NZ creates remarkably valuable tech firms. How can it keep more of the benefits?
A new stocktake of the tech ecosystem shows NZ has grown companies now valued at more than $133 billion. But is it as good at retaining them?
New Zealand's technology sector has seen a remarkable surge in value, with a recent report estimating the combined enterprise value of venture-backed companies at NZ$133 billion. This growth has been driven by more than 400 firms, including eight "unicorns" with valuations exceeding US$1 billion, and two "decacorns" valued at over US$10 billion – Rocket Lab and FNZ.
However, while the creation of these valuable firms is impressive, there is a concern about retaining the broader economic benefits generated by these successful companies.
The challenge lies in understanding the full economic impact of these technology successes. While enterprise value provides a snapshot of a company's worth, it doesn't fully capture the broader capabilities and ripple effects that these firms have on the New Zealand economy. Successful start-ups not only create valuable companies but also generate experienced managers, engineers, and investors who can build at a global scale.
They also foster the development of new companies, the recycling of returns, and the acquisition of market knowledge.
The report highlights that New Zealand's economic return from entrepreneurship cannot be solely judged by the valuation of the companies produced. Instead, it should consider how much value is created and retained within the country. It's important to note that growth can shift where value is created, as companies expand internationally and decide where to locate important activities like management, research, and investment.
While international investors play a crucial role in funding early-stage and late-stage ventures, the report also shows that domestic investors are vital in the initial stages. International capital is essential for New Zealand companies seeking to operate globally, providing access to deeper pools of finance, specialist expertise, customers, and networks. However, as firms expand internationally, the geography of their operations can change, potentially altering where high-value activities are located.
The ultimate goal should be to ensure that successful New Zealand technology companies not only become global but also continue to build local capability. This means conducting research and development domestically, developing senior technical and managerial talent, and recycling knowledge, networks, and capital into the next generation of ventures.
By focusing on the productive capability left behind by these successful firms, New Zealand can foster an environment that supports the creation of even more valuable technology companies in the future.
Written by urgent.news from The Conversation AU's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
