Fertilising our technology tall poppies

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The Press, July 2011

Another technology tall poppy poked its head through the canopy of business success last week, with the acquisition of Wellington software company Aptimize by a US-based company.

Some commentators, typically not those accustomed to risking their own funds on business ventures, have lamented the transaction as another example of New Zealand entrepreneurs selling out too quickly, rather than trying to build a big home grown enterprise.

These sentiments show a misunderstanding of the challenges of taking technology products to global markets from New Zealand, and miss the broader benefits of our intellectual property being snapped up.

Aptimize provide software that helps speed up how fast website and intranet pages load, and is used by the likes of TradeMe locally, and Disney, Google and Microsoft internationally.

Publicly-listed Riverbed Technology Inc, based in San Francisco, bought the company for a reported $US20 million, with a further pay-out due for shareholders if the company meets earning targets, possibly taking the sum past $US30 million.

As well as being an acknowledgement of the quality of Kiwi technologists, it’s a great reward for Aptimize’ s shareholders, particularly given the company is only four years old.

Contrary to the armchair critics, it’s a smart move by Aptimize’s shareholders, given where their product fits in the market.

Aptimize’s Website Accelerator product, no matter how smart, is only a small part of a much bigger group of tools that the operator of a large website would use to improve their customer’s experience.

For Aptimize to build a large global company they would need to be able to offer some of these other products and services to customers, as their existing product is too much of a niche. That takes a lot of capital, let alone the risk, to either fund more product development or acquire other companies with the appropriate technology.

Instead Aptimize have sold their intellectual property to a company with a broad spread of products, as something that adds to their overall portfolio.

Acquirer Riverbed Technology has 13,000 customers worldwide, providing products and services that basically help companies ‘grease the pipes’ they use to get computer data from one place to another.

With the huge growth of services like cloud computing, where companies host their IT systems remotely, the opportunity for companies like Riverbed are significant. And Aptimize’s technology will play a key role in this, expanding far beyond its existing group of 150 customers.

As with many other Kiwi tech company buyouts, it will have many downstream benefits for our economy.

Most of the Aptimize team, including some of the shareholding owners, will move to San Francisco, picking up more knowledge and skills about operating in the US that can be shared with our technology industry. In my experience successful Kiwi tech entrepreneurs are incredibly generous in doing this.

Those same shareholders will also receive capital that can be invested back into our technology sector, as these types are rarely those that will take the money and lie on the beach. Typically they are driven by a desire to build businesses by solving problems using technology.

There are numerous examples. Sir Gil Simpson sold his first product LINC to US-company Unisys and went on to found the company now known as Jade Software Corporation.

Denis Chapman sold his Christchurch electronics business Swichtec to a UK company and has invested in and built businesses subsequently. Sam Morgan of TradeMe fame is very active as an investor in a number of companies.

Most recently Rod Drury built and sold a couple of tech businesses before he decided to build a global company from New Zealand in the form of online accounting software provider Xero.

Like many of these industry luminaries, Aptimize were smart not just about the product they built but the way they took it to market. According to media reports, the product originally emerged in a classic Kiwi way from frustrations encountered when building an online project management system.

Instead of just creating a product and throwing it at the market, they aimed squarely at the US as the largest centre of online businesses. And once they worked out it wasn’t smaller online companies (the ‘dotcoms’) that wanted it, but large corporates like Google or Disney, they went hard at that market.

Another real strength was the fact they have kept their story simple and clear. No ‘leading integrated, leveraged, fully featured optimisation technology’ for them. Instead a clear and compelling promise of value – according to their website “Aptimize is a company dedicated to speed. We develop and sell  . . . – a software product that accelerates websites and intranets.”

Aptimize also backed their product with outstanding support, from their New Zealand base. They understood that the only way Kiwi tech companies can overcome concerns about our remoteness is by providing service superior to any of the competitors.

Instead of getting the secateurs out, we should be loading the fertiliser on top of technology tall poppies like Aptimize. Its’ founders will go on to do more, and either directly or indirectly New Zealand’s technology sector will bear the fruit of this.

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