What NZ startups need to know about Silicon Valley and doing business in San Fran

What NZ startups need to know about Silicon Valley and doing business in San Fran
Bad Kiwi habits will be sanded off and good Kiwi traits enhanced. Culture clashes will ensue and disorientation will occur. But the opportunities in Silicon Valley for New Zealanders are limitless. James Robinson reports.

Bad Kiwi habits will be sanded off and good Kiwi traits enhanced. Culture clashes will ensue and disorientation will occur. But the opportunities in Silicon Valley for New Zealanders are limitless.

Facebook founder Mark Zuckerberg understands the power of the Valley. "In Silicon Valley, you get this feeling that you have to be out here," he said in an interview at the end of 2011.

Even with 10,501 kilometres separating San Francisco and Auckland, Zuck’s thoughts have implications for any New Zealand tech startup too. If any local company with ambition is not itching to stretch their legs here, they should be.

Circa 2013, the Silicon Valley is more a nebulous philosophy than an actual place. Its boundaries extend far beyond the physical boundaries of the valley itself, in practice now extending more than 70 kilometers down the US-101 freeway from downtown San Francisco into Santa Clara.

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According to the American National Venture Capital Association, US$11 billion in venture capital was  invested in the Silicon Valley and San Francisco in 2012, five times that of New York almost and accounting for more than 40 percent of total American investment. In New Zealand, venture capital spending fluctuates rather wildly from year-to-year and was pegged in 2012 at just NZ$111 million.

New Zealand has only a slightly smaller population base than the Silicon Valley and San Francisco. Per capita in Silicon Valley, about US$2,200 was spent on venture capital in 2012. In New Zealand, it was NZ$27. This investment bedrock supports a high level of innovation. The amount of patents granted in the Silicon Valley in 2011 was roughly 10 times higher per capita than it was in New Zealand.

It goes past mere numbers. Downtown San Francisco, in the trendy SoMa district (so called for being the area south of Market Street, which splits the city) tech companies and chic office spaces have transformed a once sketchy neighbourhood. Twitter, Yelp, Pinterest, Instagram, Airbnb and Reddit are located within walking distance of each other. The balance here has now been tipped away from the homeless towards casually dressed young executives doing business deals.

South of this, within the traditional geographic boundaries of Silicon Valley, a flatter, more characterless run of towns oriented around business parks and office blocks, lie the giants: Facebook in Menlo Park, Apple in Cupertino, Google in Mountain View. These companies don’t just have offices – they have campuses.

The San Francisco Bay Area has been described many a time as the Hollywood of the tech industry. It's fitting. If Brad Pitt were a website, he'd probably be Facebook.

The region is a tantalising carrot for any New Zealand startup looking to push itself – and all just a 13-hour flight away. As veterans of this move will attest, both business owners and advisers, it is not an easy move to make. Bad Kiwi habits will be sanded off and good Kiwi traits enhanced. Culture clashes will ensue and disorientation will occur. But the opportunities are limitless.

Whether a company is destined to be the next big thing or not, all parties attest to the fact that any New Zealand entrepreneur will return home better equipped than they left.

The Silicon Valley is part new market opportunity, part startup finishing school.

NZ'S LIMITS

david white indiereignDavid White (pictured) is the chief executive officer of Hamilton-based IndieReign, a film distribution website for independent movies, which he founded late in 2011. As the central hub of America’s tech scene, he knew that San Francisco represented the largest opportunity for him to grow his company’s user base.

It is a thought echoed by Mario Wynands, managing director of game development company PikPok, headquartered in Wellington. PikPok started out in 1997 and Wynands says he’d been making “dozens and dozens” of trips here for 10 years.

“San Francisco is a very important city for us, as it houses many companies we partner with to leverage their technology, monetisation services, licensing opportunities, or development services,” Wynands says.

It’s a common predicament. For any New Zealand tech company, America represents a larger, more developed market. San Francisco, as the centre of that, holds strategic partners, capital and inspiration.

There’s no shortcut to physically making the trip. White had tried, with little momentum, to get things going over email and online.

“You can’t learn the area by reading TechCrunch,” he jokes.

Wynands stuck to the conference circuit for a while in America, but found that he wasn’t getting the quality face time with potential clients that he needed.

“Targeted trips proved more fruitful in terms of winning business.”

Some people even see downsides to a company staying too long in New Zealand and not testing the waters soon enough in the Silicon Valley. Catherine Robinson (pictured below), director of the Kiwi Landing Pad, which provides workspace and mentoring to New Zealand companies in San Francisco, believes that in a smaller market like New Zealand, everyone’s chasing the same dollar.

catherine robinson kiwi landing pad director

“You don’t get the same access to conversations,” she says. “By the time market information hits, it is already over.”

But that’s nothing to be intimidated about, either. The Silicon Valley is geared as much to outsiders as Americans and New Zealanders have a lot to offer.

“Large companies here are prepared to look outside of the US for solutions and New Zealanders are innovative and unique, by proxy of our position in the world. We seek to solve problems unique to how we see them,” Robinson says.

To Amal Johnson, a San Francisco based venture capitalist and entrepreneur who assists with NZTE’s international Beachheads programme, New Zealand is a perfect test size to develop a product.

“There’s a size and maturity to the New Zealand market that can be an asset,” says Johnson. “It helps you to validate your product. The country serves as a real petri dish – you can prove it works and then take it abroad.”

GETTING HELP

In a spacious, high-ceiling, open-plan second floor office in San Francisco’s SoMa district, complete with games tables, couches to put your feet up on and a beer fridge for unwinding at the end of the day (all standard trappings for any startup company in the city) sits the Kiwi Landing Pad. The space was established in 2011, a collaboration between private New Zealand investors and the Ministry of Business, Innovation and Employment, to provide a workspace and mentoring to new entrants to the San Francisco market and foster a sense of community.

Robinson presides over the space, which is adorned with the silver fern, maps of New Zealand and various trinkets from home.

“I think the name says it all,” she says. “We support the notion of landing here and finding your feet.”

The Kiwi Landing Pad has resident businesses that use it as a base when they’re in town and it also runs the klp8 programme (formerly Catapult), a straight partnership with the Ministry of Business, Innovation and Employment, which supports earlier stage tech startups to come to San Francisco for a month.

Robinson says that there’s no set model for success. The Kiwi Landing Pad works to a company’s goals, needs and deficiencies – be they sales, marketing or bureaucratic – rather than setting out a formula.

Companies working at the Kiwi Landing Pad invariably become a team.

“It’s about building up a business ecosystem of shared networks and infrastructure, about utilising shared problem solving and those informal in-house conversations that naturally happen,” she points out.

David White first entered San Francisco with IndieReign through Catapult in September last year and raves about it.

“It’s far more than a desk,” he says. “The connections, the intros and the advice, it all means you go in a lot warmer otherwise. They align themselves with what you want to achieve.”

The Kiwi Landing Pad is a little evolved from the standard business incubator model, but that’s also an option for any New Zealand company looking to move across. NZTE has had a relationship in the past (it is currently up for review) with the Plug and Play Tech Center, housed since 2005 in an office park in Sunnyvale. The center is a small business factory, with two major office floors packed tight with cubicles.

One of these is an international pavilion, for its foreign partnerships, where an NZTE sign and a New Zealand flag still hangs.

There’s a network of venture capitalists affiliated with the centre and an executive in residence programme, to go with a yearly expo where businesses get a chance to pitch their company at potential investors.

ryan stevensen nzteIt is an extensive enterprise. As manager Ryan Stevensen (pictured) outlined, in June 2013, there were 250 companies in residence, with more than 1,000 key cards issued.

Wellington’s Social Code, the creators of a software platform that encourages users to take preventative steps to improve their health, have just graduated out of a three-month accelerator programme at the Plug and Play Center. The company has been experiencing nice momentum recently, having been named to Entrepreneur magazine’s Top 100 most brilliant companies of 2013 list. Social Code founder and chief executive officer Siobhan Bulfin (pictured) says the centre was a very focused place to work.

siobhan bulfin socialcode“It helped to be around people doing the same thing – it’s very well established.”

Ultimately however, it is up to the company itself to make of the opportunity what they wanted to get out of it, she says.

NZTE’s other important programme in helping companies get abroad is Beachheads, essentially a rolodex of global advisors in different industries that can mentor a New Zealand company as they make the move.

Amal Johnson (pictured), a Silicon Valley venture capitalist and executive, has worked with this programme for three years. “I help provide a bridge for this journey,” she says.

amal johnson nzte

A company can always pick up and move on its own also, although this has risks.

As Robinson pointed out, if you’re stowed away in some hotel and not plugged into the right networks, you might as well still be back home in New Zealand.

Going solo carries with it some frustrations. “You can go it alone,” Bulfin says. She made several trips on her own before she set up in the Plug and Play Center (pictured below). “But it helps in the eyes of customers to have a base here. Customers want to know that you’re not just flying in and out.”

In America, without an infrastructure around you, it can be bewildering when things don’t come off.

“The US seems more crowded, noisy, and rushed with less people willing to lend a hand if you get stuck,” Wynands says. “It can be annoying and intimidating if something is going wrong because it is difficult to know where to turn.”

CULTURE CLASH

Once settled in America, there’s a cultural sea change to navigate as a business. Silicon Valley doesn’t have the work-life balance that New Zealand does.

People aren’t so casual; they’re more direct and move at pace, unflinching in how they sell themselves and look to compete.

Johnson puts it like this: in New Zealand, we play rugby, and there they play American football. The gap is large and you can’t switch seamlessly between the two games. You have to look at doing business in the same way.

For a start, she says, any New Zealand entrepreneur should forget having time off in Silicon Valley.

“People in the US live and breathe the companies they start. It frustrates and surprises the New Zealand companies that come here.”

New Zealand’s avid respect of work-life balance, for better or worse, can count against a company when they reach the Silicon Valley.

“I was working with a New Zealand company and over Christmas the president and CEO decided to take a three-week vacation. It cost them here, professionally,” Johnson says.

Things are done in the Silicon Valley to a different, much-heightened beat.

“It’s so much different to New Zealand,” says White. “Things can get signed and sealed at a first meeting.”

For any New Zealander doing business in the Silicon Valley, they often run head-first into an ingrained national capacity to shy away from the spotlight and have to shake the distinctly Kiwi brand of modesty that can lead them to undersell themselves.

White recalls that at first, his casualness seemed to hurt his chances at making good first impressions.

“In New Zealand if someone asks you how your business is going you might just say, ‘It’s going okay’, even if it is going really well. You don’t want to brag. But there, when people hear this they interpret it as you not being enthusiastic about what you do, or not having faith in your product.”

Bulfin saw the American attitude to starting your own business as being night and day compared with that in New Zealand.

“It’s OK to be an entrepreneur in the US. In New Zealand people still view it with skepticism and mockery,” she says.

“People wear failure as almost a badge of honour in America. In New Zealand it’s a badge of shame.”

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BE PREPARED TO LEARN

Hurdle number one for the spotlight-averse Kiwi entrepreneur? Learning to talk up their businesses and make clear, direct pitches for either customers or capital.

Bulfin couldn’t stand the idea of pitching her business. “Being there quickly taught me to have a pitch ready,” she says.

White arrived in San Francisco with a detailed pitch that he’d carefully honed in New Zealand based on local advice. He scrapped it by the end of his first day in town. He soon gained a new appreciation for talking in straight, clear lines.

“The way that you pitch, the way that you formulate what you’re asking from people, you can’t be afraid. You need clear answers. You learn here how to sell yourself better and to be less humble,” he says. He made peace with the idea that it’s not
disingenuous or slippery to teach yourself how to talk things up a bit.

“You’re not lying, you’re just presenting yourself in a much bigger way. When people ask, you let them know things are going brilliantly. That you’re going through 50 percent growth, week-to-week,” he says.

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For the businesses that come through the Kiwi Landing Pad, Robinson has seen how consistently perplexing networking in America can be for a New Zealander.

“Here it is not only about making friends,” Robinson says. “Whether it is one, two or 10 people, it is not about the number of connections people make, it is the value of those connections. New Zealanders take a lack of connection personally.”

Johnson warns that the business model from home would not replicate itself easily in the Valley. For a start, in New Zealand a company is in a smaller market with less distance between them and their clients, to whom they can reach out directly.

In America, selling like this isn’t necessarily the most efficient way of going about it. Companies may have to investigate using a reseller. There’s also less premium put on being the cheapest, as there is being the best.

The learning begins quickly when local companies touch down on the ground and all involved say it’s a process that evolves and continues with repeated exposure. Wynands says it’s ultimately taught him how to be aggressive and more competitive in business.

“That education continues always as we continue to visit the city,” he says.

JUST DESERTS

Moving to the Silicon Valley isn’t about deserting New Zealand, though. Whether a New Zealand company ends up fizzling out in America or as the second coming of Facebook, it’s a win for those involved and for the country. It’s less a brain drain issue than it is a gain in skills.

For a New Zealand tech company expanding internationally, it’s easier than ever to split development and sales between here and the world. The lessons learned working in the Valley will always be applicable in business and the new perspective can be a valuable leg up when a company is back in the domestic market.

For Bulfin, experiencing success in Silicon Valley has taught her that is the idea that counts, not where it comes from. The New Zealand business sense is just as good as anywhere else.

“You’ve got to think big with your plans. You have just as much chance of making or breaking it as anyone else, regardless of nationality.”

Still, she can see now that work ethic is the deciding factor in success, rather than the idea at stake. In Silicon Valley, she worked between 5am and 11pm, six days a week. “Ideas are easy – you won’t be the first who came up with yours and if someone else can steal it and get to market faster, more power to them.”

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IndieReign closed out a nearly $1 million funding round when White returned from his first San Francisco visit, leveraging his positive experience there for votes of confidence from investors. The company has grown quickly to 50,000 users, 70 percent of which are US-based. White, like Bulfin, sees now that it is a matter of thinking big and moving quickly in the future.

“In New Zealand we’re very small business- focused. We think maybe we’ll go to Australia, then the UK, and then maybe do something in the USA. If I start another company, I’m going straight to the USA.”

PikPok, IndieReign and Social Code all have established San Francisco and Silicon Valley presences now and are in America now for much of each year. Trips to the Silicon Valley for New Zealand tech companies become a repeat reminder of best practices.

“It’s always good. I come back pumped every time,” White says.

Wynands concurs. “There is much more energy and drive to succeed there then back home and it is infectious. I come back from every trip invigorated and inspired.”