Many Kiwi tech companies stalling at start-up stage

01 November 2016

Kiwi hi-tech companies are staying in the start-up stage for too long, the recently released Market Measures study shows.

Conducted by marketing advisory firms Concentrate and Swaytech, and sponsored by New Zealand Trade & Enterprise, the annual Market Measures survey drew data from over 300 New Zealand-based technology companies on their approach to marketing and selling their products overseas.

“Tech is New Zealand’s most exciting industry, but commentators often underestimate the huge challenge of marketing and selling our innovations offshore”, says Owen Scott, Managing Director of Concentrate.

“Our tech companies are developing world class innovations, but too few of them realise their potential as they struggle to cost-effectively scale their sales activity,” says Scott.

Sharon-May McCrostie, Customer Manager at NZTE, says: “We’re seeing more Kiwi hi-tech companies executing competitive and truly innovative strategies and achieving game-changing results. But as the Market Measures study suggests, we still see companies staying in start-up mode for too long. We urge companies going offshore to relentlessly focus and invest in execution to really bring benefits to themselves and to New Zealand and grow bigger, better and faster.”

The Market Measures 2016 report found that while 60% of the companies in the survey were over 10 years old, 35% had annual revenues of less than $1 million and only 2% generated more than $50 million in turnover.

“New Zealand’s hi-tech industry is a few large companies and a long tail of small businesses. The challenge for the small firms is extracting themselves from the long tail of hi-tech exporters by finding cost-effective ways to achieve substantial growth,” says Bob Pinchin, Director of Swaytech.

According to Scott, if hi-tech companies are to mature faster, they need to take a more strategic approach to marketing and sales.

“To break out of the long tail trap, companies need to follow a three step approach. First they have to increase their intensity of their sales efforts by focussing more tightly on which markets they target and the sales model they use. They need to become much better at communicating the value they deliver, so they can charge premium prices; and they need to be more adventurous way in how they use digital marketing.”

Summary of 2016 survey results

327 New Zealand technology companies completed the 2016 survey. The typical company is:

  • Most likely based in Auckland, then Christchurch and Wellington.
  • Has been operating for 10-19 years.
  • Turns over between $0m -$5m.
  • Is an established business.
  • Sells software-as-a-service, software development services and software products.
  • Exports these products to other businesses, primarily in the manufacturing, retail and utilities sectors, in Australia, the USA and the UK.
  • Takes just under six months to close a typical sale.
  • Uses their own direct sales team, investing 15% of turnover on staff involved in sales and 5% on marketing.
Growth trends
  • The majority (73%) continue to be focused on export to traditional markets such as Australia, USA and UK.
  • Average annual turnover growth was 41% year-on-year.
  • Overall tech firms continued to invest in sales and marketing, on average spending 34% of turnover.
  • Start-up firms were the most aggressive, spending 38% on average, while mature tech companies invested 18%.
What opportunities are there to improve sales and marketing performance?
  • Gain more intensity with greater focus: get better results from their sales and marketing investment by being more focussed and strategic in the way they take technology products to market.
  • Find how to express and capture more value: extracting more value from sales by achieving premium prices.
  • Smarter lead generation: being more innovative in the way companies promote their products, especially in the use of digital marketing approaches.