Right Hemisphere a wrong decision?
By David MacGregor,
The government is giving New Zealand software firm Right Hemisphere a $12 million dollar loan to help boost international sales, keep the company in New Zealand and stimulate the growth and development of a cluster of similar businesses. Sounds great. Especially if you’re Right Hemisphere.
The deal is obviously not without its critics. Is it fair that one company should be singled out for special favour by cabinet—effectively playing the role ’Dragons’? Does it set a precedent where the taxpayer becomes venture capitalist in high risk ventures?
I feel the issue is complex and can see both sides of the argument. But as a card-carrying battler in the Creative Economy—my partners and I managed to launch Idealog based on our own sweat and ability to persuade sponsors and advertisers to participate in our idea—it would have been nice to have a tranche of cash made available with no interest component. I’m sure other entrepreneurs will feel the same way.
So, good on Right Hemisphere, I’m sure they will be watched very closely (bearing in mind our national proclivity to mow down the blades of grass that dare to sprout above the rest of the lawn).
It’s nice to know the government is putting your money where its mouth is in fertilising the creative economy (though interestingly the Treasury opposed the deal). Get your proposals ready. Perhaps an interest-free fund for small to medium sized enterprises with fast access to cash (if world markets are in your sights).
On the other hand who wants the dead hand of government on their board? Could be a Faustian deal.
What is your point of view?
Comments
Matt
I wrote about Right Hemisphere three years ago. Sequoia Capital, one of the great Silicon Valley venture capital firms, has an investment in the company.
http://computerworld.co.nz/news.nsf/0/e8703c8794375ee9cc256de7007b2513
Getting the Sequoia funding was a real coup for Right Hemisphere. Check out the website — Sequoia has had a piece of great businesses from Apple and Atari to Google and YouTube.
http://sequoiacap.com/
Sequoia likes its companies to be based within a bicycle ride, which is exactly where Right Hemisphere's HQ is conveniently located. It made a second investment in Right Hemisphere last year. It's possible Sequoia was keen to see the R&D moved to California too, but the interest saved on NZ$12 million seems like pretty small beer to the people who fund Silicon Valley's finest.
David MacGregor
The Sequoia site has a gem of a page on it for entrepreneurs - guidelines for start-ups and business plans for pitching.
http://www.sequoiacap.com/ideas/
(For those of you who haven't twigged Matt - the author of the previous post is Editor of Idealog magazine.)
…But to bring the conversation back to Right Hemisphere - whether interest on 12 million bucks is 'small beer' isn't the point. It is the principle, not the principal that matters, surely?—
gnat
I hope this kind of deal would be a rarity rather than the norm. I can live with Government waving cash around to keep companies at home. In the long-term, though, we need to have an economic climate that [i]makes[/i] companies want to be here—it should be in their economic best interest to stay here, without bizarre interest-free loans from taxpayers. But we won't get to the goalposts (self-supporting ecosystem of suppliers, partners, and capital, selling to customers overseas and taking advantage of an acceptable local tax climate) if we let the early bloomers leave. Keep Right Hemisphere and others while the young ones are nurtured and taxes are rationalized, and in a few years there won't need to be any of these unusual financial arrangements.
Vincent
Isn't the point that it is a one off? Either have a transparent system for assisting exporters - or nothing at all. The problem with picking winners is the potential for catastrophic failure. First there's the strong possibility that bureaucrats and politicians get it wrong. They certainly have less chance of getting it right than infomred investors. Second, there's the whiff of pork barrels about the whole thing. Let alone corruption. I'm sure we all wish Right Hemisphere all the very best. But heck, there are plenty of companies we wish that for. Including mine own. Hey, Ms Clark ….(see, it's started already)
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