A Timely recycling of the Trade Me bounty
Bernard Hickey explains how the success and subsequent sale of Trade Me led to the recycling of capital and expertise into a bunch of successful businesses that are now taking on the world.
A common refrain whenever a high-tech success story is sold into foreign ownership is that New Zealand Inc has 'lost' that capital and expertise. Critics point to countless examples where it appears great businesses are poached offshore at the first sign of success and then the owners retire to the beach with their booty, leaving the local unit to wither and die.
The most memorable one is Navman. The high-flying sat-nav company employed over 300 people in Auckland at its height in 2004 when it was bought by America's Brunswick for $108 million. It was subsequently carved up and sold off into a series of bits, only some of which now remain in New Zealand. Meanwhile, Auckland-based touch screen TV and interactive whiteboard company NextWindow was sold in 2010 to Canada's Smart Technologies for US$82 million. But a strategy change by Smart eventually saw NextWindow wind down and close by 2015.
But it hasn't always worked out that way and the best example is that of Trade Me. Despite its sale to Australia's Fairfax Media in 2006 for $750 million and its relentlessly local focus, Trade Me has turned into a machine for recycling capital and expertise into some of New Zealand's most outwardly looking and successful startups, ranging from Xero to Vend to PowerbyProxi and Green Button.
The most recent example this week was a $7 million capital raise for Timely, which is a Dunedin-headquartered Software As A Service (SAAS) company providing booking services for hair salons and beauty spas in New Zealand, Australia, the UK and America. It allows customers or staff to book a 20 minute appointment at a hair stylist or a beauty salon online, and for that information to integrate with the businesses' accounting, rostering and other software packages. Think of it like Vend for hair salons, and the link is not coincidental.
The Trade Me connection in the company and the capital raise was not obvious at first glance, but it was incredibly important to Timely's co-founder and CEO Ryan Baker. Not only did the capital generated from Trade Me's 2006 sale indirectly help the company grow, it also provided the people and experience to help it turbo-charge its growth.
Baker and fellow co-founder Andrew Schofield have benefited from the Trade Me 'machine' in a variety of ways. Their first startup was BookIT, which was a wholesale booking engine for motels, hotels and tourism attractions. They started it with help from Dunedin's Ian Taylor, the former TV presenter turned 3D animations company owner. TradeMe bought BookIT in 2010 and Baker and Schofield spent a couple of years working for New Zealand's biggest and most popular e-commerce company.
Baker said they learned a lot, but decided to go out on their own again in 2012 to build Timely. But the connection didn't end there. A closer look at Timely's board and the detail of the major investor behind its latest capital raise, Movac, shows the Trade Me alumni is alive and well.
Rowan Simpson and Mike O'Donnell are directors of Timely and were key players in the stunning growth of Trade Me, alongside Sam Morgan. Simpson founded Flathunt.co.nz in 1999, which morphed into Trade Me Property when he joined up with his school friend Morgan to become Trade Me's third employee. He was Trade Me's head of software development and product from 2000 when Trade Me was just another website to 2007 when it was a household name worth hundreds of millions of dollars.
Simpson then went on to be a key player in the growth of Xero with Rod Drury, becoming its head of product strategy at Xero in 2007 and 2008 at a time when it was launching on the stock market. He also worked and invested hand in hand with Morgan and his father Garth Morgan at Xero, which had much wider and arguably bigger international ambitions than Trade Me. Simpson didn't stop there either, despite being in a financial position do just that. He went on to become one of the original investors and directors in retailing point of sale SAAS company Vend, which also has the same ambitions as Xero to become a global player in point of sale software in the cloud.
O'Donnell, who is known widely as MOD, was the chief operating officer at Trade Me over the latter part of the same period, helping to grow Trade Me from 10 employees to over 300 employees. He also went on to help growth Gareth Morgan Investments before it was bought by Kiwibank.
Movac's investing link
The investing glue that runs through this lineage is the Wellington-based venture capital investing group Movac, which invested just $100,000 to back Morgan and Simpson as they grew Trade Me. Its first seed fund invested in Trade Me and Parts Trader, both huge Wellington technology success stories employing hundreds of developers and growing e-commerce businesses in New Zealand and the United States respectively. Movac then recycled the profits from those sales into a range of other Kiwi start-ups, including PowerbyProxi and Green Button, also tech stars that have been bought by Apple and Microsoft respectively.
After several cycles, Movac has invested in Vend and was the lead investor in Timely's capital raise of $7 million announced on Saturday.
Baker said he called on both directors for advice regularly as Timely planned its growth and prepared for the next step. Timely has grown to 47 people since 2012, with most working from home up and down the country, and overseas. It has actually been funding its business from revenue over the last year, having built its customer base up to 8,300 who pay $20-30 per user a month.
But its next stage is to use the capital add another 30 people over the next six to 12 months in New Zealand, and even more overseas. It now sells its service in 48 countries.
Baker pointed to O'Donnell's influence in creating the business culture and governance for the next stage of growth.
"His experience doing that on a day to day basis has been invaluable. It's been great to have him on tap for guidance on that dynamic between people, and on culture" he said.
Simpson's "nerdier" experience on building Timely's online product had also been extremely valuable, Baker said.
A bathrobey culture
One feature of Timely's link with Trade Me has been its culture, which Baker describes as #timelylife.
The company encourages staff to work from home and to fit their jobs in and around their lives. One part of that is that employees are given a bathrobe to mark their first anniversary with the company. TradeMe was also known for a few quirky touches, including its staff bus trips to the zoo and the now famous slide from one floor to the next.
Baker thinks this approach has helped Timely build its business with salon and spa business owners, many of whom also fit their work in around their lives, rather than the other way around. He pointed to how one large US firm who signed on to use Timely had preferred dealing with Timely's less corporate approach than other competitors.
He aims to use the Trade Me capital handed down through Simpson and Movac to fund another surge in growth in markets beyond New Zealand, with more than half of that growth coming from Australia and just 10-15 percent of its customers now being in New Zealand.
Timely is beginning to adopt many of the same global growth aspirations of Xero and Vend, and is using the same cloud computing approach and offerrings to small businesses. That's no accident when the capital and the people came from Trade Me, a company that excelled in building software that both customers and small businesses could use at once from their own devices.
(Corrected from an earlier version that transposed Apple and Microsoft in the section about acquisitions and clarified to make clear that businesses pay $20-30 per month per user, rather than per business)