues I let go and embraced that NZ has a location disadvantage for new tech ventures. This decision was hard, and the price I've paid has been high. Leaving my friends and family and starting from nothing in London... no friends, no money just my entrepreneurial dreams, has much harder than I ever imagined.

I am a much stronger person because of it. Also I know right down to my bones that moving here has been the best move for my future entrepreneurial prospects. If it doesn't work out then I'll do it all again and somehow, some way, move to Silicon Valley. It's been hard... and I expect it will get harder since I have a baby on the way, but IMHO you have got to stack as many things in your favour when you're trying to launch a new venture and location is part of the equation.

If the scales are tipped against you then you've got to do what it takes to even out the odds.

Best of luck to all kiwi entrepreneurs, you all have my heart felt condolences.

[jacques_chester]

A lot of this rhymes with the Australian situation.

[pm]

We have tall poppy syndrome, but there's also a great deal of Valley envy. There are as many naysayers telling us to keep our day jobs as there are sociopaths telling us to "fail fast and break things", the consequences be damned.

I think there's an appropriate middle ground, and we'll find our footing over the next 5 years or so.