In December we saw Christchurch take the largest leap in Startup Blinks ecosystem map but the sad reality is that Christchurch is currently on a trajectory to unwind all of that and what we will see is the biggest decline if we don’t do something to fix it.
Let's be honest 9 out of 10 startups fail and there is nothing wrong with that, it’s part of the game, startups are not trying to be small businesses; they have ambitious goals to deliver radically world-changing ideas that are inherently high-risk / high-reward with almost all of them having a globally scalable product or solution.
“While about 90% of startups completely fail, Startup Genome research demonstrates that only 1.5% of startups — or about 15% of those that survive — produce a successful exit of $50 million or more across the top eight U.S. startup ecosystems.”
Cities need to embrace startup culture and it makes financial sense to support startups because the 10% that succeed become established companies in the city that employ locals and often export their services to the world. The 1.5% that really make it big often become global players in their industry creating hundreds of jobs and spending tens of millions of dollars on wages in the local economy. Look at companies like Tait, Datacom & Seequent; well-established companies that started in Christchurch and are now delivering solutions to the world but they all started from an idea and over time they evolved into giants.
It’s simple maths, more startups = more winners.
Building a better startup ecosystem is a positive-sum game that pays itself off but we aren’t just talking about accelerator and incubator programs. Most startups don’t go through an accelerator or incubator, it’s best for startups to fail and fail fast without spending too much time, effort, and energy into a project that was never going to work in the first place. Most founders have an idea in their mind that their solution to a problem is going to change the world but it isn’t until they test their hypothesis and talk to customers that they find it isn’t quite right and they need to pivot or cut their idea altogether. This type of approach doesn’t require an accelerator or an incubator, it just requires talking to the right people and feeling comfortable sharing their ideas in a safe place among like-minded individuals and mentors.
Right now Christchurch doesn’t have anywhere for startups to do that. Sure there are a couple of accelerator & incubator programs if you want to go down that route but those aren’t always in the best interest of the startups. Even if you go through one of those programs what support is there on either side? Steve Barsh from Dreamit Ventures says “I think that less than 5% of accelerators around the world have any substantial material value to a startup”. These programs often end with a “demo day” showcasing the startups to the world if they are ready for the exposure or not. Doing a demo day presentation before finding product market fit can be detrimental to a startup and set them off on the back foot.
The truth is Christchurch has the opportunity to be the Tech & Startup capital of New Zealand if it were to put some resources into the right places. It wouldn’t take much and the marketing would be easy. We host enough tech events to almost fill every day of a calendar with up to 30 tech events being hosted every month. We are the only region in NZ that has its own dedicated regional tech ecosystem association, Canterbury Tech, and we are extremely lucky to have them.
Canterbury Tech is a jewel in the crown of Christchurch but they are a resource that is underappreciated & underfunded. They rely on membership fees and sponsorship from tech organisations to fund their efforts but if they were better funded or even just had a permanent location in Canterbury they could be an even stronger resource for the city. They don’t even have a dedicated office and they are working out of a shared space that has kindly been donated to them, despite this the tech events and support system in Canterbury is strong.
But the same can’t be said about startups, even Westport hosts more startup events than Christchurch & EPIC Westport is better equipped to help startups than Christchurch’s EPIC building. EPIC Christchurch started with good intentions but now it is just cheap rent for a handful of long-term tenants that got in early, we are not seeing any new companies spawn from there.
So if we want high-wage & high-growth jobs to emerge out of Christchurch we need to be open to supporting entrepreneurs with the resources to fail fast, try again, pivot & succeed. Outside of accelerators and incubators, what can Christchurch offer startups? There is no free workspace, there are fewer startup events, & people are working in silos trying to keep their own hamster wheels turning.
For the city, the goal is to get startups funded so they can then spend the money in the city, on staff and other resources but before that the startups need as many resources as possible to get there and deliver an MVP (minimal viable product) as quickly and cheaply as possible. According to Fundz,$15m-22m USD is the average Series A investment given to startups from VCs (venture capitalists) and before that there is normally a $2.2m USD Seed investment. If the city were able to better support 100 startups that could be 10x Seed investments and 2x Series A investments going right into the local economy.
But right now startups are underappreciated and under-supported resources in the Christchurch ecosystem despite the clear benefits. Startups need help early on, they need access to free desk space, office hours with industry experts & comradery with fellow founders. Michael Seibel from Y-Combinator consistently emphasises the importance of founders networking and working with each other because everybody is on a similar journey.
“The Power Law from a venture capital standpoint, in basic terms, states that the odds of creating outsized returns for investors increase as you invest in more early-stage companies”
It’s funny ChristchurchNZ spends so much time, effort, and energy trying to attract companies to set up shop in Christchurch with little return and yet they have a city filled with brilliant individuals who could reshape the world given the right opportunity & support mechanisms.
For my own startup I’m confident in my business plan and ability to raise capital; so if I’m looking to deploy $8M USD in the first 2 years (in mostly wages) why would I stay and build in Christchurch? If I wanted to stay in New Zealand then moving to Auckland or Wellington would be much more logical because of the support systems and the talent pool. “According to the Wellington Regional Economic Development Agency, the tech-oriented city harbors great potential for global businesses because it is 20 percent easier to launch a tech startup, expand a business or seek innovative investment opportunities.” Or if I wanted to save on overheads I could move to Westport.
Outside of NZ there are also plenty of options because it’s not just Silicon Valley that welcomes startups with their arms open, besides the USA the notable countries are the UK, Canada, Israel, Sweden, Germany, Ireland, Singapore, United Arab Emirates & many more. Many of these countries even have dedicated pathways and special tax incentives for companies that are bringing investments into the countries.
New Zealand is a great country to build from so I’m not looking to jump on a long-haul flight any time soon but a relocation of a headquarters is definitely on the cards if Christchurch doesn’t get its A into G. A lot of the mechanisms for success already exist in Christchurch like Callihan Innovation, New Zealand Trade & Enterprise & Canterbury Tech, it wouldn’t take much to put the resources together.
So ChristchurchNZ now has two options, breathe life back into the startup ecosystem or watch the StartupBlink clock wind itself backward.
