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Idealog—in the ideas business

Let’s celebrate organic growth

We Kiwis have a thing for companies on a meteoric rise – often at the expense of valuable businesses with more leisurely growth.

Over on his blog TradeMe alumnus Rowan Simpson has recently been giving some New Zealand startups the opportunity to tell their stories – it’s a great series that is well worth reading and it includes some posts by companies whose founders are friends of mine including Ponoko, Vend, MinuteDock, Polar Bear Farm and others.

Alongside that series of case studies, last week Lance Wiggs wrote a post criticising the failings of some local folks calling themselves angel investors and decided to introduce his self-determined test as to what is required before he believes someone can call themselves an angel. Some have criticised Wiggs for being elitist and negative – I believe he was merely trying to generate some debate – but I do disagree with some of his views.

Both of these posts, from respected investors, entrepreneurs and investors who I’m on good terms with, got me thinking about our propensity in this country for wanting to pick winners and tell the story of meteoric growth companies – oftentimes at the expense of more leisurely growth, but still valuable businesses.

A bit of back and forth with Rowan had me suggesting, with the utmost respect, that perhaps there were unheralded businesses in New Zealand contributing to GDP from such boring things as consulting or actually making stuff. Businesses that aren’t necessarily showing the growth rates that get our Minister of Economic Development excited, but that nonetheless have a role to play.

I said as such to Rowan who replied, accurately, that it’s hard to scale businesses that either rely on individual input or organic growth.

Fair comment, but also one that, if I didn’t know first hand what a thoroughly decent guy Rowan actually is, I’d think was fuelled by the random and incredibly lucky fact that he was part of the TradeMe bonanza. When you’ve supped Dom Perignon champagne, sometimes one forgets that others make do with Chateau Cardboard.

But it’s not only the high-flying tech startups that commentators seem to fixate on; they have a penchant for companies in more traditional spaces that embark on some religious massive-growth path. The recent demise of one such company in my local area, Cariboo, reminded me of this.

Cariboo was making children’s furniture and, perhaps excited by calls for mass expansion from the powers that be, was heralded recently for breaking into those holy grails of success measure – endorsement by both Hollywood stars and Harrods in London. Alas, Cariboo has now gone into liquidation owing a significant amount of money to creditors.

So how about we think about building viable businesses that can enjoy modest but safe growth, that can contribute to our economy without needing to borrow to do so, and can be long-term stalwarts of the economy?

Over the past four or five years I’ve built up a consultancy business advising and contracting to primarily US-based companies. In that time it’s contributed to the economy with a significant amount of foreign currency. True it’s not eminently scalable and is unlikely to hit the headlines with a $700 million acquisition deal, but there’s every likelihood that for the next decade or two, it’ll keep paying tax (annoyingly large amounts in fact) and contributing to our country. Sexy? Not really. Important? Hell yes.

Or how about another business I own part of, Cactus Equipment which has, for almost 20 years kept a number of local people gainfully employed. In that time it has enjoyed modest but sustained growth. It's made a small but measurable fiscal profit in every year but one of those couple of decades, and has contributed in a number of areas to the local economy. It’s a good, solid business that, in its industry has seen bigger businesses come and go over its existence. The two biggest names in the industry when Cactus was born, Fairydown and Macpac, have both been sold as brands to a company that is seeking to recreate the Kathmandu model of highly discounted Asian manufactured products – nothing wrong with that but I’d suggest it’s a somewhat ignoble end for two stalwart Kiwi brands.

Astute readers will point out that Icebreaker has also come into existence in the past couple of decades and I agree, Icebreaker is an excellent example of taking a raw material (merino wool) and adding significant value to it for a global marketplace. But for every Icebreaker there are, and should be, many dozens of smaller local companies. I’d never deny the value and excitement of high-growth businesses, I’m an investor in at least three of them, one in the US, one across the ditch and one here at home (in stealth mode at the moment). But the important point is that while being involved in potential high growth companies, I still maintain an involvement in old faithful, and consider it no less valuable than something that may shoot to the stars (and alternatively may crash and burn).

I’m a passionate advocate for high-growth startups in New Zealand, and do my utmost to help them succeed where I can, but I’d also like NZ Inc to retain a little attention for the businesses that fly below the radar, and employ many of our workers and bring in much of our tax take.

Because for every crash and burn, it’ll be the Ma and Pa business that saves this country’s bacon … I would offer them space to tell their own stories here but something tells me they’re too busy actually running their businesses to take me up on that opportunity.

Ben Kepes blogs at diversity.net.nz.


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Comments

i absolutely agree ben, thank you! i am sick of the soar and crash culture that is too often promoted at the expense of steady success. it propagates the notion that a new business has to borrow big to launch with a bang, so they go out and buy everything new: the brand design, the website, the office furniture, even the coffee machine. repayments cripple cash flow before it gets a chance to start, and bang becomes crash. but of course those behind it walk away unharmed leaving others the pain of writing off their debts, thanks to company law. the same old story of greed to have everything now! it is your steady businesses that grow more conservatively within their means from cash flow that hold the economy together, so lets hear more about them, not the feckless high-flyers!

Couldn't agree more, and have been saying so for a while—in fact perhaps some of those people supping dom Perignon should reflect on that enduring power of that very brand (and it's story which is all about organic growth) and understand that good things often take time. And, perhaps it's time to remind people that chasing market share over margin is the fast way to bankruptcy

David and Michael - many thanks for your comments and David, let us know when you want to design a DT series of sewn gods

;-)

great points, i totally agree Ben. The focus on the fast growth scenario seems to discriminate against many forms of endevour and design success, as David above says. And I suspect it infects lots of NZ Inc, having watched it play itself out ad nauseum in our agricultural and horticultural industries in the last 20 years…

Interesting debate and. like you, I fall into the safe and exciting category. But I also invest in some startups (one in NZ and one UK) which may be game-changers in future.

What I find interesting having moved to NZ two years ago is a 'chip-on-the-shoulder' attitude of not liking foreigners. particularly foreigners who may have a good idea or want to do something which was not invented here.

Can you shed light on this - a national tendency (or is it just me and my personal experience?)


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