Speaker 1: Think of the best known e commerce and software startups
Speaker 1: that New Zealand has produced.
Speaker 2: The zero Trade me then timely just to name four
Speaker 2: of them.
Speaker 1: Well, there's one tech entrepreneur and investor who has been
Speaker 1: heavily involved in all four of the ones you mentioned
Speaker 1: and many more.
Speaker 2: Rowan Simpson is one of the most successful serial tech
Speaker 2: entrepreneurs in the country, and he's distilled what he's learned
Speaker 2: into a new book, How to Be Wrong, A Crash
Speaker 2: Course in startup success.
Speaker 3: The biggest successes in tech companies did not invent the
Speaker 3: technologies that they are famous for. By Apple, the biggest
Speaker 3: technology company, did not need any of the things that
Speaker 3: they are most famous for. But they did work out
Speaker 3: what all of those things were for, and man, they
Speaker 3: worked out how to make us want them and to
Speaker 3: pay top dollar for And so the really valuable part
Speaker 3: has not been the first to have the idea. The
Speaker 3: really valuable part has been the one who works out
Speaker 3: how to sell that to somebody in a way that
Speaker 3: they will pay for.
Speaker 1: Coming up on the Business of Tech by two Degrees Business,
Speaker 1: Rowan Simpson on learning lessons, the hard Way, measuring Everything
Speaker 1: and near death moments and startups.
Speaker 2: I'm Ben Moore and I'm Peter Griffin and some very
Speaker 2: articulate commentary about the state of innovation in New Zealand
Speaker 2: coming up. Rowan's interview has lots of great nuggets of advice.
Speaker 2: Try things, make mistakes, but learn from them and he's
Speaker 2: definitely done that, going on to enjoy major success in
Speaker 2: New Zealand startup sector.
Speaker 1: So here's Rowan Simpson talking to Peter about failing pivoting
Speaker 1: and the importance of having a beginner's mind.
Speaker 2: Rowan Simpson, Welcome to the business of Tech. Great to
Speaker 2: see you again and thanks for coming on.
Speaker 3: Thanks for having menu. It's great opportunity.
Speaker 2: It's incredible, you know when you think of the legacy
Speaker 2: that you have had in New Zealand in the startup community.
Speaker 2: We talk about trade me obviously zero ven timely so
Speaker 2: nice sex and one capacity, whether on staff, as part
Speaker 2: of an executive team or as an investor as well.
Speaker 2: Probably not a lot of key wes know your face,
Speaker 2: like a Sam Morgan or a Rod Drury. You're just
Speaker 2: interested to start really what your approach has been. Did
Speaker 2: you ever want to be that sort of founder that
Speaker 2: had all the intention or were you more happy being
Speaker 2: a support person part of a team.
Speaker 3: I mean, I play my role, and I mean it's important,
Speaker 3: I guess that there is a person to front these companies.
Speaker 3: One of the things I write about in the book
Speaker 3: is this what I call the myth of the lone genius.
Speaker 3: We tend to attach one name to any successful company,
Speaker 3: and Sam and Rode a great examples, so that vorn
Speaker 3: at vend would be another. But there's always a team,
Speaker 3: there's always a big group of people that sit behind
Speaker 3: any successful business like that, and I guess I'm just
Speaker 3: one of those. So yeah, it's maybe useful for people
Speaker 3: who might fill those roles themselves to get that perspective.
Speaker 2: You start the book very clearly talking about some of
Speaker 2: the near death experiences off those four companies. They all
Speaker 2: had great exits or in Zero's case, listed in multi
Speaker 2: billion dollar business that now, but each one of those
Speaker 2: companies had massive challenges. You talk about trade Me in
Speaker 2: two thousand and one, you said the business model was
Speaker 2: not working at left us hanging by a thread. I
Speaker 2: planned to provide free online classified supported by advertising, had
Speaker 2: failed to generate revenue, and it was that successfully that
Speaker 2: you added that saved the business. But for a time
Speaker 2: there it was looking like, I mean, you guys went overseas,
Speaker 2: you've basically left it behind.
Speaker 3: Yeah, Sam, his sister Jess, who was the second employee
Speaker 3: before me, and myself, we were all in London at
Speaker 3: the same time in two thousand and one Year's Eve
Speaker 3: two thousand and one, So yeah, I mean we literally
Speaker 3: had billboards back in those days which said only Turkey's
Speaker 3: pay for classifieds. That was the tagline for trade me.
Speaker 3: So we were quite wrong about the business model. And yeah,
Speaker 3: I mean this is a repeated pattern, So I would
Speaker 3: think about that across all four Like the stories we
Speaker 3: tell about startups tend not to be actually honest or
Speaker 3: accurate or detailed stories, and there's a good reason for that,
Speaker 3: Like the honest story is messy, convoluted, doesn't fit so
Speaker 3: nicely into soundbites. But the airbrushed versions of these stories,
Speaker 3: in my opinion, kind of skip all the interesting bit
Speaker 3: and often most of the important lessons as well. So yeah,
Speaker 3: I think it's I think it is useful to tell
Speaker 3: those stories. I was really determined in the book to
Speaker 3: start with those four near death moments. It's easy to
Speaker 3: retrospectively look back on those four companies and say, you
Speaker 3: know they were great successes, but that's not how they
Speaker 3: felt when we were actually in those moments. Like when
Speaker 3: I left to go to the UK, if I'm honest,
Speaker 3: I didn't think there'd be a trade me to come
Speaker 3: back to well. And you know, that's the experience of
Speaker 3: working in those companies day to day, and for people
Speaker 3: working on their own startups today, like understanding that experience
Speaker 3: is way more interesting than just reading the headline success stories.
Speaker 2: Yeah, you take Timely another great company that had a
Speaker 2: fantastic exit as well, But and Covid obviously that that
Speaker 2: particular product for hairdresser is you know, small businesses for
Speaker 2: managing timing and scheduling and all that sort of stuff
Speaker 2: went out the window when people went into to lockdown.
Speaker 2: That company almost went to the wall.
Speaker 3: Yeah, I mean, you know, all of our customers were
Speaker 3: health and beauty businesses. They take their bookings week by week,
Speaker 3: and we saw those numbers go very quickly to zero
Speaker 3: as the world shut down. Where customers all around the world,
Speaker 3: so it was sort of different in different places depending
Speaker 3: on how those lockdowns worked. But that required a really
Speaker 3: quick kind of you know pivot for the business. If
Speaker 3: you're like we had to respond very quickly to that
Speaker 3: or we would have been dead. And yet it was
Speaker 3: a relatively short period of time after that twenty twenty
Speaker 3: one when we exited the business for you know, one
Speaker 3: hundred million plus, and so you know again that experience
Speaker 3: sort of being in that moment where the company felt
Speaker 3: very tenuous, and you know, we had to make some
Speaker 3: very quick, difficult decisions about how we were going to
Speaker 3: adjust the cost model or the business around that too.
Speaker 3: Only you know, a year or so later, you know
Speaker 3: that excitement of selling the company. If you only hear
Speaker 3: about the exit, you kind of miss a lot of
Speaker 3: the interesting bits of that story and that journey.
Speaker 2: You call the book How to Be Wrong, you know. So,
Speaker 2: and it's very clear that all of these lessons and
Speaker 2: mistakes that you've made along the way and as part
Speaker 2: of these companies, have built a confidence in you. You know,
Speaker 2: you talk about vend in the book, another great company
Speaker 2: but was burning cash twenty fifteen, close to shutting it
Speaker 2: all down. You came back, camped out in a hotel
Speaker 2: room in Auckland and went to work with the team
Speaker 2: there to try and save it, which was painful cutting jobs, Yeah.
Speaker 3: Especially painful because a lot of those folks who were
Speaker 3: let go in twenty fifteen were the ones who had
Speaker 3: been you know, on the steep curve up and had
Speaker 3: done the hard yards, so that was especially painful. And yeah,
Speaker 3: I had a lot of very direct conversations with our
Speaker 3: investors too, because you know, at that point, because of
Speaker 3: the mistakes we've made Wet, we weren't going to be
Speaker 3: able to raise external capital. So if we were going
Speaker 3: to keep the company alive, we need to get support
Speaker 3: from our existing investors. So those are crunchy discussions, you know,
Speaker 3: And yeah, I think it is. I think again it's
Speaker 3: interesting to share those stories so that people can sort
Speaker 3: of appreciate what that's actually like.
Speaker 2: Yeah, because there are you know, probably a lot of
Speaker 2: startup founders and even just small business owners at the
Speaker 2: moment who are in one of those near death experiences.
Speaker 2: We've already seen some of our startups that had a
Speaker 2: lot of exposure sort of fail in the last couple
Speaker 2: of years, sunfed Ubco, great electric bike company, even solar Machines,
Speaker 2: you know, Gred Crofts, fantastic innovative companies run in to
Speaker 2: trouble with its business model. So a lot of people
Speaker 2: in these businesses are thinking, if I make a mistake here,
Speaker 2: the business is over, what do you do? I guess
Speaker 2: it's hard to give advice. Every situation is different. But
Speaker 2: what have you learned the confidence that you've built up
Speaker 2: to tackle these problems over successive crises in startups? What's
Speaker 2: your advice?
Speaker 3: Yeah? So, I mean, as you say, call the book
Speaker 3: how to be So maybe let me just run through
Speaker 3: the three ways to be wrong, because there's actually only three,
Speaker 3: which surprises some people. The first way is to not
Speaker 3: even ask the question, So don't even measure your results,
Speaker 3: don't even ask if it's working or not. And I
Speaker 3: think that's the first piece of advice. I would go, like,
Speaker 3: be inside the business at least be very inquisitive about
Speaker 3: whether it's working and how you will know. You can
Speaker 3: do a lot of work to really understand how much
Speaker 3: of the story you're telling externally actually is true internally,
Speaker 3: So it's the first way. Second way is just to
Speaker 3: make an error. Like we're all human, we have our
Speaker 3: own biases, especially when you're a young company, Like the
Speaker 3: feedback you get from your first few customers can sometimes
Speaker 3: be quite misleading as you expand to a broader range
Speaker 3: of customers. So those sorts of things. You just have
Speaker 3: to be consciously and continuously aware that you might be wrong.
Speaker 3: And I think it's always better to kind of have
Speaker 3: that mindset, assume you're wrong and look for the ways
Speaker 3: you're wrong so that you can correct them quickly, rather
Speaker 3: than kind of assume your right, which is I think
Speaker 3: the sort of behavior more of an encouraging founders. And
Speaker 3: then the last way is just to lie, which you
Speaker 3: know kind of sounds facetious but actually is surprisingly common.
Speaker 3: And I told a few of those stories in this
Speaker 3: book too, like you, where people know that something's not working,
Speaker 3: but it kind of doesn't serve them to be honest
Speaker 3: about that, especially externally, and so they just sort of
Speaker 3: plow on. And I think, you know, so all three
Speaker 3: of those things, whether it's you know, omitting to actually measure,
Speaker 3: or making a mistake or just being dishonest, like, there
Speaker 3: are easy things you can do to avoid all three
Speaker 3: of those mistakes. And if you really consciously avoid those
Speaker 3: three things, you give yourself a chance to be right.
Speaker 3: There's no guarantee. These are startups we're talking about, but
Speaker 3: I think those behaviors are you know, the things that
Speaker 3: I would pin my advice on.
Speaker 2: You talk about the value of curiosity and continuous learning.
Speaker 2: That's a continuous theme actually through the book. You're on
Speaker 2: a journey, but you're learning from every interaction you have
Speaker 2: with the founded team. When you investigate a company with
Speaker 2: a view to investing, you talk down I think it
Speaker 2: was you know, Steve Jobs quote about having this beginner's
Speaker 2: mind as technology evolves, and I think that's really pertinent
Speaker 2: at the moment where we have, you know, the biggest
Speaker 2: technology that's attracting investment and hype at the moment is
Speaker 2: generative AI. Trying to as a company reinvent yourself to
Speaker 2: incorporate this technology, because we're being told if you don't,
Speaker 2: you won't be competitive anymore. What's been your approach in
Speaker 2: a fast moving technology landscape. Sure, you're an expert in
Speaker 2: software as a service those types of business models, but
Speaker 2: everything from accounting software to and voiceing so nice sex
Speaker 2: very different type of business. How have you kept fresh,
Speaker 2: kept curious, and kept learning.
Speaker 3: I mean, that's definitely a moment right now, isn't it.
Speaker 3: And I guess old enough to have seen a few
Speaker 3: of these waves with the you know, trade me road,
Speaker 3: the breaking wave of the internet really as that became
Speaker 3: broadly adopted, and then in between then and now we've
Speaker 3: had the mobile wave, you know, with the iPhone and
Speaker 3: two thousand and seven and Normwalds and so you know,
Speaker 3: it often surprises people, for example when I tell them
Speaker 3: that zero iPod before the iPhone was released, which is
Speaker 3: kind of crazy to think, but so, you know, I
Speaker 3: think all you need to do, really and I think
Speaker 3: this is the behavior that we need to kind of
Speaker 3: really try and encourage the kids especially is to understand
Speaker 3: how things work, like be curious about how things work,
Speaker 3: like try and deconstruct that because everything, everything was made
Speaker 3: by somebody. So generative AI is a great example, like
Speaker 3: you show, you know, the average person what that technology
Speaker 3: can do and it feels magical, like they type in,
Speaker 3: you know, a simple command and the machine responds in
Speaker 3: a very human kind of way and it feels magical.
Speaker 3: But you can deconstruct that, you can understand how that works.
Speaker 3: I'm about four and a half hours into a five
Speaker 3: and a half hour podcast you recommended better on this,
Speaker 3: which is like you know, dense with information about that.
Speaker 3: You know how they underlying technologies have evolved and been
Speaker 3: built up and all those things. So yeah, if you
Speaker 3: are curious to understand and those are things you can
Speaker 3: inquire about and learn and discover for yourselves. And then
Speaker 3: the next step is to realize that you can you
Speaker 3: can build those things. You don't just have to consume
Speaker 3: those things. And so you know, for me, that was
Speaker 3: the real switch that flipped when I was at university
Speaker 3: and the Internet wave was breaking. So when I was
Speaker 3: in second year was when the first web browser was released, Mosaic,
Speaker 3: and you know it would it would have been easy
Speaker 3: to see that as a consumption media and a lot
Speaker 3: of people consume the Internet, but you can also build them.
Speaker 3: And so yeah, having that mindset of being a writer
Speaker 3: as well as a reader, I think is part of
Speaker 3: that curiosity.
Speaker 2: One of the things you've written in many LinkedIn posts
Speaker 2: and probably got a bit of flat for as well,
Speaker 2: because we do love in this country in the startup community,
Speaker 2: our meetups and startup founders, talking to startup founders, and
Speaker 2: one of your bits of advice which has stuck with
Speaker 2: me is don't spend time talking to other startup founders.
Speaker 2: Go out there and talk to your customers. If you're
Speaker 2: doing software for a cement company, go and talk to
Speaker 2: cement makers and go to their conferences. And that's about
Speaker 2: that learning and that curiosity about what is actually going
Speaker 2: to improve your product and not make you feel better
Speaker 2: as a founder because you're hanging out with a bunch
Speaker 2: of people drinking beer.
Speaker 3: Yeah. I mean to be clear, I don't say don't
Speaker 3: hang out with startup founders. That's fine, Yeah, And I
Speaker 3: think it's probably important too, like to have peers who
Speaker 3: can relate to the things that you're working on experiencing.
Speaker 3: But my advices, don't spend all your time in that
Speaker 3: community because your customers aren't there. And this was a
Speaker 3: real lesson from Timing. Actually, like when we first started Timely,
Speaker 3: we thought ourselves we thought of ourselves as a technology
Speaker 3: company that was providing technology software effectively to the health
Speaker 3: and beauty sector. And eventually, over time we realized that
Speaker 3: we were wrong about that and we wear ourselves a
Speaker 3: health and beauty business and our product was technology services.
Speaker 3: And as soon as we made that switch mentally, it
Speaker 3: totally changed the way that we thought about selling and
Speaker 3: marketing the product. Like, as you say, we started hanging
Speaker 3: out at health and beauty conferences, not at startup conferences.
Speaker 3: It was very hard to get Ryan and scoff to
Speaker 3: come to startup events. It wasn't their scene, and you know,
Speaker 3: it's part of part of the success I think of
Speaker 3: that business was really getting to know the customers deeply
Speaker 3: and well. And yeah, like going back to those hard
Speaker 3: moments you were talking about earlier, I think that that
Speaker 3: allowed us to respond better because we had that connection.
Speaker 3: We even had we even had people on the board
Speaker 3: who were health and beauty people, not technology people, not investors,
Speaker 3: and so they were able to you know, they were
Speaker 3: able to see the right way to respond in those moments.
Speaker 2: Yeah, you've obviously learned a lot about investing as well
Speaker 2: as a beautiful anecdote you're telling you Sam Morgan very
Speaker 2: hard nosed, an investor, very experienced. Now so nice sex.
Speaker 2: You know, you were saying, oh, that was a good return.
Speaker 2: He was going, Nah, I think we could have done
Speaker 2: much better out of that. What have you learned and
Speaker 2: how how have you did your approach to investing based
Speaker 2: on the success but also maybe some of the things
Speaker 2: that didn't work out the way you wanted to.
Speaker 3: Yeah, I was really fortunate in that Zero was a
Speaker 3: nice hybrid for me. Like I was an employee at
Speaker 3: Zero but also an investor pre IPO. So in many ways,
Speaker 3: my first kind of investment post trade me was a
Speaker 3: very easy one, and the next couple that followed after
Speaker 3: that definitely punched me in the face. And I tell
Speaker 3: those stories, but I think the key lesson I took
Speaker 3: away from that was for me, at least, what made
Speaker 3: me happy was being closer to the founders, being part
Speaker 3: of the business, and really understanding what was working in
Speaker 3: those businesses, what wasn't working in you know, that sort
Speaker 3: of quick iteration in the very early stages especially was invigorating.
Speaker 3: But also where I could add the most, like just
Speaker 3: being an investor sitting on the sidelines and kind of
Speaker 3: cheering them on, didn't wasn't you know, wasn't giving me
Speaker 3: any happy points. And Sin of Sex is a great example,
Speaker 3: like I doubled my money on that, but I learned
Speaker 3: almost nothing from it. And so yeah, the ones that
Speaker 3: came after that were really heavily informed by that experience,
Speaker 3: and thankfully a lot of those have gone very well.
Speaker 2: Yeah, and we're seeing more cases of sort of hands
Speaker 2: on investors who have all this experience, people who've gone
Speaker 2: through two or three startups now who are willing to
Speaker 2: this is.
Speaker 3: How ecosystems grow. And I've been saying this for a while.
Speaker 3: We talk about building an ecosystem, but actually ecosystems grow,
Speaker 3: and it's awesome now. Like I would say, if you
Speaker 3: define the ecosystem as just the collective noun of startups,
Speaker 3: we're in as strong a position now probably as we've
Speaker 3: ever been. And there's a really easily understood reason for that,
Speaker 3: and that is a lot of people who have spun
Speaker 3: out of drave Mee and zero and Vened and Timing
Speaker 3: and lots of other companies that have had successes and
Speaker 3: are doing their next thing, either either directly you starting
Speaker 3: the new company themselves, or they're investing or advising. Ryan
Speaker 3: at Timley is doing exactly what I did ten years
Speaker 3: ago and has handpicked two or three companies to work
Speaker 3: closely with and is trying to make them as good
Speaker 3: as poss like that's exactly what grows an ecosystem.
Speaker 2: We're going to close really discussing the state of the
Speaker 2: ecosystem and the state of sort of tech in New
Speaker 2: Zealand as well, but keind of drill into building teams
Speaker 2: in company culture. You write in the book, first, we
Speaker 2: need to accept that being excellent at just one thing
Speaker 2: is often insufficient. Then we need to think harder about
Speaker 2: the skills we have that can be combined. This is
Speaker 2: true for individuals, but especially true for the team. So
Speaker 2: I mean, these days, I think you play an incredibly
Speaker 2: valuable role in looking at a team. You've learned from
Speaker 2: the early days of trade me through to zero, what
Speaker 2: actually makes for a good team, especially in those early
Speaker 2: days when you may only have five or six people.
Speaker 2: What have you learned about that? And have we got
Speaker 2: better at doing this? Building startup teams in New Zealand.
Speaker 3: I think the metaphor I like to use as a
Speaker 3: rugby team because New Zealanders kind of understand this. Like
Speaker 3: when you think about selecting a rugby team, you've got
Speaker 3: a lot of different positions to fill. You know, you
Speaker 3: need to props, you need some locks, you need a
Speaker 3: half back, you need to fall back. And same time
Speaker 3: with startup teams, like going back to the myth of
Speaker 3: the lone genius, it's kind of alluring to think if
Speaker 3: you just have you know, a team of those crazy,
Speaker 3: you know, inspirational leaders, then then magic could happen. But
Speaker 3: actually you need you need some props, and you need
Speaker 3: a half back to complement the fleshy winger, you know,
Speaker 3: And so yeah, that's I think the mindset that people
Speaker 3: should have is, like, is what are all the skills
Speaker 3: we need? And those those extend well beyond just product
Speaker 3: as well, like thinking about the business model, thinking about
Speaker 3: sales and distribution, like those are not strengths in New Zealand,
Speaker 3: but they are skills that are vital to any successful company.
Speaker 3: So yeah, like, I mean, you know, one of the
Speaker 3: one of the mantras that we had at trade Me
Speaker 3: actually was a's higher a's, b's higher cs. And so
Speaker 3: the whole mindset was trying to hire people who were
Speaker 3: better than us, and thankfully I managed to do that
Speaker 3: in a couple of instances so that by the time
Speaker 3: I left Trade Me, they more or less didn't miss me.
Speaker 3: But it's easy to do the opposite. It's easy to
Speaker 3: kind of to not think carefully about the people that
Speaker 3: you're bringing into the team, especially in those early days,
Speaker 3: who really set the culture and set the trajectory for
Speaker 3: the business. So hiring intentionally is a huge part of.
Speaker 2: That, I guess as a founder and as a CEO,
Speaker 2: knowing when to step aside or as the CEO and
Speaker 2: you've had that with Vorn and people like that throughout
Speaker 2: the history of some of these companies have gone I'm
Speaker 2: a software guy, I'm a CTO type person. So I
Speaker 2: guess that's really pivotal and this is where investors can help. Look,
Speaker 2: you're still integral to the business, but not necessarily in
Speaker 2: an operational role.
Speaker 3: Yeah, I mean, i'd include myself in that as much
Speaker 3: as anything. I'm also a generalist. I think that I
Speaker 3: am best suited to those early stages of the business,
Speaker 3: but everyone will have their own life cycle in these companies.
Speaker 3: Some people can see it all the way through. Others
Speaker 3: will be more suited to certain ages and stages of
Speaker 3: the business. And that's fine. It's not something I think
Speaker 3: you need to get too stressed about. It's just understanding
Speaker 3: what you can contribute to the business at the staf
Speaker 3: age it's at right now.
Speaker 2: Yeah, you've been at times a bit skeptical of things
Speaker 2: like accelerator programs, you know, startup incubators. We've got one
Speaker 2: Creative HQ here in Wellington that's done reasonably well. There's
Speaker 2: some others around the country in terms of bringing young
Speaker 2: budding entrepreneurs together and trying to sort of flesh out
Speaker 2: those teams and find their way and where they add
Speaker 2: value to a startup. What is the best approach? What
Speaker 2: is the best way to go about that? We've got
Speaker 2: You know a lot of people coming out of universities
Speaker 2: and they will typically look to go into some of
Speaker 2: these incubators. Is there a better way?
Speaker 3: One hundred percent there's a better way? I mean, I'm interested.
Speaker 3: You say that's worked quite well. I don't. I don't
Speaker 3: know how well.
Speaker 2: I guess got a start in those places, but exactly
Speaker 2: how do you measure would they have done it any
Speaker 2: better or worse if they hadn't gone through the HQ.
Speaker 3: The Cheesease founders came out of zero and Kivybanks, So
Speaker 3: I'd probably ascribe more of the success to that. To
Speaker 3: be honest, I mean you need to ask them, But
Speaker 3: I mean, there's one hundred percent a better way, which
Speaker 3: is like the best way to get an apprenticeship on
Speaker 3: a startup and learn is to learn by doing. Like,
Speaker 3: all of these companies are desperately short of people, and
Speaker 3: they will hire smart people quite readily into roles where
Speaker 3: you will learn a huge amount and a very compressed
Speaker 3: period of time and be paid for it, And for me,
Speaker 3: that's a much smarter route for somebody who's interested in
Speaker 3: startups rather than an incubator program or an innovation hard
Speaker 3: or or whatever else where where most of the advice
Speaker 3: is going to come from people who have never done
Speaker 3: it themselves, like learn by doing, by getting into a startup,
Speaker 3: and even if you want to spend a couple of
Speaker 3: years there, you'll come out the end of that with
Speaker 3: so much experience and so many lessons that you can
Speaker 3: apply to whatever you want to do next that will
Speaker 3: be so much more valuable than any of those programs.
Speaker 3: So that's like, individually, I think, much smarter advice for somebody,
Speaker 3: and then collectively, I think it goes back to what
Speaker 3: we were just talking about before about the difference between
Speaker 3: building and growing system. We've invested enormous amounts of money,
Speaker 3: billions of dollars over ten fifteen years and trying to
Speaker 3: build an ecosystem from the top down, and the measurable
Speaker 3: results of that are pretty hard to find, you know,
Speaker 3: certainly if you look at the highest kind of level
Speaker 3: economic indicators productivity per capita GDP, all those headline things
Speaker 3: that we're supposed to improve as a result of us
Speaker 3: investing that much in these things haven't improved at all.
Speaker 3: In most cases have deteriorated, So, you know, I think
Speaker 3: collectively again, the smart way is to try and build
Speaker 3: these companies up one at a time. So if you're
Speaker 3: somebody who really wants to contribute to an ecosystem, choose
Speaker 3: one company and go and work on it, or invest
Speaker 3: in it, or get close to it and make it
Speaker 3: as great as you can. And if enough of us
Speaker 3: did that, the ecosystem would be much bigger and stronger.
Speaker 2: Yeah, and actually what you say about the Sharesas team
Speaker 2: is really pertinent, and it goes for like the guys
Speaker 2: behind first AML, they came out of the financial sect,
Speaker 2: and you see this a lot in fintech people who
Speaker 2: work in banks, insurance companies. There's a frustration. They come
Speaker 2: up against it in their work and they go, I'm
Speaker 2: going to go and find a better way of doing this.
Speaker 3: One hundred percent. Discontent is the one one of the
Speaker 3: rare things that all founders have in common. So, yeah,
Speaker 3: that's your apprenticeship, you know.
Speaker 2: So rather than come out of university, look for an
Speaker 2: incubator type opportunity where you might get thrown a little
Speaker 2: bit of money usually in exchange for some equity, go
Speaker 2: into the industry that you're passionate about or want to
Speaker 2: learn about.
Speaker 3: That's your apprenticeship. And if you don't know yet, like
Speaker 3: there's some great programs for students too, Summer of Tech
Speaker 3: here in Wellington and it's just a fantastic program, been
Speaker 3: running for many years and some great examples of people
Speaker 3: like you know Amanda and Nicco too, people we hired
Speaker 3: at south Gate Labs back in the day who've gone
Speaker 3: on to work on multiple of these successful companies. Amanda
Speaker 3: was part of the design team timely is now at
Speaker 3: a new company called Connectworks. So you know, you see
Speaker 3: those sort of dots connected through the ecosystem when people
Speaker 3: take those opportunities and yeah, it's it's the only way
Speaker 3: to lard.
Speaker 2: This leads us really to discussing the ecosystem where we
Speaker 2: are at the moment in New Zealand. You know, there's
Speaker 2: been a lot of discussion in the wake of the
Speaker 2: Science Sector Advisory Group report from Sir Peter Gluckman and
Speaker 2: his team of advisors has been put out quite disruptive
Speaker 2: for R and D and innovation sector, particularly the winding
Speaker 2: down of Callahan Innovation. You devote quite a lot of
Speaker 2: space in the book to talking about Sir Paul Callahan.
Speaker 2: You obviously have a lot of respect for him and
Speaker 2: some of the ideas. You disagree with some of them
Speaker 2: as well. But pretty sad to think twelve years on
Speaker 2: that we are winding down something that had his esteemed
Speaker 2: name on it. What is your sort of summary off
Speaker 2: the legacy of Sir Paul and how do we need
Speaker 2: to adapt that now?
Speaker 3: Yeah, it's kind of devastating how it's ended up, to
Speaker 3: be honest. So I was lucky enough to be in
Speaker 3: the room when he gave that lecture in twenty eleven,
Speaker 3: which included so many of the lines that we still
Speaker 3: repeat all the time, like, you know, New Zealand needs
Speaker 3: to be the place where Tellent wants to live, and
Speaker 3: the things that we're going to be great at will
Speaker 3: be niche in confusing and surprising and so on and
Speaker 3: so forth. Had he had all the answers in twenty eleven,
Speaker 3: and sadly we stood something up in his name that
Speaker 3: kind of did the opposite, you know, it tried to
Speaker 3: pick winners when he explicitly said that we're going to
Speaker 3: be surprised by these things. So it is kind of
Speaker 3: devastating to think that we've spent so much and have
Speaker 3: so little to show for it in that sense, and
Speaker 3: I do have a lot of respect for him. I
Speaker 3: think I think a lot of his ideas were right.
Speaker 3: I think I mean one that we've already talked about
Speaker 3: where he maybe didn't quite see the future, where he
Speaker 3: said it would only take one hundred inspired founders to
Speaker 3: turn this country around. Yeah, and like the reality of
Speaker 3: that is not right. Like it's true, we probably do
Speaker 3: need a hundred Peter Becks, but every Peter Beck needs
Speaker 3: one hundred or a thousand people whose names you don't
Speaker 3: know to build those companies out. So we actually need
Speaker 3: tens of thousands of people, and that's the real constraint now.
Speaker 3: So yeah, I mean, it's it's a necessary reset. In
Speaker 3: my opinion, what's happened at Callahan Innovation. I think they
Speaker 3: got bogged down, especially in recent years, doing too many
Speaker 3: things and again with very little measurable impact. So it's
Speaker 3: awful for all those folks who are directly impacted by that.
Speaker 3: But I actually hope that some of them at least
Speaker 3: will take the opportunity now to go and work directly
Speaker 3: on startups. Rather than working on a bureaucracy that's sort
Speaker 3: of an umbrella over the top of these companies. Every
Speaker 3: single one of those companies that they've been supporting through
Speaker 3: Callahan will needs to hire more people. Yeah, and that's
Speaker 3: the constraint that I keep coming back to.
Speaker 2: And there will be a new what was a Crown
Speaker 2: Research Institute, they call it Public Research Organization. It will
Speaker 2: focus on artificial intelligence, quantum technologies, and synthetic biology. What's
Speaker 2: your take on that. Having written about this recently, a
Speaker 2: lot of people from the business community and the startup
Speaker 2: world is saying this is doomed to fail. If you
Speaker 2: really want to move quickly and grow the economy, as
Speaker 2: Christopher Laxon is saying he wants to do, actually invest
Speaker 2: in startups that find the best AI experts in the country,
Speaker 2: don't put them under a roof of a bureaucracy. Actually
Speaker 2: tell them what you want to do and see if
Speaker 2: they can solve the problems.
Speaker 3: Yeah, and again I don't necessarily think government will solve
Speaker 3: this problem from the top down. I guess I don't
Speaker 3: have a very informed view on the pure science aspects
Speaker 3: of that. It probably is one of the parts of
Speaker 3: Callahan that actually has been successful, ironically, and hopefully there
Speaker 3: is a way that that values retained in the system.
Speaker 3: But what you're talking about with that area is much
Speaker 3: more invention than execution or innovation. Innovation. For me, the
Speaker 3: definition I like to use at least is fresh thinking
Speaker 3: applied to create value. And I think often we get
Speaker 3: bogged down in the first part of that, which is
Speaker 3: the inventing part of it, and New Zealand has a
Speaker 3: pretty good track record of being the first to think
Speaker 3: of things, But it's the applied to create value part
Speaker 3: that we just continue to struggle with, and I think
Speaker 3: that's where we need to probably focus our energies and efforts.
Speaker 3: And that's sort of bad news because to be inventive,
Speaker 3: you just need to have one novel idea. To be
Speaker 3: graad at, execution in these businesses requires thousands of little
Speaker 3: things to go right repeatedly over time and for years,
Speaker 3: and that's much harder work, and it requires a big team,
Speaker 3: and again our constrainers that there's just not that many
Speaker 3: of us. So yeah, like I think, you know, the
Speaker 3: sorts of things that are going to ultimately lead to
Speaker 3: the success that the Prime Minister and others talk about
Speaker 3: is in my mind quite disconnected from that pure science end,
Speaker 3: which is not to say we don't need it, but
Speaker 3: it's maybe a useful precurs rather than the silver bullet.
Speaker 2: Yeah. I mean, if you look at something like synthetic biology,
Speaker 2: we've really wound down that capability in New Zealand. So
Speaker 2: it's going to take a decade for the pure science
Speaker 2: to build up something that we're going to be able
Speaker 2: to add value in.
Speaker 3: But remember the biggest successes in tech companies did not
Speaker 3: invent the technologies that they are famous for. Apple, the
Speaker 3: biggest technology company, did not mean any of the things
Speaker 3: that they are most famous for, but they did work
Speaker 3: out what all of those things were for, and man,
Speaker 3: they worked out how to make us want them and
Speaker 3: to pay top dollar for them. And so the really
Speaker 3: valuable part is not being the first to have the idea.
Speaker 3: The really valuable part is being the one who works
Speaker 3: out how to sell that to somebody in a way
Speaker 3: that they will pay for. And that's a repeated padn
Speaker 3: across all of these companies that I've worked in, and
Speaker 3: in fact across every big tech company. Google wasn't the
Speaker 3: first big search engine. Netflix wasn't the first streaming service.
Speaker 3: Zoom wasn't the first video.
Speaker 2: And I think that goes for AI in particular. We're
Speaker 2: never going to be able to compete on large language models,
Speaker 2: even with deep seeks, you know, cutting the costs. It's
Speaker 2: the application of AI, whether it's law view making legal
Speaker 2: papers easier to assemble, So it's the application.
Speaker 3: One hundred percent. I think. I think my personal view
Speaker 3: on AI is that it will always be imminent, like,
Speaker 3: because the things that actually work will We'll just think
Speaker 3: that they're features of the products that we use. Auto
Speaker 3: correct is the best example I have of that. Suddenly,
Speaker 3: after years have been quite crap, Auto crep got quite
Speaker 3: good recently, have you noticed, And that's because it's now
Speaker 3: using AI under the covers, right, And so yeah, we'll
Speaker 3: just consider those things to be features of the products
Speaker 3: and services we use. I'll give you another example of innovation,
Speaker 3: which is completely fieled. New Zealander basically invented pop up.
Speaker 3: We were the first country in the world to do
Speaker 3: that format of talent reality.
Speaker 2: Nigel Stanford's business.
Speaker 3: No it wasn't Nigel, it was another guy, but you
Speaker 3: might remember Troopliss, the Girls band, And then we can
Speaker 3: the inventor of that completely failed to capitalize on that.
Speaker 3: Other people around the world were the ones who captured
Speaker 3: the value of that. So yeah, I think we over
Speaker 3: index on invention and massively under it index on execution.
Speaker 2: Yeah, in terms of that talent, In terms of that
Speaker 2: talent constraint, I mean, we've got sort of token things
Speaker 2: the government's just thrown out in the last couple of
Speaker 2: weeks visa changes to try and get both investors but
Speaker 2: also digital nomad's people working here and that sort of thing.
Speaker 2: That's only going to go so far.
Speaker 3: So far, all those things are fine, but yeah, none
Speaker 3: of them are a silver bullet. They are long term
Speaker 3: investments unfortunately, Like the best time to pine a tree
Speaker 3: is twenty years ago. And if you look at the
Speaker 3: number of STEM grads we have, for example, coming out
Speaker 3: of New Zealand universities, it's pretty woful. So we're not
Speaker 3: we're not in a strong position really to capitalize on
Speaker 3: these things. Sadly. We need to probably really change our
Speaker 3: mindset of how we invest in that pipeline.
Speaker 2: Yeah, the domestic talent pipeline. Labor had the Digital Industry
Speaker 2: Transformation Plan that's been spiked by the government. There just
Speaker 2: seems to be a big gap around how we get
Speaker 2: the pipeline really going get businesses offering apprenticeships and things
Speaker 2: like that. I think until we solve that problem, we're
Speaker 2: going to be reliant on an overseas tech workforce trying
Speaker 2: to lure them here for lifestyle reasons.
Speaker 3: Yeah. I mean. Another thing that's a little depressing about
Speaker 3: the active investor visa announcements in the last week or
Speaker 3: so as we record this is it. It's that mindset
Speaker 3: of importing foreign solutions, and I mean we do this,
Speaker 3: we do this with capital as well. We're desperate for
Speaker 3: international investors to come and invest in New Zealand. And again,
Speaker 3: I think we could shift our mindset on this, Like
Speaker 3: we have been very tentative on compulsory savings in New Zealand,
Speaker 3: and politicians like to compare us to Singapore and other
Speaker 3: countries like that, Australia even you know, those countries all
Speaker 3: have a much more aggressive superannuation scheme, you know, for
Speaker 3: all of their people, which builds a huge pool of
Speaker 3: capital that then gets invested. And so let me make
Speaker 3: that really practical and specific. Like when vend was sold
Speaker 3: in twenty twenty one, about fifty percent of the ownership
Speaker 3: of that company was New Zealanders or New Zealand Funds,
Speaker 3: and fifty percent were overseas investors who'd invested large amounts
Speaker 3: of capital. We've took in about seventy million dollars of
Speaker 3: capital into that business over the years and one of
Speaker 3: the biggest, I think the biggest investor in vent that
Speaker 3: exit was Squarepeg Capital, which is a big venture fund
Speaker 3: in Melbourne. You know, their investors are the Australian superfunds,
Speaker 3: and so if you think about it that way, like
Speaker 3: the value that was created at the end that was
Speaker 3: returned to shareholders when we solved the business ultimately went
Speaker 3: back to benefit Australian supernuation funds, So all Australians that
Speaker 3: were invested in those funds. That's the way we should
Speaker 3: be capitalizing on the ecosystem that we're growing, but we
Speaker 3: just don't do it. We're very tentative about even making
Speaker 3: Kebsaber compulsory alone, let alone at the high levels that
Speaker 3: is sort of mandated in countries like Australia or Singapore.
Speaker 2: So we've got some challenges, but you're passionate about this country.
Speaker 2: It's very clear from the book that you're optimistic for
Speaker 2: the future as well. What's on the cards for you
Speaker 2: this year? Are you sort of living to dream of
Speaker 2: investing in companies? You've had a great track record, so
Speaker 2: having you on board as a director and as an investor,
Speaker 2: you must be getting opportunities all the time.
Speaker 3: Yeah, I mean I see a lot. The biggest constraint
Speaker 3: I have continues to be time. There's only so there's
Speaker 3: only so many hours every day. It doesn't matter how
Speaker 3: much money you have. And I like to be close
Speaker 3: to these companies that I work with, and so that's
Speaker 3: the constraint for me. There's a small handful of companies
Speaker 3: that I pick pretty carefully to work with. But I
Speaker 3: look around and think that there was a time when
Speaker 3: I felt like I was an investor in all of
Speaker 3: the good companies in New Zealand, and that's definitely no
Speaker 3: longer true. Like there's now a wide list of companies
Speaker 3: that are doing great things, and so yeah, for me,
Speaker 3: the state of the ecosystem from the bottom up has
Speaker 3: kind of never been better. I think there's things we
Speaker 3: need to think about and configure differently from the top down.
Speaker 3: I think we need to do a much better job
Speaker 3: of connecting the dots from these companies that are successful.
Speaker 3: How does that actually benefit all New Zealanders. I don't
Speaker 3: think we've told that story particularly well at all. But
Speaker 3: on an individual company level, like if you're somebody who's
Speaker 3: working on or investing in one great company at the moment,
Speaker 3: things are good for you at the moment you and
Speaker 3: there's lots of opportunities.
Speaker 2: Really interesting book How to Be Wrong, and it sort
Speaker 2: of resonates as we were talking about being AI some
Speaker 2: of the difficulties that early stage companies go through. Rowan
Speaker 2: talks in the book about a fate worse than failure
Speaker 2: for a startup, which he describes as being basically living dead,
Speaker 2: and he says there are a few features off it.
Speaker 2: It has some customers and associated revenues, but few who
Speaker 2: really love it. Because people don't feel strongly about it
Speaker 2: one way or other, it's difficult to get really good
Speaker 2: feedback product where crawls to a standstill and it just
Speaker 2: sort of spirals into failure. But it takes a long
Speaker 2: time and a lot of money is lost along the way.
Speaker 1: I think what really underpins that idea of living death
Speaker 1: is what you mentioned in that quote, which is that
Speaker 1: the love and the passion and you know, really startups
Speaker 1: require people who are going to pour everything to the
Speaker 1: point where it may cost them, you know, personally into
Speaker 1: that business, and that that's a hard thing to ask for.
Speaker 1: I think sometimes I think maybe Ruin in your conversation,
Speaker 1: I think maybe he underestimates how large the leap can
Speaker 1: be for people. It's all very well and good to say,
Speaker 1: you know, these people out of Callahan, they should go
Speaker 1: and get into startups and throw themselves into the ecosystem.
Speaker 1: It's like, well, you know what, maybe some of them
Speaker 1: can't do that. Maybe that their life does not you know,
Speaker 1: allow for that kind of risk. Maybe they don't have
Speaker 1: the capital or the capability to do that right now.
Speaker 2: So yeah, that is true. Having said that, he sort
Speaker 2: of has lived that experience himself, albeit starting at a
Speaker 2: young age, and trade me it's easier to do this
Speaker 2: as a young person, but has then gone on to
Speaker 2: add a lot of value to other startups who have
Speaker 2: young teams as well. So that's great. One of the
Speaker 2: key takeaways for me is this idea that Royan has around,
Speaker 2: you know, rather than innovation, execution is everything, and maybe
Speaker 2: that's where we've fallen down. He said, if we have
Speaker 2: an agency supporting startups in this country, it should be
Speaker 2: it should have been probably Callahan execution rather than Callahan innovation,
Speaker 2: because he's basically saying that being first isn't the most
Speaker 2: important thing. He pointed out in the book. Google wasn't
Speaker 2: the first search engine, Facebook wasn't the first social network.
Speaker 2: Amazon wasn't the first online store, but it did something
Speaker 2: in the application of it, of doing its own version
Speaker 2: of those things that gave it the edge. And sometimes
Speaker 2: the innovation isn't the product itself, but it's the distribution channel,
Speaker 2: or it's the revenue model. If you take Zoom for instance,
Speaker 2: you know it wasn't by any means the first video
Speaker 2: conferencing tool, but it, especially during COVID, became the one
Speaker 2: everyone wanted to use. So I think that's a really
Speaker 2: important takeaway is that we focus very much in New
Speaker 2: Zealand on the inventor sort of mindset where you need
Speaker 2: to create your IP and all the value will come
Speaker 2: from that. But and this is really important for the
Speaker 2: world of artificial intelligence. Being first or or having something
Speaker 2: that is completely unique is very difficult for us. But
Speaker 2: applying that in a very innovative way, which goes to
Speaker 2: what David McDonald's trying to do with with its treehouse concept.
Speaker 2: This sort of broker of APIs for the AI agents,
Speaker 2: you know, that could be the way forward. That's the
Speaker 2: sort of thinking we need. But it's all about execution.
Speaker 1: Yeah, and it goes into something that I read somebody
Speaker 1: post somewhere a while ago and it stuck with me,
Speaker 1: but unfortunately I can't remember who it was. But there's
Speaker 1: the you know, actually New Zealand needs to start to
Speaker 1: step away from the number eight wire mentality. Yeah, because
Speaker 1: realistically what people now want is, like you said, execution.
Speaker 1: They want really clean user interface. They want it to
Speaker 1: be you know, well processed, have a clear path, and
Speaker 1: to be you know, really focused on what are the
Speaker 1: outcomes going to be for that company, for investors and
Speaker 1: for the customers, how it's going to you know, impact
Speaker 1: their outcomes and deliver value. And I guess, you know,
Speaker 1: just using a bit of number eight wire to make
Speaker 1: a fuse or fix a railing is a little bit
Speaker 1: of a different approach and maybe not quite right for
Speaker 1: the current state of startups.
Speaker 2: I think we've actually left that behind quite a while
Speaker 2: ago in the software space. Anyway, that mindset they've got
Speaker 2: quite good at at all of those things, but the constraints,
Speaker 2: as Ron points out to really nail that execution, talent
Speaker 2: and capital were really constrained on both fronts, and there's
Speaker 2: no great answers there. The government is tinkering with investment
Speaker 2: and visas and all that sort of thing, but we're
Speaker 2: well behind. Until we have great people and a pipeline
Speaker 2: of people to go into these startups, and until we
Speaker 2: have more capital from sovereign wealth funds, our own capital,
Speaker 2: not just international capital, we're really going to be constrained.
Speaker 2: So those are the two things that are standing in
Speaker 2: a way off the sort of world that we want,
Speaker 2: which is the knowledge economy, all the things that so
Speaker 2: Paul Callahan talked about, which are still as valid as ever,
Speaker 2: but we just haven't really got as close to as
Speaker 2: we need to.
Speaker 1: And if I may climb up on my soapbox slightly
Speaker 1: for a moment, I think that we do need to
Speaker 1: create an environment where people can try really hard and
Speaker 1: veil and it's not going to ruin them, you know,
Speaker 1: because if people don't have security, if people don't have
Speaker 1: you know, like at least some semblance that if they fail,
Speaker 1: it's going to you know, ruin everything, because when you're young,
Speaker 1: like you say, you can do that, but if you
Speaker 1: want a pipeline of people, we can't only be focusing
Speaker 1: on young people. We need to be enabling people who
Speaker 1: are not just those who are already wealthy and comfortable,
Speaker 1: but maybe people who are willing to take a bit
Speaker 1: of a risk, but maybe not their entire life, you know,
Speaker 1: maybe that's just you know, maybe there are some social
Speaker 1: structures that we could put in place there.
Speaker 2: But yeah, and that's what Silicon Valley is really really
Speaker 2: good at. Actually, and there are older founders there as well.
Speaker 2: There isn't necessarily a safety net for them. The reward
Speaker 2: is great if they succeed, but there isn't a stigma
Speaker 2: there if you fail. You could do two or three
Speaker 2: ventures before you have a successful startup, and they don't
Speaker 2: do living dead over there. You know, you very quickly
Speaker 2: die or succeed and move on to the next thing
Speaker 2: if need be. So that's still something we need to
Speaker 2: take some lessons from.
Speaker 3: Yeah, definitely.
Speaker 2: So thanks to Ron Simpson for coming on. His book
Speaker 2: How to Be Wrong at Crash Course and Startup Success
Speaker 2: is out now. Links to where to find it are
Speaker 2: in the show notes at Businessdesk dot co dot NZ.
Speaker 2: You just check out the podcast section for them.
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Speaker 1: Catch us again for the next episode next Thursday.
Speaker 2: See it end