We learn these basics by being founders, being embedded in the start-up and growth ecosystem, taking part in events like Webstock and Gather and by reading sites like Hacker News, books like Lean Start-up and following and understanding stories like Amazon, Apple, Trade Me and Xero.

So without further ado, here are 10 top of mind basics for early stage companies in NZ.

1. Start with nothing, engage with end users and and build a prototype product, before seeking money from investors. It’s easier to invest when you can see the product and talk to the end users.
2. Organic Growth is better than paid growth. It allows us to scale up and improve the product, sales and customer service as required, and allows investors to see a track record of growth and a curve ahead.
3. Products and services need to constantly evolve, based on learning from customers through sales, observation of how they use the product and greater understanding of their unmet needs.
4. Usability and design is critical as it drives end user delight, and happy end users is what drives lasting revenue. The drive for end user delight should come from the top.
5. Monthly subscription revenue is one of the best business models, with recurring revenue from loyal customers close behind. It means that you can focus on growing the monthly revenue through product improvements and reducing churn.
6. IP and technology are generally overrated as a competitive advantage, with companies often worrying about patents and secrecy rather than developing compelling products. The compelling part of a technology is that it is integrated into products that sell.
7. It’s ok to make losses as you are rapidly growing and increasing market share. Amazon set the standard, as they still makes a loss but is worth $120 billion. They have almost doubled sales in the last two two years to $60 billion and had over $2 billion in free cash flows in 2010 and 2011, down to $395m last year. Their loss was 19 cents per share, and their shares are worth $278 each.
8. The technology and internet sector is already large in NZ, with 34 ICT companies in NZ earning over $50m, 18 over $100m and the tech sector itself is worth over $23b a year, and third biggest. Above all – it’s growing very quickly.
9. Great staff and leaders drive the fundamental value of companies.
10. Get on a plane and sell. Nothing beats getting face to face with customers and stakeholders, and New Zealand based companies are only one flight away from a number of key markets. We are lucky to have the worlds best airline, so use it.

Members for more than three months will be allowed to vote for councillors, and I encourage everyone to sign up the the superb NetHui.

Here’s my election statement:

I’m proud to be a current InternetNZ Councillor, finishing my first term with this election, and I seek your vote for this 2013 election.

The last three years have been a great time for Internet NZ. The team and members responded with energy and intelligence to bring a calm and authoritative tone to a large number of critical policy debates. We’ve also been active in less visible work including IPV6 and Internet Filtering, and in supporting the 2020 Trust in getting better at helping people to learn and connect.

But we really caught ourselves doing something right  with NetHui, and kudos goes to Vikram Kumar for both pushing for the event, and coining the name. This year promises more than ever, and I’ve been impressed with the continuing professionalism in the preparation and conduct of the event under the acting leadership of Jordan Carter.

But we can do more. A lot more: 

• Too many people are not connected to the internet in New Zealand. Statistics NZ reports 331,000 households don’t have broadband and 63,000 households with children don’t have internet*, and that’s unacceptable. We can count the number of disconnected better, and we can work to connect them and keep them connected.
• There is no single authoritative place to find information about the Internet in New Zealand. We are the natural place to collate and host it.
• Our policy makers and media are often at a relatively early stage of a learning journey in topics that we know well, albeit often a rapid one. We are the natural providers of fact-based independent advice and education.
• New issues rain upon us all of the time, and we need the scale and experienced hands on the team to be able to present well informed and aligned responses and advice across a broad range of topics.

However:

• We have perennial discussions about the scope of Internet NZ. Are we guardians for the infrastructure and values, or are we also guardians for matters that are more material today, such are privacy, security and copyright?  We need, in my opinion, advocates in NZ for all of these matters, and to ask if not us, then who else? for  issues like copyright, PRISM and TPP.
• We are wonderful custodians of our .nz mandate, but I worry that a large share of the source of our source of income is from purchasers of domains for profit, who may switch to more lucrative gTLD offerings. NZRS will need Council support and guidance that allows them to conduct their business in a newly competitive realm while still adhering to the Society’s values.
• We hold funds, most of which are payments in advance. We have an incredibly conservative bank-debt-only investment strategy, and need to continue to gently explore more professional ways to manage those assets. That means we need professional investment heads around the Council table, to act as a committee to advise the council and the external parties who are the investment professionals.

What I stand for

My shared mission is simple – Let’s connect everyone at ever increasing speeds, let’s help individuals and business take advantage of this wonderful infrastructure to improve society and the economy, and let’s create the best environment to create and consume content in the world.

But let’s also ensure that while we are a non profit, that we are unafraid of money. Money allows us to better achieve our objects, but like any business we need to be prudent and take a long-term perspective.

Bio

I’m a founder, director, active investor or advisor to several early stage companies including 200Square, PocketSmith, Vend, Lingopal, myTours, Powerkiwi, Define Instruments, Cadimage and more.

I’ve recently launched a fund management company a colleague, and that in turn is launching a fund, Punakaiki Fund to invest in growing Internet, Technology and Design-led businesses.

I’ve been a part of the NZTE Better by Design program as a private practitioner, and serve on the Return on Science Investment Committee. I’m also the current Chair of the Council’s Investment Committee, and was a driver in creating the strategy and committee itself.

I was a co-founder of Pacific Fibre. We tried, and I learned a lot. It’s now the time for someone else to have a go, and one of our team is now with Hawaiki.

http://nz.linkedin.com/in/lancewiggs

Writing: Blog at LanceWiggs.com and business advice column for Idealog.

Education: MBA (Yale), B Tech (Massey) and a large number of professional development courses, including the COMU/Massey course in governance.

Member of the Institute of Directors and (currently unpaid) member of NZICT.

For me Optimizer HQ, who have 60 staff here and offshore, comes out of nowhere, from the non-aligned community or non visible community in the diagram below.

I know very little about them aside from what I can read on their websites, but it’s yet another sign that the number and size of the early stage and growth companies in the innovation sector is a lot bigger than anyone has yet recorded. The NZ Young Company Index, which VIF reports, records around $36 million of investment goes into the sector each year. My own belief is that substantially more than that is being invested, and that there is also even more substantial pent up demand from quality companies.

Three that were older favorites:

• Blame directors for failure, CEOs for success - because I really do believe this is the case. 
• Xero’s second round  – because it’s nice to see that I got it right.
• Buyers and Sellers guide to Web Design and Development firms - because it did apparently resonate with a lot of people.

And the motorcycle pictures bought back memories of snow and sand.

In turn, companies that create a culture of over-delivering to end user needs, who execute well, and who are good at finding and retaining great customers will create long term value for shareholders.

Air New Zealand has in recent years been a shining light for placing the end user at the center of their operation. To me the transformation over the last few years was superb, and the airline was justified in winning the awards it did. I do still enjoy the flying experience, but tonight I was reminded that the airline is eternally at risk of forgetting about their long term value at the feet of over-emphasis on selling. This needs constant vigilance.

The first sign was the realisation that I paid for travel insurance on a trip a few weeks ago. I only realised when I saw the invoice:

Air New Zealand managed to extract $18 from me for a service I did not want and value at less than zero. Less than zero because the pain of unclicking the travel insurance box is a waste of my time and interrupts the flow of each flight purchase transaction. The interruption to flow means I am marginally less likely to buy. Meanwhile the amount is too small for me to bother to waste my time to call to explain the problem and ask for a refund.

The second reminder was an NZHerald profile of new CEO Christopher Luxon starts “Air NZ boss Christopher Luxon has sold everything from soap to icecream. Now he wants to sell tickets – lots more tickets.” Luxon arrived at Air New Zealand from Unilever, a sales-led company that sells products which surprisingly we have none of in our house.

Luxon talks about growing the market pie for travel rather than just winning market share, and that’s absolutely right.

But then there was this:

A change in strawberry jam supplier saved the airline $200,000 a year … The new jam was “good enough” ‘

Now we know. The food on Air NZ is “good enough” and not “Air New Zealand quality.”

I know that most flyers are going to accept the lousy jam, but for me reducing the quality of jam is a symptom of erosion of the Air NZ experience. It sounds trite, but I have for years examined the backs of jars of jam (and other products) to make sure that the ingredients are acceptable, and I do so on planes as well. For everyone the taste left from each trip will diminish ever so slightly.

Let’s not blame the new CEO – the procurement process a year or two ago for tea and coffee on domestic flights no doubt saved a bundle of cash for Air NZ, but the price for flyers is now wretched undrinkability.

These little things sum to the customer experience, and Air New Zealand’s focus on the customer experience is what won those awards, bought record numbers of tourists to our shores and helped move our domestic economy.

For me the key champion of the customer experience (over the shareholder) has to be the CEO, supported by the board. If not, then who will it be? And how would anyone else  ever have the power to keep the tasty jam over the short term voice of the shareholder?

In this instance we the people of NZ are the majority shareholders, but we also derive benefit far beyond the profits of the airline. Every passenger Air NZ brings to or from New Zealand contributes to our economy and society. Every pleasant trip makes us happier and less frustrated. This is something worth preserving, as any flight in the USA will remind us.

What should Air NZ leadership do?

1: Keep it up

Please continue to place the end user, that’s us flyers, first. You’ve done so for several years now and the staff and service are fantastic.

2: Door to Door, end to end

There seems to be increasing acceptance that the trip is door to door not gate to gate, and that trend needs to continue, whatever the mode of land transport.

The mPass iPhone application and the revamped check in process are superb, and both have obvious room to improve and hopefully development paths. But the website is grossly dated, and the opt-out steps conflict with the goal of simplicity.

3: The next big thing

But that’s the status quo – continuous improvement is only standing still. We need Air NZ to keep surprising us with a series of “one more things.”

Consider putting yourselves back into our shoes, but lifting your standards of minimum acceptableness. Train yourselves to get frustrated easily, like I do, and to observe the point of pain that earned the grimace.

To start, book your own end to end travel, and do so using your own retail website and other services. Drink the tea in flight, eat the cheese with inadequate crackers, and sit at the back of the plane.

I’d like to see the next generation of products emerge from a Hanger 9. I’d like to see things that nudge passengers to get on and off planes faster, that make booking and flight management a joy and help travellers of different types self-identify and get what they need.

When it’s more fun and easier to fly, we fly more. And that’s good for Air NZ, the economy and the country.

I cannot really say more than this due to securities law.

Punakaiki Fund Limited (Punakaiki) is pleased to announce that it is considering raising between $20 million and $50 million by Initial Public Offering (IPO), to fund investments into high growth potential New Zealand companies.

The proposed offer of ordinary shares to the New Zealand public is expected to commence in late June to July this year.

The company intends to appoint Lance Wiggs Capital Management Limited as manager.

Punakaiki intends to apply any funds raised from an offer to invest in New Zealand-based growth companies, including seed stage and focussing on early and mid growth stages. Punakaiki will seek to make long-term investments in companies which can demonstrate the ability to:

• generate early revenues to validate their business model;
• follow an attractive revenue (and profit) growth curve; and
• create a sustainable competitive advantage through the clever use of internet, technology and/or design.

Punakaiki director and co-founder Lance Wiggs said: “We can say very little about this offer right now as we are bound by NZ Securities law. We are working hard on getting ready to make the offer to the public, and expect to do so towards the end of June or in July. To help potential investors we have launched Punakaikifund.co.nz, where we are accepting pre-registrations of interest until June 14th. As we all know from recent events that doesn’t commit investors to anything, but it will allow us to keep investors informed and also inform us about the opportunity.”

No money is currently being sought by Punakaiki and no applications for shares will be accepted or money received unless and until a combined investment statement/prospectus containing information about the offer has been registered and has been received by the subscriber.

Contact:

Lance Wiggs
Director

Phone: 021 526 239
Email: lance@lwcm.co.nz
Twitter: @lancewiggs

Meanwhile I have just returned from our annual visit to the deep South via motorcycle – stopping at the the Brass Monkey rally. Along the way I took the time to take a few photos in Punakaiki.

Christchurch based mass spectrometer company Syft seemed to never want to emerge from the speculative early stage, absorbing over $30m of investment and revenue without ever lifting out of the starting blocks.

But now things have changed. There’s a new CEO in town, my friend and fellow Yale MBA Doug Haste, and there is Syft steadily selling the Voice units that they spent so many years developing. Syft have just closed a round for $3.5 million, which does not seem like a lot compared with previous rounds, but is meaningful now, and at a very good price.

My take is that Syft spent too much time being a science and engineering compamy rather than a sales, customers and end user company. This was not helped by obtaining government grants to further research and development, as laudable as that was. Nor did a team full of scientists and engineers focusing on science and engineering help.

The same team, minus a few lost due to belt tightening, remains, but things have changed.   Doug, famous for his Chanui Tea advertisements, has shifted Syft since he has arrived last year into a customer and sales-led organisation. It started in his first week when he and almost all of the staff stayed behind to paint the offices, and continues now when those same scientists and engineers are driving the distribution and sales efforts. With the business now focused on selling, manufacturing and product and process improvement, the sales are mounting and the income is flowing.

However Syft were burdened until now by high levels of debt, and by the need to borrow in order to buy parts. With the $3.5m that need has now gone, and so the P&L will also look a lot better without the interest and fees associated with the debt.

So from outside I see that Syft have entered their phase, where every dollar invested is gainfully used to grow sales. With money in the bank they will able to build inventory,  manufacture more quickly, and, even stock the several hundred thousand dollar Voice units ready for sale.

I call this investing on the dot – investing at the sweetspot stage when it seems fairly clear that solid growth is ahead to a clear yet diverse market and with a defined and improveable product.

Syft have little credible competition when competing head to head in many applicaitons, and for now their job is to build and nurture the distributor network and to build and service units. The more customers in the more regions that they get, the more they are insulated against lumpy or low sales volumes in a particular region or customer.

As for investors in the current round? We, and I was one of them, and we are gaining the benefit of the millions that were invested before, and at relatively cheap price. Investors have been hurt a lot in the journey to date, and so this round was at a very cheap price (a down round) to encourage investors to ante up. The low price will mean some investors who did not put in will be diluted a bit, but it rewards others who over subscribed.

The winner in the round is the ACC fund, who over subscribed with $750,000, and is now the largest shareholder. They see that what Doug is doing is great, and it’s also nice to see Doug on the register with just under 5%, but that should increase to 15%. There are 1.1 billion shares on issue, so my few million are beneath the reporting limits of the companies office.

For me this is a long term investment, and I’m investing not in the technology, which is great, nor the staff and leadership, who are also great. Instead I’m investing in the long term sales story, the ability to steadily grow sales over the next 10-20 years without recourse to another funding round.

And if I’d had more to invest, I would have, and I also invested in Vend’s last round so the well was dry.

A lot of people are visiting the NZX.com site today, with one thing on their mind – the Mighty River Power float.

How delightful when we see in NZX an organisation that understands what its visitors want.

A hearty well done.

Sadly Kiwi Melissa Clark-Reynolds’ MiniMonos is closing down. It’s a virtual world for kids full of monkeys, and seems to have had a good run, so this is a tough time for Melissa and her team. The tag line is “love to play, love the planet” and it was aimed at younger folk.

The problem was stated as losing member numbers. My take is that their target market was ever changing, as kids grow up, which means the site would have to constantly get a new generation of kids on board. Meanwhile the technology and gaming world moved quickly on to the next thing, in this case iPods, iPads and iPhones. It seems that their outstanding customer service and other efforts came at a cost that was to high versus their declining revenue.

Meanwhile similarly named MinoMonsters is hiring engineers.  Here’s their web home page, which simply points to their iPhone app:

and that app on  iTunes is doing very well:

2446 reviews, a very high rating along with that and a long list of potential in-game purchases. This looks like it’s well loved and making good money. The game promises that you can “collect, raise and battle your way to greatness”, and is aimed at everyone.

Aside from the names and cartoon look, it is a little random to compare these two businesses. But doing is interesting to show how the world has moved.

I see three definitive differences between the games:

1. MiniMonos is Flash based, aimed at kids using computers, while MinoMonsters is iOS based, aimed at people using iPhones and iPads. While Flash is still surprisingly huge, the world has shifted hard towards Flash-less mobile devices.
2. MiniMonos is a wander around and touch world aimed at small kids, MinoMonsters has battle element and is attractive to people of all ages. Older people have more money to spend and ability to spend it.
3. MiniMonos is played in a virtual world with others, MinoMonsters on your own device in your own time. A virtual world needs other people in it to interact with, and once others start disappearing the reasons to stay evaporate. iOS games have various techniques to bring in gaming with friends and strangers, but they are often playable when the other party is offline.

So what should MiniMonos do?

It looks like they have done the right things.

Firstly they have launched not one but two iOS applications. The first, MiniMonos Flight was released in 2010, panned by the handful of reviewers, and best left alone. The second, MonkeyMe, which seems to have just been released, seems much better. It has 7 reviews in the US store, all positive, and while the cynic in me discounts the first few reviews, the current paying customers if MiniMonos will come across to try out their free coins. The app lets players create monkey avatars, share them with friends and enter a daily competition. It’s an interesting approach that keeps the community aspect of MiniMonos while allowing offline play. Time will tell how it works out, but at the very least it will be a lot lower cost and  maintenance than the MiniMonos flash site.

Secondly they made the hard call and closed down the MiniMonos site. It’s hard to watch something that you have poured a lot of money and effort into get switched off, but it’s the right thing to do as it frees up that time and money to focus on other internal or external work. If the paying customer numbers are not rising, or start to fall, then in general teams need to take a hard look at the reason why, and either change things up or walk away.

And thirdly they will surely try again. There are a lot of learnings on the path to failure, and while the iOS app may or may not be too late, the MiniMonos team no doubt has plenty of other ideas to dive into.