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Start a business in New Zealand? Why not?

Start a business in New Zealand? Why not?

Are you:

  • starting your own business?
  • a serial entrepreneur just about to launch your next venture?
  • an investor looking for an ideal opportunity to position yourself for the future?

Toby RuckertIf any of the above apply to you, then there are some things you should know about New Zealand, dubbed the "youngest country on Earth".

Apart from being beautiful in many ways, New Zealand has silently but surely made its way up the international ranks of doing business, becoming a prime destination for entrepreneurs and startups:

In the Ease of Doing Business Index by the World Bank, New Zealand ranks third after Singapore and Hong Kong and before the US. But what should excite entrepreneurs and investors more is that it ranks first both in the sub-categories of "Starting A Business" and "Protecting Investors". Leading investors such as Vinod Khosla and Peter Thiel have already taken notice and invest actively in this country of just over four million people.

Let's have a look at some of the insights that I've come across while incorporating and building my own venture during the last few years here in New Zealand.

Government support

It takes time to build a team, product or service, find investors and/or become profitable. Contrary to popular belief, it simply doesn't happen over night and it's a long and winding road to get from idea → team → product → market → success.

The time and money it takes to reach a stage where an idea isn't just an idea any more and people actually start using (and ideally paying) for your product or service is frequently underestimated.

Even if there is potentially or obviously a lot of value in what you're creating, it is usually very hard to manage on your own, especially if you – or your friends and family – don't have a big bank account.

Provided you have a genuinely good, high-value idea for which you may only need support to get to the next level. There is (for instance) a dollar-for-dollar funding programme by the New Zealand government – something that helps the local company to get to the next milestone without getting diluted from too many angel investment rounds early on. At the same time, both local and international investors are impressed by seeing their investment matched without having to give up equity or having to put up with another board member.

There are a number of different programmes and schemes available, ranging from business startups and growth grants to support for charities, researchers, scholarships and much more.

Legal and political climate, economic freedom

When you build a business, you want to build it in a strong legal environment, especially if you're creating a lot of intellectual property (IP). Creating IP is one thing, defending it is another. With the unfortunate advent of patent trolls trying to cash in on any sort of IP you may have created comes the question of IP defendability.

I'm not trying to say this sort of thing can be completely avoided in New Zealand, especially when you've got an international market and you're selling to the world. But when setting up a business you would at least want to make it as hard as possible for those wanting to misuse the legal system.

To attack or defend IP in New Zealand is handled differently than in the US, for instance. Even if somebody had a right to dispute IP because there is an overlap with yours, in New Zealand they'll still have to pay their own lawyer before putting a case. That definitely makes one think twice before one would go ahead in this direction.

New Zealand is also frequently rated among the top three countries of economic freedom (not to be confused with "democratic freedom" in which Singapore and Hong Kong for example are only perceived to be "partially free").

There is currently no capital gains tax in New Zealand. This is something which should be of great interest to both entrepreneurs and investors alike. Whereas investors often have various SPVs (Special Purpose Vehicles) for their investments to secure minimum tax implications for their overall ROI, entrepreneurs – and especially when launching a business for the first time – are mostly not as sophisticated in their legal and taxation based setup. They should take a close look at the subject of capital gains tax, simply because the entrepreneur often makes the most money when the company is ultimately sold.

Better life, better business

Whether you like the mountains, beaches, the sea or the city life, there is a place for everybody here in New Zealand. Unless you're a very big city person only – because then you're kind of limited in your choices here in New Zealand – there is really only one big city (ie with more than a million people) and that is Auckland.

From a lifestyle and work-life-balance perspective, I can't imagine being in a better place to raise my startup. Sure, life is hectic here, too and you have the same stress and pressure as you'd expect from any high energy, make it or break it startup environment.

And yet, there is a certain balance and especially "lightness" about key strategic decisions I'm making here for my venture that may shape its destiny many years down the line. I think it has to do with the fact the international contacts and markets I'm dealing with don't interrupt my thinking process during the most productive daytime hours – simply because there is a significant time zone difference – which you may or may not like as it requires you to stay up late for certain conference calls (something which you in a startup probably won't mind doing anyway).

Another advantage is that you're pretty much always ahead of time – somebody in the US tells you he needs this by Monday first thing in the morning? No worries – that is already Tuesday in New Zealand. Plenty of time to play around with and one of the first things I miss once I'm travelling internationally.

The best are everywhere

You may think having everything local is the best and most efficient solution and there certainly are cases where this is the best option. But in the fast-moving world we live in today, having a globally distributed team is actually one of the most natural and efficient ways to keep track of the pulse of what's happening in the world.

Yes, it has its own unique challenges and for most startups it's even inadvisable because it requires a whole lot of discipline from everybody working with this freedom every day. But it also unlocks unknown potential in people that go the extra mile because of the location freedom and flexibility of working times (i.e. some people just like to work at night) that you give them.

So for those putting together a global team, there are some aspects which are worth considering early on, such as "if the company originates from New Zealand, how would somebody in Europe perceive that?" Depending on where your market is, this actually matters quite a lot. For instance, New Zealand ranks first on the International Corruption Perceptions Index - something which people and companies in Europe, for instance, have a "perceived respect" for - which of course results in better trust and transparency during business transactions and deals. 

What I'm saying is you don't have to limit yourself to New Zealand talent (as good as it is) but if you move your startup here, simply being perceived as being from New Zealand has big advantages when working with the best around the world. For example, why not hire your key business development, marketing and sales people in the US, have your R&D wherever it suits you and the IP somewhere else again?

The likeability of the country where your business is incorporated cannot be underestimated in this global setup – it affects cost and sympathy aspects. When talking about “sympathy” we think about how others perceive New Zealand: do people want to work here one day? Or do they want to work with New Zealanders?

This likeability is such that I have seen many great seasoned executives attracted towards the unique work/lifestyle package that New Zealand has to offer. After all, what is not attractive about a nation with the most golf courses/sailing ships per head and world-class wine?

 Sustainability and stability

Considering the likeliness of further financial turmoil in the near future, there will be hardly any countries, including New Zealand, that won't be affected by it. However New Zealand is well positioned to be a comparatively safe/stable location for businesses in such a condition.

Why? It's one of the few countries worldwide with enough resources (minerals, water, food, etc.) to be considered sustainable for all its people – even with our current (and often wasteful) lifestyle.  It also ranks second on the Global Peace Index – something far more relevant in times of turmoil than in times of peace (whether economic or otherwise).

Infrastructure and IT

Especially if you're a tech startup, you might be interested in this one. New Zealand is centrally located between the US and Asia. It is politically safe and neutral and has no atomic power with most of its energy being from renewable sources.

With global companies like Google, Facebook and Amazon keen to use renewable energy, New Zealand can deliver, since the bulk of its power comes from such "green" sources – like hydro-electricity and geothermal sources.

In addition, IBM and others are currently building new data centres here that could turn the country, particularly Auckland, into the datacentre hub of the South Pacific. New, high power cables are being laid through the oceans supported by a broadband initiative of the government. New Zealand will have some of the fastest and most direct cables in the world connecting Asia, Australia and the US.

Considering how far off the world map New Zealand actually is, the latency is surprisingly low. For one, New Zealand has only four million people. How much traffic can four million people really generate? And then there are very few high traffic sites currently hosted here, so there is not much to deliver down the pipe to other places around the world – leaving plenty of low cost traffic growth opportunities.

An added bonus: when New Zealanders are most active on the web, they do it while the rest of the world sleeps.

 Mindset

When I came to New Zealand more than eight years ago, little did I know that many very successful Kiwi expats are placed in key positions around the world. They are extremely well connected  and rarely forget “home”.

I was also surprised at the ease with which it is possible to meet new people and decision-makers. Whether presidents of political parties or CEOs of some of New Zealand's leading companies, I have had much easier and less complicated access to them – something that would normally take me months or years of networking being new in other, bigger countries.

There is also the fact that New Zealanders are generally curious to try out new things and that this “trying” is limited to a specific geographic region with clear physical and marketing related boundaries. That's one of the reasons why the country often serves as an international trial market for introducing new products or services to the world, ranging from toothpaste to chocolate to the debit cards that are now being used all over the world. If it works here with a very limited, but diverse population, chances are it will work elsewhere as well.

 What's not to like?

So what is there not to like you may ask? Not much, really. The one thing that I have noticed the most and is probably the biggest disadvantage down here is a certain "uncertainty" many people exhibit about themselves – one way: 'we're too small to get this done', or the other: 'we are the best, we can do anything'.

That kind of uncertainty can sometimes cause trouble in the most unexpected situations – just like it would anywhere else in the world. But then again, it is also that kind of uncertainty which makes people quite modest - something which in my perception is definitely likeable, and we've already discussed the upside of likeability!

Toby Ruckert is an Auckland-based entrepreneur and blogs at tobyruckert.com.

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