The Role of Startups in Economic Recovery
Written by Mads Moller
Canterbury region and in particular Christchurch city, is well known as an exciting research and business hub for engineering, software and manufacturing. These enterprises are built on the solid foundation of a proud and successful agricultural industry. The University of Canterbury and its neighbouring tertiary institutions every year produce and develop high quality talent both for these industries and for our regional startup ecosystem generally. Startups not only attract capital and increase job numbers, but also provide a valuable career pathway for our precious graduates.
Many innovative startups have been facing huge threats since the COVID-19 outbreak, as have their counterparts in more established businesses. However, the proliferation of e-commerce, video-conferencing tools, and other digital startup technologies facilitated the unexpected switch from what once was a standard workplace or shopping experience into the new “COVID-19 normal” lifestyle.
Startups of course are faced with the same difficulties and realities such as cash flow, reduced financial reserves, lack of funding, diminished demand or even logistical or bureaucratic issues. Incredibly however, digital distribution of new services or applications has in many cases driven improved productivity, enabled continuous learning, and made it possible for startups to continue to grow their businesses.
For many years, global startup ecosystems, as well as our own here in Christchurch, have continually demonstrated the ability to drive new levels of productivity within economies. Without startups there’s less diffusion of innovation at both larger corporations and small and medium sized businesses as well. It’s not only the private sector who benefits from
startups innovative strives and leaps. Startups also play a role in pushing the public sector forward by providing huge efficiency gains.
Innovative and disruptive
We have seen again and again that global crises always accelerate the adoption of new technologies. COVID-19 has wildly increased adoption of new innovative technologies — in particular digital technologies and digital business models. This has literally created the perfect opportunity for some our local startups to enter the global market at a pace that has not been seen before. There are many exciting local startups who are riding the wave of
this perfect storm, for example: oVRcome, VMC/Skilitcs, Vxt, State3 and Workable.
Unquestionably, it is fundamental within the DNA of a startup to innovate, disrupt and thereby improve productivity. Startups also provide competition to entrenched players in virtually every industry. Without startups, finance, healthcare, agriculture and other fields would be stagnant. Not only are startups bringing new technology services to life but their novel business models challenge and disrupt established players, benefitting consumers.
High paid job options
Startups are not just about cool new innovative applications, services, and high value IPOs. Reports from around the world frequently illustrate how startups are plugged into a constellation of advanced industries such as artificial intelligence, clean technology, aerospace and healthcare that drive job creation and economic growth. And they supply critical innovative products and services that make entire industries of established companies more productive and competitive. They’re turning the economy we have now
into the economy we’re going to need as we transition to a lower carbon, more equitable future. These young companies also create disproportionate numbers of high-quality, higher paying jobs. It is this unique job creation that primarily drives economic growth. We have many great examples of companies creating jobs locally and internationally like TASKA
Seequent, Syft, Zero, Plexure and many more.
Keeping talent in region
Startups in these sectors create a disproportionate share of new jobs including highly paid positions in science, technology, engineering, math, business etc. For Christchurch and our region this means the amazing talent we produce every year at the University of Canterbury and other local and regional educational institutions have a more compelling option to remain in the region. Cultivating a startup ecosystem provides exciting, ground-breaking,
and well-paid job options for our new graduates.
A special cocktail of high risk and resilience
Christchurch is unique as have we shown our resilience and response to numerous crises — earthquakes, the Mosque shooting and now this COVID-19 crisis which threatens us with global recession. Christchurch has an opportunity to produce amazing entrepreneurs and startups based on a special mix of resilience and a natural appetite for high-risk technology,
disruptive business models and a global growth mindset.
Exit early or operationalise globally?
New Zealand and the Canterbury region is far away from the big global markets. We have seen New Zealand success stories and our region is not and should not be shying away from promoting our own potential unicorns — Enatel, TASKA, Seequent, SLI Systems, Tait Radio, Jade Software and many, many more. The defining characteristic of a technology startup is,
of course, their exponential growth potential and this stands them apart from other small businesses.
But here’s the burning question. Should you exit early and let a big global operator spend time and resources scaling the business further or should you do it yourself? Ultimately there are no rules and no guaranteed formula. We have already seen entrepreneur exits — cashing in just so they can start again. We are even starting to see some entrepreneurs having a portfolio of startups on the go selling the IP, releasing each business when it is ready to go. Obviously, this also brings money into the region and constantly develops
I believe we will witness an amazing impact on our local, regional and national economy by supporting the startups who are boldly endeavouring to enter, scale rapidly and grow in the international markets.
Mads Moller leads the Growth programme at ThincLab and is an independent director of several early stage companies. With a strong background in strategy and commercialisation, he also sits on the University of Canterbury Business School advisory board.