Comment: Five steps to stronger capital markets

If the New Zealand economy were a human body, then we can think of capital as the oxygen required to sustain life.

In a functioning capital market, those seeking capital are brought together with those who wish to deploy it. This lowers the cost of equity and debt, boosts the growth of funding and sparks wealth creation.

Is this economic oxygen flowing as it should? Most New Zealand companies listed on the stock exchange (NZX) have unrestricted access to capital, enjoy diverse and internationally-based registers, and are trading at fair to elevated multiples.

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Labour targets ICT as second largest economic contributor

A Labour-led government would target the ICT sector to be New Zealand’s second largest contributor to the economy by 2025, believing it is a job-rich source of growth for a nation of small businesses.
While the precise definition of what constitutes ICT is up for debate, the party believes it currently sits somewhere between the third and fourth largest sector, behind tourism and the dairy and wine industries.
The party’s finance spokesman, Grant Robertson, unveiled the target when launching the results of the party’s two year ‘Future of Work Commission’ at its annual conference in Auckland over the weekend, unveiling a raft of proposals to improve intellectual property protection for small and medium-sized tech businesses, infuse schools and communities with digital learning opportunities, and a shake-up for innovation, science, and university research funding.

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KPMG to drive economic growth through support of entrepreneurism across Indigenous communities

KPMG has today launched a series of proposals aimed at spurring the economic growth of the Australian Indigenous community. To encourage further involvement in business and entrepreneurship, KPMG has developed 20 recommendations in conjunction with Indigenous thinkers to focus on areas of innovation, education and the Empowered Communities reform.
The Igniting the Indigenous Economy report, conducted by KPMG revealed that the gap between Indigenous and non-Indigenous Australians is now showing some signs of closing in key areas. While this gap may be closing, the progress of employment for the Indigenous community is still poor. KPMG acknowledges that the employment gap for Indigenous Australians vanishes for those who attain a high level of education.

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Amplifying NZ’s kotahitanga – working together for our people

One of THE best days I’ve had at work this year was the one I spent with fellow judges, Robin Hapi and Ian Taylor, talking to the finalists in the inaugural Maori Economy category of the HiTech Awards.

Without exception these finalists were not only great businesses – spanning startups to mature enterprises – they were also being run by talented, wonderful people.

What excited me though was how vividly clear it was that the values under pinning these businesses were shared by New Zealand’s angel investors.

As I said in my last post, we know angel investors join our networks for the following reasons:

  • To lift New Zealand higher – economically and socially;
  • To be actually involved in doing this – by contributing money, expertise and connections;
  • For the cool company – to be involved with like-minded, positive people; and
  • For the rich rewards – of course they hope for a financial return but the “psychic return” of doing good and contributing to lifting NZ higher is also a key reason why people become angels.

These values align with key values in Maori business such as:

  • Puawaitanga – the best possible return is sought on integrated goals, including but not just financial outcomes;
  • Kotahitanga – unity and a shared sense of belonging to work together for the benefit of your people;
  • Whanaungatanga – acknowledges the importance of networks and relationships, of developing, managing and sustaining relationships; and
  • Kaitiakitanga – which is about guardianship of natural resources but also extends to sustainable enterprise and taking care of assets as kaitiaki or guardians, the owners and trustees of an enterprise are responsible for protecting (and/or growing) resources for future generations.

The call for more Maori engagement in our rock star, high growth businesses and business people is getting louder. The New Zealand economy generally and the Maori economy specifically need more successful entrepreneurs. Did you know that all the net new job growth in an economy comes from new businesses?

Ian Taylor made the point during the day we spent with the finalists that our young people need more successful business role models. So true!!

Many of these budding role models and businesses would benefit from angel support. Providing capital is only a part of what angels provide. The money is just the fuel in the tank. Fuel in the tank means very little without skill behind the wheel and an experienced support crew. Experienced people who’ve been there before, who know who to talk to and where to source the best resources. And like driving a Formula One car, angel investment is not for the faint hearted. It’s a portfolio game with 90% of your returns coming from just 10% of your portfolio ventures.

More Maori engagement in early stage investment, will find the right time and place to come alive and gain momentum but the word is out now … New Zealand’s angel investment community is keen to do as much as it can possibly can to help.

Ends

 

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Record angel spend great omen for economy

New numbers from NZ Venture Investment Fund (NZVIF) show a record $60 million of angel investment seed funding was invested in 2015 up from $56.4 million the year before and just $21 million in 2006.

Since 2006 some $414.7 million has been invested in angel stage companies, according to the NZVIF Young Company Finance Index.

The 94 young companies that received funding in 2015 represent the future of the New Zealand economy so it’s good news to see growth here.

It might even be anecdotal evidence of a diversifying economy.

Critics will point to the difficulty in tracking the long-term success of these investments and the ever-present risk that they are sold offshore without contributing big gains to the local economy.

The New Zealand economy, with its reliance on agriculture and tourism, is a big ship to turn around and the companies at the early stage of their growth aren’t going to save us in this economic cycle.

But they are creating jobs at the smart end of the economy.

Could it be we are actually heading in the right direction?

In the past 10 years 39 per cent of angel investment has gone into software and services, 15 per cent into pharmaceutical and life sciences, 11 per cent into tech hardware and just 8 per cent into food and beverage.

These percentages reflect the economy we could one day be.

Economic development minister Steven Joyce was last week also keen to trumpet statistics that showed business spending on R&D has grown by more than 15 per cent in one year, from $1.25 billion in 2014 to $1.44 billion in 2015.

Technology is now our third largest export sector – after tourism and dairy – worth $6.5 billion according to last year’s Technology Investment Network (TIN) 100 report.

Over the past year the sector has had record growth of $609 million, or 7.3 per cent, with the combined revenue of the top 200 technology companies surveyed by TIN reaching just under $9 billion.

Our economy is clearly handling a commodity slump in more robust fashion than it has in the past. We’ve still got GDP growth above 2 per cent and our dollar is back near US70c.

This slump isn’t done yet and it looks set to provide a significant stress test for the economy over the next 18 months.

We’ve still got immigration gains propping things up and the prospect of increased government spending to come.

But if there is an upside to the dairy downturn it might be the economic incentive it provides for New Zealanders to try new things, explore different land uses and smarter investments.

Let’s hope the trend continues.

First published on nzherald.co.nz 11 April 2016

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Minister Steven Joyce addresses angel investors at #ABAF15NZ

#ABAF15NZ: Minister Steven Joyce addresses angel investors

# Minister Steven Joyce – Economic Development & Science/Innovation Minister, an entrepreneur himself who started in the Radio industry, talks to #ABAF15NZ investors about creating stronger links for New Zealand in the Asia Pacific rim and driving New Zealand’s Business Growth Agenda.

Includes the announcement of the 2015 fiscal surplus for New Zealand, mention of the free trade agreement with China and TPPA.

“New Zealand is far more innovative and a far lower cost”

BGA paper including ‘Innovation Chapter’ available here

BGA Building Investment – “New Zealand needs more capital”

Click here to watch video on youtube

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