Many people are surprised to learn how big New Zealand’s tech export sector has become. It is now our second largest source of offshore revenue after dairy, and it’s not about to slow down soon.
Sir Paul Callaghan summed things up succinctly with his words at the launch of the 2011 TIN Report: “We’ve grown a $7 billion innovation sector with $5 billion per annum in exports, without most New Zealanders even being aware of what we can do. Imagine what will happen when all New Zealanders discover what we are really good at!”
What’s remarkable is that tech’s total revenue and exports have doubled in the decade following that report.
In a country famous for its dairy, meat, forestry and tourism exports, many people are surprised to learn how big its tech export sector has become. It is now New Zealand’s second largest source of offshore revenue after dairy.
The tech sector’s growth is not about to slow down either. If it continues at the same pace, it will double again in the next five years – taking it to $20 billion in sales. Tech companies are increasingly growing in size and profitability – with 53 of the TIN200 companies posting revenues over $50 million, and this year for the first time, four companies reporting revenues exceeding $1 billion.
Greg Shanahan, managing director of Technology Investment Network (TIN), which produces the TIN Report, has witnessed the sector’s growth first hand.
“I love the fact that we can grow billion-dollar revenue companies that are global leaders in their respective fields.”
He is referring to Xero and F&P Healthcare.
“There is so much to learn from both companies that is inspiring,” he says. “One of the key differences between the two is that Xero grew so quickly and in doing so inspired a whole generation of SaaS companies to follow in its path.
“I admire the confidence, unwavering vision and executional skills that Rod Drury demonstrated to pull it off.”
In terms of vision and confidence Rocket Lab is a stand-out, says Greg. “Who would have believed prior to Peter Beck that we could build a space industry in New Zealand or even imagine that New Zealand had advantages in doing so?
“Who before Peter Jackson and Weta Digital would have imagined that you could have a sustainable film production industry in Wellington?
“These iconic companies are transforming our country. But now there’s a new generation of young companies emerging, led by equally young CEOs in their 20s and 30s who are very impressive people.”
Greg also points out that the base of the tech company eco-system is expanding rapidly. In 2005 TIN surveyed just 70 companies. In 2022 that number had climbed to 1200, and he expects the growth to continue to remain strong.
Meanwhile, on the investment front, there is more money being invested in early-stage companies, although the number of companies receiving those funds is fairly static.
“However, despite recent turbulence in the public markets, there are now more people making money out of technology investment than ever before, both from publicly listed and private companies,” explains Greg. “So more money is coming into the ecosystem from cashed-up investors. Last year two foundation shareholders in publicly listed companies sold share parcels for more than $300 million each.”
More people have access to tech opportunities through platforms like Sharesies, he adds, and internationally the number of offshore investors in Kiwi tech companies is growing by the week.
On the flip side, if you’re a fledgling tech company looking for backers, Greg’s advice is to be very focused and clear in your communication about the opportunity and your plan to build a business around it.
“Investors are looking for novel, scalable solutions to big problems or opportunities and an executional plan that makes sense and shows understanding of the issues,” he says.
“So put your team forward. Be confident, but don’t be afraid to say you don’t know.”
This article is an extract from the August Quarterly edition of NZBusiness.
