Latest / Best of Business / Rowan Simpson: Kiwi Entrepreneur talks start ups, business confidence, and economic growth

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Rowan Simpson: Kiwi Entrepreneur talks start ups, business confidence, and economic growth · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks Be follow
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  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: And Insight for you Now into what this country could be.
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  Speaker 2: The government talks a lot about growth. Of course, we
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  Speaker 2: talk a lot about productivity. What we talk about though,
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  Speaker 2: and what has been real are two very different things.
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  Speaker 2: As we were mentioning with Adrian Or a couple of
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  Speaker 2: moments ago, So what do we need for success? How
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  Speaker 2: do we grow companies? Can we start and grow large
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  Speaker 2: successful companies? Rohan Simpson was one of the founding members
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  Speaker 2: and investors and Trade Me and Zero. His new book
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  Speaker 2: is out money. It's called How to Be Wrong, and
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  Speaker 2: so presumably uniquely placed to give us a little bit
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  Speaker 2: of advice this morning. Rowan currently is chair of what's
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  Speaker 2: called the Hoku Group, which I will explain in a moment. Anyway,
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  Speaker 2: Ryan Simpson with us, Ryan morning, Hey Mike, how are
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  Speaker 2: you very well? Indeed, so Hoku finds ideas. How many
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  Speaker 2: ideas are out there? And of those ideas that are
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  Speaker 2: out there, how many are nuts and how many are real?
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  Speaker 3: Well? Yeah, I mean there are there are lots that
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  Speaker 3: are not investable, but there's more than enough for us
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  Speaker 3: to invest in that I have great potential, and you know,
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  Speaker 3: I've written about four of those companies. There was a
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  Speaker 3: point in time where I thought I was an investor
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  Speaker 3: in most of the good companies in New Zealand, but
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  Speaker 3: that's certainly not true. Now there's hundreds.
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  Speaker 2: What's the gap between a good idea and making it work?
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  Speaker 3: Well, it's ultimately it comes down to people. For a
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  Speaker 3: long time, we've talked about there being a shortage of
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  Speaker 3: capital in New Zealand, and through that whole time, great
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  Speaker 3: companies have been out there raising tens of millions of
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  Speaker 3: dollars to grow. And you know, again the companies that
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  Speaker 3: I've written about a great examples of that, but there's
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  Speaker 3: many others. Hold Her as one that raised an eighty
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  Speaker 3: five million dollar around the time last year. So there's
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  Speaker 3: no shortage of capital. I think we need to get
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  Speaker 3: over that. What happens though, with these companies as soon
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  Speaker 3: as they raise their capital, they then have to spend it,
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  Speaker 3: and they spend in it on people, and that's what
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  Speaker 3: We're desperately short of people who can work on and
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  Speaker 3: grow these companies.
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  Speaker 2: And does that at this present point in time make
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  Speaker 2: life even more difficult? My assessment of what's going on
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  Speaker 2: in this country is you know, is well written and
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  Speaker 2: well understood. But the immigration story we don't seem to
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  Speaker 2: be as cool as we once were. Is that fair
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  Speaker 2: or not?
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  Speaker 3: I don't know if that is fear To be honest,
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  Speaker 3: I think that, you know, like New Zealand's reputation is
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  Speaker 3: probably as good as it has been amongst the engineers
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  Speaker 3: and the folks who we actually need to come and
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  Speaker 3: work and live in this company and make these companies great.
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  Speaker 3: I think one of the things that happens when we
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  Speaker 3: think about immigration is again we get distracted by capital.
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  Speaker 3: We think we need to attract wealthy people to bring
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  Speaker 3: their money here and invest here. And it's I don't know,
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  Speaker 3: it's a little bit like imagine mirror Sican Division three
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  Speaker 3: andthrugby team and we can we just need to hire
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  Speaker 3: the next retired All Black to help us win a championship.
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  Speaker 3: What we really need are the people who who want
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  Speaker 3: to come and live here and work here and do
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  Speaker 3: the hard that do the hard yards on them helping
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  Speaker 3: these companies grow.
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  Speaker 2: Okay, and saying what you just said to you against
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  Speaker 2: what the government announced the other day, and that is
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  Speaker 2: to attract wealthy foreigners to come here with their money.
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  Speaker 3: I think it's fine. I know some of those folks,
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  Speaker 3: and there's a few of them that really desperately do
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  Speaker 3: want to help the Zealand companies grow and that's great,
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  Speaker 3: But you know that's certainly not the silver bullets.
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  Speaker 2: Are you dealing with in general terms? Once again? And
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  Speaker 2: I'm sort of looking at these things macro. So the
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  Speaker 2: country's got a whole lot of problems. A lot of
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  Speaker 2: kids don't turn up to school, those who do turn
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  Speaker 2: up to school, don't pass exams, all that sort of
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  Speaker 2: stuff we talk about regularly. Are you dealing with a
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  Speaker 2: microcosm of people within a population who are always going
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  Speaker 2: to be bright, always going to be achieved, is always
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  Speaker 2: going to be go getters, and those are the ones
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  Speaker 2: you're picking off? Is that what we're dealing with?
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  Speaker 3: I mean, there's an irrationality to starting a business like
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  Speaker 3: these companies that grow to become big. So you know,
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  Speaker 3: we're all lucky actually that the crazy founders of these
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  Speaker 3: companies are a little bit irrational, because otherwise they wouldn't start.
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  Speaker 3: But it's a myth too that we just need those
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  Speaker 3: folks like every crazy Rodgery or Peter Bett needs to
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  Speaker 3: hire teens and then hundreds of people to help them
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  Speaker 3: grow those businesses. So yeah, ultimately we need to grow
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  Speaker 3: that pool much wider, you know, and that's all of
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  Speaker 3: those things you talk about, investments in education and all
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  Speaker 3: those things feed into.
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  Speaker 2: That is the money out there globally? Certainly it seems
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  Speaker 2: to me that if you've got some idea, especially around
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  Speaker 2: things like climate change, you can get money. Is that
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  Speaker 2: fair or not?
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  Speaker 3: The pool of capital for these companies are actively infinite, Mike.
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  Speaker 3: You know, there's now hundreds of millions of dollars of
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  Speaker 3: venture capital available for investment in New Zealand, there's billions
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  Speaker 3: of dollars of in capital in Australia, so you know,
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  Speaker 3: like the constraint is certainly not around money for any
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  Speaker 3: of these folks. So yeah, I think you know, there's
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  Speaker 3: been there's been a lot of evidence of international investors
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  Speaker 3: been more than willing to invest in based companies.
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  Speaker 2: What is driving that? Is that a passion project for
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  Speaker 2: many people or is it I'm looking for good return?
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  Speaker 3: These folks are called venture capitalists, like they're looking for
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  Speaker 3: returns and you know, their job literally is to find
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  Speaker 3: the best companies in the world and to invest in them.
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  Speaker 3: And so the challenge for us in New Zealand is
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  Speaker 3: to be good enough, frankfully, to attract that investment. Are
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  Speaker 3: we well we are if you look at the you know, again,
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  Speaker 3: the companies I've written about have proven that we can
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  Speaker 3: grow these sorts of companies here. You know, Trade Me
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  Speaker 3: was a great domestic success. But there are in the
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  Speaker 3: End and Timely and the others that I've worked on
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  Speaker 3: an investment and have all been global companies. And so yeah,
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  Speaker 3: there's there's no question we can do it here. We
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  Speaker 3: just need to do it more in The question we
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  Speaker 3: should really be asking is what's the constraint to that.
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  Speaker 2: I'll ask that question in a moment. But before I
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  Speaker 2: forget trade Me, what I didn't understand about trade me
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  Speaker 2: when you were in there in the start. It eventually
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  Speaker 2: leaded lead to money that went up for a whole
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  Speaker 2: bunch of other startups. So it's very existence helped others.
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  Speaker 2: I don't know that many people would necessarily understand that,
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  Speaker 2: would they?
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  Speaker 3: No? I mean, you know we sold that We sold
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  Speaker 3: trade Me in two thousand and six, so it's a
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  Speaker 3: long time ago now. That company was sold for seven
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  Speaker 3: hundred and fifty million dollars. That capital was all Australian money,
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  Speaker 3: was a Fairfax, Australian media company that border, and the
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  Speaker 3: vast majority of that has been reinvested in the next
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  Speaker 3: in the next wave of the company. The only reason
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  Speaker 3: I was able to be an investor in zero was
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  Speaker 3: because of that outcome. And each generation builds on there
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  Speaker 3: on the previous one.
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  Speaker 2: All right, so take us through the specifics. You saw
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  Speaker 2: what in trade me right at the very start, or
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  Speaker 2: you didn't quite know.
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  Speaker 3: I was actually hired originally as the engineer to help
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  Speaker 3: Sam and Jeff's sister who just hired to build the
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  Speaker 3: site in the beginning, So you know my route into
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  Speaker 3: that as a software engineer really, and yeah, I mean
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  Speaker 3: we were crazy, like I was just describing, and we
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  Speaker 3: thought we could create something from nothing and gave it
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  Speaker 3: a good crack.
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  Speaker 1: And you did. Ryan.
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  Speaker 2: You talk about barries before I get to zero, you
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  Speaker 2: talked about barriers and what are the barriers? What do
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  Speaker 2: we need to do?
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  Speaker 3: Well, as I said to you earlier, I mean as
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  Speaker 3: people really ultimately, all the careful that's raised by these companies,
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  Speaker 3: Spinion's galerries, so you know that's where we're desperately short,
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  Speaker 3: we're an underpopulated large set of islands.
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  Speaker 2: Tiers, okay, and what do you do to change that?
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  Speaker 3: Well, I mean there's no single answer to that. There's
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  Speaker 3: certainly no silver bullet answer, but it's all the little
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  Speaker 3: things that add up. So, you know, we need to
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  Speaker 3: train more people. As you look at the number of
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  Speaker 3: science graduates and engineers, especially in twenty twenty three, I
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  Speaker 3: think there are only five hundred and ninety engineers we
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  Speaker 3: graduated in New Zealand. So you know, we're woefully short
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  Speaker 3: of of the people we need in terms of the
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  Speaker 3: ones we train. And as we were talking about immigration
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  Speaker 3: as part of the solution.
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  Speaker 2: Too, yeah, exactly. And so the engineer is just this
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  Speaker 2: very weekend or the beginning of the week said there
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  Speaker 2: are engineers leaving the country left, right and center because
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  Speaker 2: there's no pipeline. I'm assuming somebody somewhere in Wellington who
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  Speaker 2: runs the place are aware of all of this or not.
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  Speaker 3: I'm sure they are. I mean, we've we've spent hundreds
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  Speaker 3: and hundreds of millions of dollars over the years on this,
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  Speaker 3: on this problem.
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  Speaker 1: Mike.
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  Speaker 3: I mean I heard the text that you read out before,
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  Speaker 3: so I was saying you know, we need to invest
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  Speaker 3: in innovative businesses and move away from dairy and tourism.
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  Speaker 3: Like this is not a new idea. We've been talking
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  Speaker 3: about that for decades and decades, and yeah, Unfortunately, all
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  Speaker 3: of that money that's been spent is a little bit
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  Speaker 3: like pouring petrol onto the roof of a car and
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  Speaker 3: hoping some of it ends up in the tank. There
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  Speaker 3: haven't really been much accountability or systems and feed that
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  Speaker 3: groups around that in terms of working out if it's
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  Speaker 3: actually working.
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  Speaker 2: So you come out of tray me to go to zero?
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  Speaker 2: Did zero seem obvious or not?
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  Speaker 3: I mean, it was an exciting potential, but it was
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  Speaker 3: far from obvious. I mean I start I started the
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  Speaker 3: book actually with the four stories near thisa moments for
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  Speaker 3: these companies, Like it's very easy to retrospectively look back
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  Speaker 3: when a company's a big success like Zero has become
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  Speaker 3: and imagine that it was always on that path. But
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  Speaker 3: that's not the experience of working in these companies day
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  Speaker 3: to day. Often the exact opposite. So yeah, I mean,
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  Speaker 3: my time at zero coincided with the IPO. We floated
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  Speaker 3: the company at a dollar per year. Some people maybe
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  Speaker 3: odd enough to remember that, but for a long time
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  Speaker 3: after that, the year price was lower than the dollar.
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  Speaker 3: You know, if you did to look at this company now,
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  Speaker 3: that's worth I think it's getting close to thirty billion
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  Speaker 3: Australian dollars now, but there was a long period of
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  Speaker 3: time where that family wasn't obvious.
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  Speaker 2: You talk also about how much startup advice is dangerously wrong.
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  Speaker 2: Why is it wrong?
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  Speaker 3: Well, we wrapped a lot of mythology around startups, and
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  Speaker 3: I think part of it's what we were just talking about,
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  Speaker 3: Like a lot of it is retrospective. But what happens
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  Speaker 3: often is the messy bits get kind of eirbrushed out
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  Speaker 3: of the stories. And for me, those are the most
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  Speaker 3: interesting moments. Like, you know, the two moments you ten
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  Speaker 3: to hear about startups and the media is when they
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  Speaker 3: are when they started or when they raise capital, and
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  Speaker 3: then when they're sold, and those are kind of the
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  Speaker 3: book end. But all of the interesting stuff happens in
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  Speaker 3: the middle, and we're not so good at telling those
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  Speaker 3: stories frankly, And ye know, it's the motivation in writing
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  Speaker 3: this book is to to kind of peel back those
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  Speaker 3: layers a little bit and describe what it's actually like.
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  Speaker 3: Good and Yeah, hopefully people who are working on these
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  Speaker 3: businesses are thinking about it and interested in it. Can
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  Speaker 3: can get a bit of sense of that.
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  Speaker 2: When Tim Brown is mentioned in the book, he speaks
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  Speaker 2: very well of you, but I follow him with a
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  Speaker 2: great deal of interest. So he's an entrepreneurial New Zealander.
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  Speaker 2: All Birds does not work, It has not worked. It
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  Speaker 2: loses money. Will it? Do you think work or not?
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  Speaker 3: I mean, I'm not an investor in All Birds. I
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  Speaker 3: haven't followed the economic prospects of that company especially well.
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  Speaker 3: But you know, it's it is an example of a
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  Speaker 3: company that went through a through a big hype cycle,
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  Speaker 3: benefited a lot from that on the upside, and I
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  Speaker 3: guess I've been hurt from hurt by it on the downside.
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  Speaker 3: But you know, of tims of smart guy is a
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  Speaker 3: very patriotic news. I have every confidence in him and
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  Speaker 3: how he thinks about the future. So what's the space.
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  Speaker 2: It's interesting, isn't it, Because it's that old thing about
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  Speaker 2: to be a truly successful entrepreneur you need to have
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  Speaker 2: failed a bunch of times. Is that true?
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  Speaker 3: Well, I think we do over glamorize failure a little bit.
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  Speaker 3: I've also worked on an invested in startups that have failed,
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  Speaker 3: and I'll tell you it's really painful. I wouldn't. I
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  Speaker 3: wouldn't encourage anybody or recommend that approach. I think a
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  Speaker 3: much smarter mindset, the one I write about is like
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  Speaker 3: lots of small little failures constantly every day. Like if
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  Speaker 3: you go in with the assumption that you're wrong and
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  Speaker 3: then and be constantly on the lookout for that, and
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  Speaker 3: you're much more likely to spot those areas and adjust
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  Speaker 3: for them and fix them before they hurt you. Yeah,
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  Speaker 3: And that's really a much smarter way to think about it. Yeah.
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  Speaker 3: I mean the second part, which you are much more dangerous,
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  Speaker 3: is to lie, like we do this a lot, especially
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  Speaker 3: unfortunately in the ecosystem where government invests. It's kind of
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  Speaker 3: uncomfortable to admit that you're wrong, and so it's easier
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  Speaker 3: to pretend that it's working even though you know that
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  Speaker 3: it's not.
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  Speaker 2: Do you have any answers around productivity just in general,
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  Speaker 2: this broad based conversation that we're no good at productivity
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  Speaker 2: in this country if you put it down on a
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  Speaker 2: piece of paper and explain the equation. But for what
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  Speaker 2: a reason? We just don't do it well?
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  Speaker 3: I mean I'm pretty simple, so I think about it
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  Speaker 3: just in terms of simple mass. When we sold trade
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  Speaker 3: Me in two thousand and six, there were fifty three
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  Speaker 3: of us working on that company. It was about six
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  Speaker 3: hundred thousand dollars of revenue per employee. So that's pretty
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  Speaker 3: remarkable in a New Zealand context. It's not really remarkable
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  Speaker 3: in a global tech context. You know. Zero I think
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  Speaker 3: it's over two hundred thousand dollars per employee, and they
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  Speaker 3: have a lot more employees than we had. You know,
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  Speaker 3: they'll get probably closer to Turndred in fifty thousand. We
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  Speaker 3: may announce the next results. So you know, we've proven
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  Speaker 3: we can build these sorts of companies in New Zealand.
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  Speaker 3: It's not a question of whether or not it's possible.
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  Speaker 3: It's just a question of scale. How do we do
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  Speaker 3: it and how do we do more of it?
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  Speaker 2: Fantastic Ryan, good to meet and talk with. You appreciate
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  Speaker 2: it very much. Good luck with the book, and I
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  Speaker 2: hope it's out there and people read the stories and
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  Speaker 2: to learn something from them. How to Be Wrong is
• 11:56
  Speaker 2: the book. Rowan Simpson is the author.
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