Ben Mack: I guess the first place to start then naturally is it's been 15 years now of the Icehouse, tell us a little bit about the Icehouse story.
Andy Hamilton: We started 15 years ago, actually with a pretty simple idea which was there were a bunch of people around the University of Auckland and some individuals in corporate organisations from places like Spark that said we think the entrepreneurial economy is going to to be really important to New Zealand’s future and how might we go about contributing to helping small business entrepreneurs grow. It’s easy in hindsight to look at that and go, "Wow, they obviously could see the future," but just that simple idea of entrepreneurs are going to be important, more business is going to be important, it still resonates today.
We didn't know how we were going to do it, we just knew that the why was really important. I don't even think we had a clear vision, we just knew that we wanted to make a difference to the ecosystem and we didn't even know what ecosystem was. It was just how do we help businesses grow? I think we've iterated and learned and changed and failed and succeeded over that time, but the core premise is still there, which is find business, find entrepreneurs, and be conscious in helping them to get to the next stage in their journey.
Fantastic. Well what are some of those things that have changed in the last 15 years?
Well, it's a really interesting question. I think New Zealand has become way more confident, way more aware of the position it has in the world and maybe less self-conscious which is not a bad thing. I think it's way easier to get to market than what it was if you had a new product or service. I think we've got a whole bunch of people who've grown their businesses, grown their start ups, who are now contributing, giving back, helping others do it as well as growing their existing businesses. I think so much has changed, but it's only when you look back, but I would say the biggest thing I think is the perspective and the confidence that exists now compared to what it was 15 years ago.
Okay, fantastic then. Well one of the things of course with start ups and start up incubators is I guess one of the harsher realities sometimes, is start ups sometimes often can have a quite high failure rate a lot of the time. You've probably seen your fair share of companies that may have started out quite promising, but just didn't have a bit of that secret sauce and didn't quite work out in the end. What are some of the advantages of an incubator programme like the Icehouse for those companies?
Well, I think it's pretty interesting, right, so we do two things, we work with start ups and the second thing we do is we work with medium-sized New Zealand established enterprises or firms, family businesses to help them grow. In each phase what we do is quite different. If you look at the start ups over the years. We just started with this thing called an incubator because that was the thing 15 years ago. That was how you supported start up companies. You created a place, you had a programme that mentored these start ups and hopefully you reduce that failure rate and then creates the success rate. If I look at it now, we're not an incubator. We're a funds kind of investment platform for start ups and that we have money at seed stage, angel stage, and a little bit of money to help get them offshore.
The key in the end is helping the entrepreneurs find their partners to get to that next level. What we talk about is, you know what really matters is these start ups achieving product markets. Start ups are awesome and the founders are awesome because they have a really strong vision around what they want to create and so they're looking into the future always. What really matters is building something that customers can use and get value from tomorrow. Once you start doing that, you have a chance to actually increase your success rate. I think our offering around working with start ups has just morphed in so many different ways as we've learned how to be true to them and their journeys, and acknowledge that, it's like American baseball, a lot of start ups are not going to go anywhere. Why they're not going to go anywhere? I think because they'll find the need and the pain and the market, all their timing is just wrong.
Well that kind of answers a bit of what my next question was going to be, which is simply, what is the difference between a start up that succeeds, and a start up that doesn't? Is there something that a start up that's successful often times has that an unsuccessful start up might not have?
Yep. Team. I think timing is always important, but a great team will recognise that timing is a challenge and find a way to pivot away from that time issue. I just think the est start ups have had either a great team or a very bloody-minded, resilient founder who has just kept going and going and going until they've achieved that product market. Once you've actually into a place where people really want your product or your service or your technology, it's how you can build that into a company around the little flame in the market. I think again, that's team, if the founder realises that he or she then needs to move to be a more company builder, some founders can't do that and then some do. At each stage changes and I suppose the teams who fail are the ones who don't recognise it needs changed the way they lead their company.
On a more positive note then in that case, over the last 15 years, you've obviously seen a lot of companies that have gone from the very early seed stage to becoming quite successful enterprises. Are there some that really stand out to you that you're particularly proud of their success?
A lot. Adherion, which listed on the Australian stock exchange last year, M. Com which sold to File Serve. E-bus which are sold out to IMD out of Europe. Crimson Education more recently which is a start up founded by Sharndre [Kushor] and Jamie Beaton, and the Education Space out of Wellington is just an awesome AR start up. There's a lot, let alone if we don't talk about the owner managers, and the SMEs like Pro Life Foods out of Hamilton and Furnware out of Hawke's Bay, Farro Fresh, there's just so many. Actually, that's the cool thing too. There's just so many entrepreneurs and owners who are building their businesses, creating value, that it's kind of weird to point out any one in particular.
Well then in that case, what has the role of government support been over the last few years with Icehouse? Has there been government support at all and if so, has that meant a lot to Icehouse's continued success?
Yeah, so look 15 years, we've had a partnership with government whether that's through industry in New Zealand in NZTE or Callahan. Primarily, what our government has done beyond the partnerships is funded our operational expenses to help us work with start ups or to help us work with owner-managed businesses. In some cases, that's what's called a voucher for people who attend our programmes and other cases, that is actually supporting the Icehouse start up teams' operational expenses. That represents about 25 percent of our year on year revenue that comes from government sources across the whole business. I think what that doesn't cover though is the strategic relationships we have with Callahan and NZTE.
For example, NZTE is bringing in international investors from Asia. We get the opportunity to work with them to connect our companies and to those investors and that's gold right, because the NZTE investment teams around the world, is looking to curate those relationships. They've been a partner all the way through, they've been a funder, and I think a great supporter of the work that we do with entrepreneurs and owner-managed businesses.
Well also, kind of on a similar note then is we talked earlier in this conversation about the increased confidence that we're seeing with New Zealand businesses in the New Zealand business space. At the same time though, what is the value still of programmes like the Icehouse or even if we look at Creative HQ in Wellington for example or Biz Dojo, what's the value of such programmes today in 2016?
Are you saying how are we different?
First and foremost, all of those organisations, Biz Dojo, Creative HQ, and Icehouse, we believe in entrepreneurs and we believe in innovation and we believe in community. We're all mates together trying to help those businesses work out how and where they go to next. Second thing is we're a community together. If you get into the detail, we've all got slight nuances. Biz Dojo has built an awesome national network across its five co-working centres, and then adds and curates the community over and above that. Creative HQ has got a real niche in acceleration and also now working with corporates to enable them to cope with disruption as they go forward. Then our nuance is that in that start up space, we have really integrated investment into our offering so that it's actually a part of what we do, as well as the work we do with owner managers which really neither of the other two organisations do.
In different ways entrepreneurs, depending on their stage, they need different things. Sometimes they need someone to hold their hand. Sometimes they need people to give them a kick in the ass. Sometimes they need access, and that's why it's important in this fabric. That's why I think those three organisations have been pretty successful is because each of us in our own right make a difference to the customers. That's why customers keep on coming back to us because they can see that we're solving something for other entrepreneurs, that makes a difference.
Well that answers my question perfectly. You mentioned success which also naturally leads into my next question here. Is looking back over these last 15 years of the Icehouse, has the success really surprised you the fact that you're still going after so many years?
I don't know about that. I think for the first five, six, seven years, we just focused on help companies, just help them. After a while, people started to say, "What does that mean? Like if you added all that help up, what is it?" We're like, "Oh, that's quite a good question. We should have done that from the beginning." For us, we now do track job creation, revenue, growth, quality companies, and also exits. Doing that I think is quite interesting for us. It is an outcome of what we do and it gives us a proxy that we're on track, but we're so driven by helping businesses on their journey and making them as well-equipped as we can that that's where we kind of where we get the oxygen and the buzz from. It's a long answer, but we do track the data, but actually our customers, what do they care about, that we'll actually help them.
They're not really going, "Oh wow, I was part of the thousand jobs that were created." They don't think of it that way. They just go, "Hey, did the Icehouse help me? Was it worth the fee I paid? Would I go back when I've got the next issue that I need to address?"
Great. How many companies are based at the Icehouse currently?
Well, we're not a place, so yes we've got an office in Auckland, yes we've got an office in Hawke's Bay, but we're across New Zealand in terms of flying in and flying out with our team to support customers. Maybe to give you an idea, we all invest in about with our partners 50 start ups a year, and we'll work with about 300 to 350 owner managers a year. The start ups mostly are based in Auckland. The owner managers throughout New Zealand.
Well, we've kind of been looking back at the past 15 years and maybe trying to take a peek into the proverbial crystal ball a little bit here, what kind of trends do you think we might be seeing in the next five, ten, maybe even 15 years with the Icehouse and just the start up space in general?
I think it's pretty interesting. This year is a lot with singularity and a raft of all of sort of the growth of the tech culture is I think there's something around disruption over these next three, five, ten years and how economies like New Zealand cope with the threats that are coming. Fundamentally, what I think that means is that as a nation we need to get a lot thinner around our infrastructure, our ecosystems, our bureaucracy to be more responsive and flexible. If we're really brave, this is a bit out there, the control systems that we have in society need to be more effective. That means non-linear education, that means the whole concept of how kids go into university because that's what their parents did is kind of out the door.
I think that's challenging when you think about the disruption that might come to milk from synthetic milk. It's disruptive to our education system, and it's challenging, but from that disruption comes great opportunity if we as individuals are flexible enough. I'm kind of excited by what that looks like, but at the same time, a bit worried that we as an economy will not be responsive enough to what appears to be wave of technology and disruption coming. That I think is going to be really quite challenging. The rest of it, you know New Zealand's on, it's pretty confident. We perform well as an economy, that doesn't mean we should be complacent. I think how we grow the stock of zeros, the Lewis Roads and more to really be more significant scaled New Zealand business operating internationally is something we really got to do.
Capital is starting to not become an issue. I'm looking next year, I think there's going to be $500 million of new money coming into the venture capital industry. That makes me kind of excited for the next three, four years. Something that we just haven't had venture industry money, over the last few years. Worried but also excited by the opportunities that will be created.
Okay. Well one model is often times gets touted in comparison to what New Zealand could potentially become, especially in the start up in technology space. Is the Israeli model, with what's happened over there with the start up tech scene, do you think that what they have going on in Israel – is that a model that New Zealand should be actively trying to replicate, or should we be focusing on doing our own thing? Are there some lessons we could take from Israel? What are your thoughts?
I think we should always be looking out to the best and how they do what they do. Observing, learning, and then adapting and applying back into our own unique New Zealand conditions as long as we don't kid ourselves that we're so different that we can't take the best practise from Silicon Valley, Singapore, and Israel. I think there's some awesome stuff in Israel. I also think culturally they are so significantly different to us in their environment that you just can't replicate that. At the same time, there's some awesome learnings. Incubators and the venture of this programme, they came out of a truck to Israel in 1999. I think we've looked at those things, tech incubators, the government is learning around the effectiveness of those in this market, but we can't just slavishly follow others. We have to learn and then adapt and apply.
Look at this, earlier this year the Simon Musa Delegation with the business round table, or business circle I think it's called that went to Israel, has led to a group of CEOs of large companies going, "Whoa, we're behind in R&D, we need to raise a fund and a big fund for corporate New Zealand to invest in start ups," and I think that's just awesome. That's a great example of people going to Israel, learning how we are different and how we're not tracking and then coming back to New Zealand and saying, "Right, let's do something with that." I think that's where it's valuable where the private sector takes action on some things that is fundamentally missing in New Zealand.
Something you talked about when looking at the future and the trend that we're seeing right now is that “D word” – disruption. It sounds like what you're saying is either disrupt or die so to speak right now for companies. Is that really the case at the moment?
Do you know everything has context on disruption? What's important is this for, if you believe in the technology adoption curve, this is all about understanding in your industry or in your technology, where an adoption curve is and how quickly it's moving through. I don't ascribe to everything is going to be disrupted, I think context requires there will be some industries where there is massive disruption and other industries, things will change the same. Tourism, people are still going to want to travel. There will still be people who do the virtual reality stuff and say, "I don't need to go to New Zealand anymore because I can do it through goggles." Others will go, "That's not enough."
I think it's just important not to get on the bandwagon of disruption blindly without thinking about how industries will be impacted by the use of technology positively and negatively.
That kind of sounds like something that David Downs has talked about before where he talked about how no technology ever truly goes extinct. One of his stats that he loves to bring out is the fact there's more blacksmiths around today than there were at any other time in history before which to me, is a bit surprising because we think of a blacksmith as somebody working on horseshoes and various other metal implements back in the Middle Ages. That sounds like that probably doesn't surprise you too much either that we're seeing traditional technologies still continuing forward?
Yeah, I'm not surprised. I think just from a society perspective, the challenge we have when there are big shifts is that their growths have dis-affected people. Taxi drivers, home carers who lose out as a result of these shifts in technology and that's just something that we need to breed in our people, a greater degree of resilience, a greater degree of flexibility. I'm kind of interested in ten, 15 years, this freelancer move in the U.S. economy, will that come to New Zealand? Will organisations the way we think of it, as hierarchy change? We'll always need government, but what type of government will we need? What types of call centres? Will they all be robots and AI? That's just something that avatars as an example, I think that it's just working through. Think about all the car parks and the cars in Auckland, will we need those in ten, 20 years? It's pretty crazy.
It sounds like you believe the jury might still be out slightly on whether or not the robots are going to take all our jobs one day?
I think that people like to promote disruption, they like to promote stuff because it's trendy and it creates conversation. The reality is some things will change, and some things won't, and we just need to, the wise person always says, "Just stay still and just reflect and make sure that you're aware of what's happening around you, and then if you have to move, move." We don't have to turn everything upside down, and just be aware of it. Unless there's such a fundamental shift. A lot of people are talking about synthetic milk right now. I know nothing about that, so I have no informed opinion around whether the cows that produce our milk will be extinct as a need in the next ten, 20, 50 years, and/or if they were, then how would be repurpose those animals to our economy? No idea.
Well thank you very much for those insights. I appreciate it. Is there anything else that you'd like to talk about?
I think just one thing that I'm always interested in chatting about is this batch boat BMW mentality, the three B's and whether that still exists in New Zealand because I've got this view that it's outsiders who create the impression that most SMEs are leisure-ous, and they just want to settle for that. My own belief is most small business owners stop growing because they're worried about growth causing them to fall over. They don't settle because they're happy, they settle because they're fearers they'll lose everything. Fundamentally, the three B's, I don't think it exists and what we need to do is help those owners build their aspirations and confidence to actually align to growing is actually a good thing and they can have a better business as a result of doing that.
That confidence thing I think is a really important thing for us to support entrepreneurs to be able to go out there because they are the heroes of our society. The start up entrepreneurs, the owner managers, the family businesses, they create the jobs and they look after the community, so I really want to see more of them doing the awesome work they do in the future.
Awesome. Well, hey, thank you very much for your time this afternoon, Andy. I really appreciate that.