Can cities with less than 200.000 people become startup hub? - A case study of Wellington, Newzealand - Part 2
18/11/2020
Can cities with less than 200.000 people become startup hub? - A case study of Wellington, Newzealand - Part 2Now we are looking into other factors that contribute to the development of Wellington Startup Ecosystem including Nurturing business culture and Government’s initiatives.Nurturing business culture
1. Wellington's topography is surrounded by hills and mountains, limited urban developing. The surrounding bay water is quite cold, which is not suitable for recreational activities such as swimming. Instead of breaking those barriers, entrepreneurs prioritise in-house software, acting as the catalyst for a technology ecosystem. This geographic feature also helps to bring people together in a small area, creating a gathering place for talented people and fostering creative activity.
2. Being small and distant from the rest of the world are the advantages of this city. "Since the domestic market is not big enough, New Zealand companies must have a global mindset from the beginning" said Brett Holland, Head of accelerator Lightning Labs.
3. However, New Zealand is currently placed outside of the world's capital flow, and the number of venture capital funds (Venture Capital - VC) nationwide is only a handful, partly because it is located between two most bustling cities of New Zealand, Auckland and Christchurch. Limited funding is a barrier to domestic business development investment. The being said, however, the scarcity of cash flow could be an advantage as Wellington startups must learn to run their businesses with minimal resources and retain ownership.
4. Successful creative startup models also have a significant influence on the incubation of these Kiwi entrepreneurs. CreativeHQ CEO Stephan Korn said that Wellington-based companies like Xero and Trade Me have become a major driver of the city's technology scene. Some employees decided to start a business after leaving Trade Me and thought, "I can do it, I can set up a website and sell it for 600 million dollars a few years later".
5. New Zealand has an active angel investor scene and a well-connected network that facilitates deal syndication. Another critical aspect of the Wellington ecosystem is the organisational system that promotes businesses and incubators that share a common view of community building. However, many angel investors are senior personnel at enterprises, only a fraction of which have experience starting large tech companies from scratch, undergoing divestment and beginning over the startup process. This is a fairly common problem when the scarcity of experienced mentors makes startup activities ineffective.
Government’s support
After the recession of the “.com” empire or making money on websites, the New Zealand government decided to promote their startup ecosystem. It started with the Creative HQ Incubator, founded by a former mayor of Wellington and has been running for 12 years. According to Creative HQ CEO Stefan Korn, “If you want your economy to grow, you need to invest in your startup ecosystem. Over the past 12 years, the central and local governments have supported incubators in all cities in New Zealand”. Looking at the government's support and intervention compared to the final outcome, it can be easily seen that these activities are creating roughly 15 times the value of the initial investment of the government.
To offset the capital shortfall in New Zealand, crowdfunding platforms like PledgeMe are gaining traction. In April 2014, the Financial Market Operations Act legalised crowdfunding. PledgeMe helped local businesses raise $12 million. One of the most successful campaigns was the craft beer Yeastie Boys, which made $500,000 in 30 minutes. This model helps shape a culture of venture capitalism and an open market for startup products.
The government also collects no tax on capital gains, no payroll tax, only a corporate tax of 28%. The median home price in Wellington is around AU $15,000, and the World Bank ranks it as the world's most accessible place to start a business. The local government is also spending up to AU$ 3 million to set up a technology hub.
The city council shares that Wellington is a good market for testing new products and some companies have taken advantage of this and set up laboratories in the city.
For the 1st part of this article, please visit:
http://startup.gov.vn/Pages/chi-tiet-tin-tuc.aspx?l=Tintucsukien&ItemID=315
Now we are looking into other factors that contribute to the development of Wellington Startup Ecosystem including Nurturing business culture and Government’s initiatives.
Nurturing business culture
1. Wellington's topography is surrounded by hills and mountains, limited urban developing. The surrounding bay water is quite cold, which is not suitable for recreational activities such as swimming. Instead of breaking those barriers, entrepreneurs prioritise in-house software, acting as the catalyst for a technology ecosystem. This geographic feature also helps to bring people together in a small area, creating a gathering place for talented people and fostering creative activity.
2. Being small and distant from the rest of the world are the advantages of this city. "Since the domestic market is not big enough, New Zealand companies must have a global mindset from the beginning" said Brett Holland, Head of accelerator Lightning Labs.
3. However, New Zealand is currently placed outside of the world's capital flow, and the number of venture capital funds (Venture Capital - VC) nationwide is only a handful, partly because it is located between two most bustling cities of New Zealand, Auckland and Christchurch. Limited funding is a barrier to domestic business development investment. The being said, however, the scarcity of cash flow could be an advantage as Wellington startups must learn to run their businesses with minimal resources and retain ownership.
4. Successful creative startup models also have a significant influence on the incubation of these Kiwi entrepreneurs. CreativeHQ CEO Stephan Korn said that Wellington-based companies like Xero and Trade Me have become a major driver of the city's technology scene. Some employees decided to start a business after leaving Trade Me and thought, "I can do it, I can set up a website and sell it for 600 million dollars a few years later".
5. New Zealand has an active angel investor scene and a well-connected network that facilitates deal syndication. Another critical aspect of the Wellington ecosystem is the organisational system that promotes businesses and incubators that share a common view of community building. However, many angel investors are senior personnel at enterprises, only a fraction of which have experience starting large tech companies from scratch, undergoing divestment and beginning over the startup process. This is a fairly common problem when the scarcity of experienced mentors makes startup activities ineffective.
Government’s support
After the recession of the “.com” empire or making money on websites, the New Zealand government decided to promote their startup ecosystem. It started with the Creative HQ Incubator, founded by a former mayor of Wellington and has been running for 12 years. According to Creative HQ CEO Stefan Korn, “If you want your economy to grow, you need to invest in your startup ecosystem. Over the past 12 years, the central and local governments have supported incubators in all cities in New Zealand”. Looking at the government's support and intervention compared to the final outcome, it can be easily seen that these activities are creating roughly 15 times the value of the initial investment of the government.
To offset the capital shortfall in New Zealand, crowdfunding platforms like PledgeMe are gaining traction. In April 2014, the Financial Market Operations Act legalised crowdfunding. PledgeMe helped local businesses raise $12 million. One of the most successful campaigns was the craft beer Yeastie Boys, which made $500,000 in 30 minutes. This model helps shape a culture of venture capitalism and an open market for startup products.
The government also collects no tax on capital gains, no payroll tax, only a corporate tax of 28%. The median home price in Wellington is around AU $15,000, and the World Bank ranks it as the world's most accessible place to start a business. The local government is also spending up to AU$ 3 million to set up a technology hub.
The city council shares that Wellington is a good market for testing new products and some companies have taken advantage of this and set up laboratories in the city.
For the 1st part of this article, please visit:
http://startup.gov.vn/Pages/chi-tiet-tin-tuc.aspx?l=Tintucsukien&ItemID=315