Predicting the future: inside PredictHQ, New Zealand’s next potential billion-dollar-business
In a Callaghan Innovation report released this year called Growing The Pie, CEO Victoria Crone said 10 to 15 years ago, New Zealand founders aspired to have an exit strategy with their business that would give them a great lifestyle – the boat, the beach and the bach – through selling their company for $10 to $15 million.
However, she says there has since been a cultural shift in recent times for founders to think beyond just having a New Zealand exit and look at what they can achieve on the global stage.
“But, what we have seen with the likes of Stephen Tindall, Rod Drury, and Peter Beck is that we can solve the world’s problems from New Zealand,” Crone said. “And that we can create businesses that can fundamentally change the world.”
Another contender to add to this list is PredictHQ founder Campbell Brown. He has had the US market in his sights since day one, and uprooted his family to San Francisco 18 months after founding the company in Auckland to open its American arm.
Now, it’s one of New Zealand’s fasting growing and biggest data-as-a-service (DaaS) companies that has picked up a slew of awards in the process.
Brown says it’s a shame that Kiwi founders err more on the conservative side than the aspirational, as his theory is if you start a business thinking about an exit, you’re not going to build a great business.
“You’re constantly thinking, ‘how can I shape this so it looks attractive for someone to acquire?’” he says. “The key thing is, it’s not rocket science – although it is with [Rocket Lab founder] Peter Beck – is build a fucking kickass business. Build something that is generating revenue. Build something that has a great culture and customers rave about. Build something where you’re turning people into rock stars inside your business.”
The vehicle for that vision is PredictHQ. The first thing to understand about the company is it’s doing something that is very ambitious: it’s helping companies understand and predict the why behind any form of demand.
A lot of this is drawn from mapping future real-world events through data, so companies can understand when demand will increase for their products. In a world of on-demand services like Uber and Airbnb, this is a significant coup.
Put simply, it’s helping companies tell the future, but in technical terms, PredictHQ aggregates and verifies more than two billion data points from 20 million events across more than 30,000 cities worldwide into a single Application Programming Interface (API).
So, just how hard is it to predict the future, anyway? PredictHQ chief data officer Dr Xuxu Wang says it’s not a simple task, but when you have the right tools and data, it’s achievable and powerful.
“Predicting the future is a journey, starting with understanding the historical data, learning the patterns hidden in there and then building the prediction engine,” Wang says.
“Some people look at PredictHQ and think it’s just an event aggregator, but this is not true. Aggregating data from hundreds of sources is challenging, but the really complex work begins with the cleansing, verifying and deduping of 20 million events that are constantly evolving.
“Scheduled events are events that are known to take place in advance and they have a predictable impact on business demand. Therefore, by knowing upcoming events, months even years in advance, businesses can predict future demand. This allows businesses to make informed decisions about revenue management, supply optimisation, pricing and other factors ahead of their competition.
While this process is immensely complex, Brown and his team’s approach is not. In a world of analytics and data, they’ve brought a fun, humorous approach to business. Staff have been known to don eye-catching suits covered in Flamingos or Star Wars patterns to business conferences around the world to get noticed by potential clients.
PredictHQ co-founders Campbell Brown and Robert Kern
“I like to lead by example. If I’m asking salespeople to wear a crazy suit because it helps them to break the ice, then I’m going to do it, too. You walk into a room and they go, ‘You absolute fucking muppet – but I’m going to come talk to you’,” Brown says.
He is planning on framing a now infamous R2D2 suit of his that has since been discontinued and putting it in the office in Auckland alongside a small hammer, with the inscription ‘break in case of a sales emergency’.
One of the initial investors in the business, Rampersand co-founder and partner Jim Cassidy, got word of PredictHQ in an unusual way.
“It’s a genuinely very funny story, as everything with Campbell tends to be,” Cassidy says.
When Brown was still based in Auckland, he happened to be taking the recycling out at the same time as his neighbour Paul Naphtahli, another partner at Rampersand. Brown mentioned his idea for PredictHQ and Naphtahli told him to get in touch with Cassidy, who ran a VC fund in Melbourne that invested in early-stage businesses. Rampersand ended up leading PredictHQ’s seed funding. Lesson learnt? Seize the opportunity to pitch, even when taking out the garbage.
Find the money
PredictHQ was founded in 2014 off the back of learnings gleaned in forecasting and marketing at GrabOne and global travel group Online Republic. Brown had identified a major gap in forecasting and marketing – knowing exactly why a demand spike was happening – and found out that more often than not, it was due to events.
“I had a thesis if we could understand real-world events, we’d be able to better predict demand,” Brown says. “We were sitting in our meetings going, ‘Shit, G20 Summit in Canberra, if we had known that we could’ve yielded more out of car rentals or priced it better’, or we could’ve put on more inventory we could’ve sold. It was always a retrospective feeling, so I thought there had to be a better way.”
This theory was tested through a booking widget on Online Republic that explained to customers to why availability was high and pricing was low. By telling them the events behind the demand – ‘car rental prices are higher than usual in New York because Beyonce is playing a concert and the New York Nicks are on’ – sales conversions improved by 35 percent. This was all the proof Brown needed.
“As soon as that happened, we knew we had a real business and we knew that it was going to be something we could apply not just to travel, but to other sectors as well,” he says.
Brown begun raising seed capital and was joined by co-founders Robert Kern (who is also CTO) and Mike Valentine. When Uber came on board as a customer, Brown took that as a signal that he needed to be closer to investors and clients by shifting to the US.
“I’d done GrabOne and that was local and that was cool, but selling to four-and-a-half million people – it didn’t really excite me to do something like that again,” Brown says.
After 18 months spent getting PredictHQ up-and-running in Auckland, he shifted to San Francisco with his family to start hitting the pavement in search of some venture capital.
“I knew the only way we were going to scale this business was going the US. Being in the venture world in America, you really see the value they bring. They open so many doors.”
Campbell Brown, Xuxu Wang, Robert Kern and Yen Lim, PredictHQ’s chief product officer.
But following the money didn’t come easily. Brown calls the experience “brutal”, and says the legwork required in the Valley isn’t for the faint hearted.
“It took a year to really network. I was Kiwi, no one knew who I was. No one gave a shit about One Republic, no one cared about GrabOne, so I had no network. I spent a year building that network up and meeting founders one or two years ahead of us because I knew when it became time to raise, the best kind of introduction or referral to a VC is a warm introduction.”
Brown’s perseverance led to people telling him he was crazy, he says.
“A lot of people said that I was dreaming when I was doing it, but when you believe in what you’re doing fundamentally and listening to customers and what they say they need, that conviction you can’t get rid of.
“When you talk to Kiwis about it – I’m a Kiwi, so I can say this – they almost get a little bit upset at you like, ‘How can you have a dream that big?’ and you go, well, it’s actually, genuinely possible.”
Over that time, Brown learnt the importance of building up what he calls “scar tissue” by putting himself out there, failing fast and trying again, which honed his pitch to the level of quality needed to impress the VCs.
“Sometimes failure makes the business and idea much stronger than you ever thought it could be. Some of the things we’ve sold have come out of problems, they’ve created real assets in our business. It takes time,” he says.
“Every day you’re getting beaten to shit and then the next day, you’ve got to go back in, super confident and pitch it again and pitch it again. You learn a lot about yourself.
“My first pitch was absolutely diabolical. It was horrible. By the time I’d finished pitching, I was on point. I knew exactly what I needed to say, which is why we got the investors we did.”
One of those investors was Theresia Gouw, who’s named as the richest female venture capitalist in the US by Forbes. Brown didn’t have a clue who she was at the time while pitching but luckily, she liked what she saw and bundled Brown in her car to go across town and meet her partners.
PredictHQ went on to raise US$10 million at the end of 2018 from the likes of Aspect Ventures (Gouw is a co-founder), Lightspeed and returning investors Rampersand, Addventure and Tony Faure.
It was one of the largest series A rounds out of New Zealand recently, with Brown saying it took around seven months all up: three months of pitching, two months of due diligence, and two months of sorting out the contract.
He also says being naïve was a superpower in front of Silicon Valley’s most powerful.
“I had no idea who Theresa was – I didn’t know she’d done all these amazing things or was one of the most powerful VCs in the Valley,” Brown says. “And so, you go in there, and you’re just yourself. You see these guys wearing khakis, they’ve been to Stanford or Berkley. That ain’t me.
“I’m very passionate about what I do, I’ve got a very clear vision of where the business is going and I’m a Kiwi and I embrace that, and you become more memorable. That doesn’t mean you can just rock up, talk shit and get money. You definitively have to be a good storyteller. You have to tell them how you’re building defensibility, the sales process you’re going to lay out, you talk about your competitors, and what your secret sauce is.”
He says often, founders are of the mentality that they’ll win New Zealand first, then expand to the Australian market and further afield.
“Just be aware technology moves so quickly that the person who has the exact same platform as you is winning America. Then they’re also onto winning Europe and that’s 30, 40, 50 times the size of Australia and New Zealand combined, so let that settle in.”
For Jim Cassidy from Sampersand, he says PredictHQ was the first New Zealand company his Australian firm invested in due to this global vision.
“You can build a really great New Zealand business and have a great lifestyle from that, or you build a business and say for this to be successful, it has to be outside of New Zealand,” Cassidy says. “We saw that with Campbell right away – the drive to take the business global truly from day one.”
Room for growth
In 2019, PredictHQ now counts Uber, Dominos and Booking.com among its customers. Brown says with companies such as Uber, the battleground in on-demand services isn’t on the consumer side. Instead, it’s being able to provide intelligence to a finite pool of drivers.
“We’re providing more intelligence to these drivers to tell them where to be at the right place at the right time. That’s where you can start to win the battle. In the US, you’re not just competing with Lyft anymore – there’s Grubhub, DoorDash, Amazon – all these different businesses that are using on-demand drivers to deliver goods and services.”
It also recently patented a product, Aviation Rank, which ingests international and domestic flight booking data and merges it with event data to understand what is driving demand for airlines.
“The next phase on from that is we’re going to help businesses do data engineering. Even though we’re dealing with supermarkets and parking platforms and airlines and telcos, they’re actually all trying to solve the same problem: how can we understand why when it comes to demand? That commonality between businesses helps us to see a large amount of scale in our business,” Brown says.
But for the moment, PredictHQ’s focus is on the travel, transport and retail categories. Brown says they have no shortage of clients, as many inbound to PredictHQ due to the company solving an intrinsic problem.
“The main reason we’re doing that [focusing on those categories] is because we’ll blow our business up. Whilst US$10 million sounds like a lot of money, it isn’t if you try tackle a lot of things and try be everything to everyone. We’re actually actively turning some people away. Of they don’t have a definitive use in our wheelhouse, we’re aware that there’s certain categories we want to win before moving on to the next one.”
He says just in the travel category alone, there’s well over $100 million in potential Annual Recurring Revenue (ARR).
In terms of PredictHQ’s growth, since the money dropped from its US$10 million raise in October, its staff has grown from 18 to 60 people. Brown declined to talk financials, but says the company itself has grown 120 percent in that time frame.
Overall, he says what’s surprised him the most along the way is the calibre of businesses that are getting in touch with PredictHQ, which has helped him shake off the humble mindset New Zealanders often are prone to in business.
“You go from being a Kiwi business to a global business that is like ‘Yeah, these businesses should be getting in touch with us’. It’s that transition from being really in awe of these businesses contacting you, to being like ‘We provide a hell of a lot of value to them’ and believing in what we’re delivering to them. That mind shift has happened a lot faster than I thought it would,” he says.
While PredictHQ boasts a high-tech product, another unique aspect of the company that shines through is its culture. The diversity in its staff is visible to the outside eye when on stage at the Hi-Tech Awards, or internally to its investors.
“Brown has resilience and drive, but also something I think is really special is he’s got a fantastic ability to bring in the bet people and there’s huge diversity in the business, whether that’s gender, race or cultural – it’s an amazing environment,” Rampersand’s Cassidy says.
Brown says a great culture comes from having diversity in the workplace. At the moment, there’s people hailing from 17 different countries or cultures working at PredictHQ.
“A lot of people try overengineer culture and you don’t need to. You’re human and you think about how you want to be treated,” he says.
“If someone’s more attuned to the fact you have empathy, they are going to be more likely to work better in your business. A classic example is you see it with Jacinda Ardern and the way in which she shows empathy and other people are rallying behind it – I think that’s a really amazing thing. It’s being cognisant of the little things, like how do people like to decompress? What are they happy or unhappy about?”
He says the same grit and determination he looks for in himself is also what he looks for in people he hires.
“My life at the moment is pitching talent and letting them see the vision of our business and how big it is. We’re not here to make $10 million ARR, we’re here to go, ‘$100 million is our first target’,” Brown says.
The future is an exciting prospect for a company with so many different avenues it could explore. In terms of what’s next, though, one thing is for certain: an exit strategy is not on Brown’s mind.
“The thing with us is we’ve got so many different ways we could be acquired, it’s not even worth thinking about. That’s not to say you don’t try build relationships with the right people in the businesses, but for me, it’s all about building a kickass business and a team that can go along with it. That makes the journey really fun,” he says.
His advice for other fledgling entrepreneurs out of New Zealand is if your business really aligns with US or European customers, go to the source. Dream a little bigger about what’s possible.
“It’s going to be painful, I get it. We had to take two kids there, and we just had our third baby. It’s really tough, but man, if we had stayed in New Zealand, I don’t even know if this business would be around anymore. It’s that serious,” he says.
“For these founders or start-ups, get over the romance of it. I think a lot of people have the romance of going to the Valley, but they don’t want to take the next step. Take the next step – get a Visa, a house, you flying in and out of San Francisco is going to do nothing. Ultimately, customers, partners and investors want to be able to call you up and be like, ‘Can you come for a beer, right now?’”