Naomi Tajitsu for Reuters writes: New Zealand technology firms are rolling into global markets, selling software to businesses that locks down mundane tasks like accounting and expenses, rather than developing slick social media apps that consumers download free of charge.
Led by Wellington-based Xero Ltd and its self-styled "beautiful accounting software", the South Pacific island nation's blossoming cloud-based tech industry is now the country's third-biggest export earner behind dairy and tourism.
Though many firms have yet to make profits, official data shows exports of technology services have doubled since 2005 to NZ$682 million ($582 million) in 2013. It's the fruit of a government push to promote high-growth start-ups that has made Wellington a fertile breeding ground, including grants and incubation finance like a NZ$160 million investment in the New Zealand Venture Investment Fund, a public-private venture.
The practical New Zealand approach diverges from the mass consumer offerings developed by some counterparts in the United States, like messaging service WhatsApp or photo sharing site Instagram. These were ultimately bought by deep-pocketed social media giant Facebook Inc for billions of dollars.
While Internet entrepreneur Kim Dotcom grabbed headlines with his New Zealand-based Megaupload online file sharing site, shut down in 2012 amid charges of mass copyright infringement, the country generally lags developed economy peers in broadband Internet coverage. New Zealand's software sector has had to find its feet in spite of that comparative connectivity deficit.
"If you're in a small market, you can't just do a glitzy little photo thing that's an advertising based model, because you'd only get $1,000 a year in revenues," Xero CEO Rod Drury said in an interview. "So you're forced to solve problems with solutions that people will actually pay for."
Though eight-year-old Xero has yet to turn a profit, its share price quadrupled in 2013 and it's now New Zealand's second-largest listed company by market value, worth about NZ$5.7 billion ($4.82 billion). That has attracted the attention of international investors, as well as an array of smaller players seeking capital and working on plans for listings of their own.
Drury, a keen surfer and paddleboarder who divides his time between Wellington and Hawkes Bay wine country, is unapologetic about the fact that, like many a tech startup, Xero has never posted a profit nor paid a dividend since listing in 2007.
"We have NZ$200 million in cash, so we have to spend it," Drury said. "Investors don't want us to give it back to our shareholders, they want us to invest and grow really quickly. We'll make losses for the next few years while we build our teams." [snip] The article continues @ Reuters.com, click here to continue reading.
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