The Press, November 2012

Tonight I plan to toast last week’s successful offshore sale of local tech company Emendo with a brew from Emersons, the beer company also acquired by a foreign giant recently. Both transactions are great news, but you wouldn’t know it by some of the reactions.

Emendo last week announced its acquisition by McKesson Corporation, the ‘IBM’ of the healthcare software sector. 14th on the Fortune 500 index, McKesson’s 37,000 employees produced revenue of $US120 billion in the last financial year.

It is a brilliant achievement for Emendo, founded by Nick Burns and Bart Vischer a decade ago. They have worked hard in a very tough market to build a strong position in their niche, helped by two proven technology entrepreneurs, Phil Holiday and Dave Tinkler, who have worked as the company’s CFO and CEO respectively in recent years.

Emendo’s software helps hospitals forecast patient demand so they can plan their resources accordingly.

The value Emendo’s software can provide is obvious in a sector where demand for services is growing at a much faster rate than the funding to provide them. Not only does it offer more bang for the healthcare buck, but an improved service for patients.

Building and selling software in the healthcare sector is challenging. They are large, complex and typically conservative organisations with constrained resources, particularly when it comes to investing in non-medical expenses.

Emendo have worked with local providers like the Canterbury District Health Board (CDHB) to build their knowledge and refine their product ahead of selling to over 40 clients worldwide. This is a model the government is keen to promote with the recent formation of the Health Innovation Hub, of which the CDHB is a founding member.

The vision for that Hub is for local healthcare providers to gain the benefits of smart Kiwi technology, while giving those companies the ability to prove their intellectual property before taking it offshore. Although not a product of the Hub concept, Emendo provides evidence the model could be effective.

Canterbury has many more smart health tech companies, from the likes of radiology software company Comrad to wound-scanning technology providers ARANZ Medical to surgical device designers and manufacturers Enztec.

Contrast the mostly positive reaction to Emendo’s success, with the mixed response to the sale of craft brewer Emersons to Japanese-owned Lion Breweries.

Founded in 1992, Emersons brews around 1 million litres a year and has found a loyal following nationwide. Showing they can be as pretentious as wine snobs, various bars and beer fans have expressed outrage at the “sell-out”.

One Wellington bar owner was reported as saying they would stop stocking Emersons because “they don’t want to find out how long it takes for Kirin (Lion’s owner) to start meddling with the brewery.”

From Lion’s perspective they have bought a brand that complements other brands like Steinlager Pure and Lion Red, helping them attract premium pricing for a niche product.

The same criticisms being heaped on Emersons for the Lion sale could be attributed to Emendo. Emendo’s customers might not get the same level of passion, enthusiasm and responsiveness from a global corporation like McKesson.

In both cases however, the customers will decide. If the acquiring company doesn’t do a good job of satisfying their needs, they will move on to another product.

The bottom line is that both Emendo and Emersons, while very different, are companies that have created unique intellectual property with smart thinking and many years of hard work by dedicated individuals. Their shareholders, some of whom would have invested significant amounts with relatively low expectations of return, will also get rewarded.

As a nation we too often have a negative view of our companies and their intellectual property being sold to offshore companies. We should be enthusiastically applauding these successes.

The world is interested in these ideas, reflected in the upcoming “Geeks on Planes” tour of New Zealand by a group of venture capitalists. Organised by New Zealand Trade and Enterprise, the tour brings 15 investors from the likes of Google Ventures and Khosla Ventures to see our innovation wares.

‘Selling out’ may mean some jobs go offshore in the small picture, but in the big picture we get good returns for our intellectual property and free up people and resources to create a greater number of even more valuable ideas, earning more valuable income for the country.

Labouring away to build a small New Zealand company, instead of selling to a large global company who can grow it by selling it around the world, doesn’t always make sense. We can build great tech companies such as F&P Healthcare, Xero, Orion Health and Rakon, but we shouldn’t assume that is the only model for getting value out of our ideas.

I for one will be celebrating both transactions with a cold Emersons, hoping it doesn’t lead me to be capacity planned in the hospital.

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