NZ Fry Up: What NZX is doing to attract tech listings; Public Network’s latest recruits

New Zealand IT, tech, and telco news and views from our editor in Auckland.

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What NZX is doing to attract tech listings

Vend and Seequent are just two of the latest tech companies to be sold offshore, fetching $1.5 billion and $486 million respectively. Congratulations to the founders, and we look forward to their next move. As NZTech CEO Graeme Muller points out, cashed-up founders often invest in growing tech startups: “As more New Zealand tech success stories emerge, it is exciting to think about how those founders and the staff of their firms will invest in the next wave of ideas and talent.”

But what about the rest of us? What opportunities do New Zealanders have to invest in the local tech scene? The NZX would be a logical place.

NZX track record called ‘patchy’

Serge van Dam, a founder who cashed out a decade ago and now supports local SaaS companies via investment and mentoring activities, describes the NZX as having “a patchy track record of the kind of companies it listed in the tech sector”.

He also doesn’t see the NZX as being actively involved in trying to understand the local ecosystem. “If you are a serious stock exchange, what you want to do is create a pipeline of companies and support them to get them to the point where they are listable. Not wait until they are listable and say, ‘Hey, do you want to list over here?’,” he says.

Van Dam also noted that listing across the Tasman on the ASX can often be more appealing because companies reach a higher valuation.

NZX disagrees, touts its strengths

Is that a fair assessment? We put those assertions to the NZX Head of Issuer Relationships Sarah Minhinnick.

She cites Xero, Pushpay, Serko, Vista Group, and Plexure as tech companies with global ambitions that the bourse has supported. “The S&P/NZX All Technology reflects the great support for technology stocks within our local market (a 23.4% 10-year return), and we would like to see more on show.”

She singled out the following examples:

  • Xero grew more than 8,000% in market cap while listed on NZX. (It has since been delisted from NZX and now is listed solely on ASX, but Minhinnick points out “it is an inherently positive story about a company with very low revenues, scaling up and raising capital continuously to successfully pursue global growth”.)
  • Serko’s share price grew more than 600% in 2017.
  • Pushpay listed with US$0.3 million in revenue and that has grown to more than US$129.8 million.

“‘Patchy’ may refer to tech companies that have not done so well, which is a feature of almost every sector,” she notes. “Another reality is that New Zealand is looked at by overseas investors, and listed companies are sometimes subsequently targeted for takeovers, such as Trademe, Finzsoft, and SLI Systems.”

Minhinnick describes the NZX as being actively involved in the tech community via organisations such as the TIN Network, Fintech NZ, New Zealand Trade and Enterprise, Callaghan Innovation, and Angel Investment Network, as well as participating in events such as Techweek, the Fintech Hui, Southern SaaS, and the Hi Tech Awards.

As to whether the ASX is a more lucrative place to list, as you might expect, Minhinnick says companies that list on their home market tend to have a good outcome. “Over 90% of companies globally have a listing in their home jurisdiction (regardless of whether they have a listing in other markets). Listing in their home market allows them to build profile and credibility and it is easier for shareholders and employees in terms of investing and managing tax obligations.”

She also notes that as a result of recent favourable valuations, “we are seeing the most interest in listing that we have for some time.”

How New Zealanders can invest in local tech

It might be a case of ‘watch this space’ in terms of new tech NZX listings, but until/if that time arrives, how can New Zealanders get a slice of investing in local tech?

Van Dam points out that two Kiwisaver funds are now investing in the startup community. One is Simplicity, which invests in Icehouse Ventures, the business incubator that specialises in growing small to medium businesses. The other is Kiwibank’s fund Kiwiwealth, which has invested in the Movac fund. “That’s a real development and just shows an appetite, and also that there are alternative models,” van Dam says.

He notes that Movac is New Zealand’s largest venture capital fund, but it is by no means the only VC funding in this market. Van Dam says there is a lot more early-stage funding now available, and global investors are also sniffing around.

“Throughout the spectrum, international investors are very comfortable investing in New Zealand companies. Partly due to our reputation as citizens and as a country, partly due to the fact that every month one or two software companies successfully exit, and that gets noticed,” van Dam says.

And you can count private equity among the interested parties. Van Dam says that the appeal for a founder is selling to this category of investor is obvious — they generally pay upfront. “Private equity is prepared to pay cash and make it really easy. One day, someone sends you an email saying, ‘I’m interested in buying your business’ and eight weeks later you’re rich. That’s quite a lot easier than the process of listing publicly.”

Public Network’s latest recruits

There are a couple of new recruits to the management team of what is shaping up to be a most interesting government IT project: Tu Kupenga Marutau, the Public Safety Network programme. It will become the communications network for New Zealand’s emergency services, and a request for proposal was issued earlier this year.

At the time of the RFP, critical roles had yet to be filled. The lead entity director Chris Goldsmith had left the programme, and he has now been replaced by Steve Ferguson, whose most recent role was general manager at Davanti Consulting.

And it’s just been announced that Andrew Hooker, the current CTO of Vital New Zealand (previously at TeamTalk and Citylink), will take up the role of chief technical director.

An addendum to the RFP issued this week outlines how any conflicts of interest will be dealt with. For example, Hooker won’t be involved in evaluating any proposals from Vital or competing proposals based on the same technology.

It’s a reminder once again that we are a small country and specialist professionals often flip between enterprise and vendor roles. As long as everyone is upfront and transparent, as they appear to be in this case, there shouldn’t be an issue.

Copyright © 2021 IDG Communications, Inc.

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