Any successful founder, venture capitalist, or indeed banker, will tell you technology business scale-up stories tend to follow the path of epic novels; fraught with danger, loaded with unexpected plot twists, and inevitably set in a harrowing race against time. The tale’s been told over, and over again. It’s in desperate need of a rewrite.
So, what if there was a way to change the scale up narrative? If New Zealand really wants to build a successful economic ecosystem around a culture of innovation, isn’t it time to figure out how to better support and grow our best and brightest? At the very least, the whole process could be a lot less painful.
I’ve been leading the Technology Industries proposition, portfolio and, these days, a large tech banker network at BNZ for the past seven years, and over that time, we’ve worked closely with over 1500 start-ups, scale-ups, and global success stories. Suffice to say there’s a few choice tales in there to learn from.
We’ve seen tech businesses use all kinds of approaches. Some choose to go hard and fast, and then try to backfill structures, processes, operations, and even capital. It can work, but it can also cause headaches thanks to retrospective admin, rushed shareholders’ agreements, hurried launches into new markets, and misalignment amongst investors without a strategy in place to cope – to name only a few examples. At worst, it leads to founder burnout, business burn out, or an exit earlier or at less value than might have been possible with a different structure in place to support growth. The businesses that succeed long term tend to work at the same speed, but take a thoughtful, longer-term view, with a strong strategy in mind. They think about the kind of investors they want, their target customers, markets and geographies, the kind of capital they need, and when they need it, and are quite aware of any key dependencies and long-term global trends.
Every business story is unique, and I won’t begin to claim that any ultimate silver bullet exists, but I do have something new to consider, a ‘smart-debt’ solution that might offer a win-win scenario; non-dilutive growth capital paired with a bespoke panel of expert advisors. It might sound a bit unusual for a bank. We call it Project Scale Up.
Project Scale Up takes on two big pain points in the story of every scale-up: firstly, getting the capital they need to grow without trading down ownership in the company, and secondly, getting the expert advice and support they need around the table. We’re building up a pool of the best tech business minds in New Zealand, and around the world, and pairing their expertise with the country’s highest potential and highest growth technology businesses. The discovery process for approving the growth capital will help us identify key risks and opportunities for the businesses participating, and we’ll use that information to curate a growth panel that’s tailored to each individual organisation. Over the course of three years, we’ll host them in the portfolio, helping these businesses navigate both risks and opportunities, so they can scale-up minus some of the avoidable scars.
By getting our panel and our Project Scale Up businesses together in the same room, we’re mitigating some of the most common challenges for companies when it comes to expert advice. While founders might have access to one or two independent directors or expert advisors, they often hear from them one at a time, without context or balance – and without the opportunity for those supporting personalities to learn from each other. Supporting businesses with all the voices in the room means there’s contextual advice that everyone’s privy to: information conflicts can, if they happen, be resolved with everyone around the table. It’s a more efficient way to spend time, and it mitigates another worry too by lessening the risk of a business’ leadership finding itself in an echo chamber.
Capital is key when it comes to growth, but there’s more to it than that, like making sure that if there’s debt, it’s smart debt. Then, there’s the things money can’t always get you: talent, knowledge, networks, support. Some of these things seem like they’re not accessible in the New Zealand market, but we’re striving to change that by opening all the doors we can reach.
Where does this lead? To more great New Zealand businesses finding ways to scale- up and scale out, taking New Zealand to the world. To growing New Zealand’s scale up muscles so there’s more opportunities for attracting and retaining talent locally, starting a bit of momentum for growth and prosperity in our own business ecosystem. To our own organisation growing and learning with each wave, and improving the way we serve businesses, especially those innovative businesses, in the years to come.
This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article. Any opinions in this article are not necessarily shared by BNZ or anyone else.