Kiwi start-ups follow the money trail to Silicon Valley

By Bill Bennett

Hapara has a toe in US as well as NZ as it spreads the word on its cloud learning tool.
Hapara's Nathan Torkington.
Hapara's Nathan Torkington.

In the 1950s a journalist asked Willie Sutton why he robbed banks. He was quoted replying: "That's where the money is".

The same logic has taken a handful of adventurous New Zealand technology entrepreneurs to Silicon Valley or nearby San Francisco.

That part of California is home to the largest pool of investment capital available for technology start-ups.

Hapara is a young, fast-growing NZ technology start-up. The company's engineering and support teams are based here but its sales and marketing team operates out of Silicon Valley.

It developed a cloud learning tool that lets teachers set activities then follow their students' progress online. This means students can work at their own pace and have more control over their own learning.

Tony Kong and Jan Zawadzki can see pros and cons in gaining a foothold in Silicon Valley.
Tony Kong and Jan Zawadzki can see pros and cons in gaining a foothold in Silicon Valley.


Hapara founder and chief executive Jan Zawadzki started the project when he worked on similar software with Tony Kong at Pt England School.

Interest in the project grew by word of mouth with teachers asking Kong and Zawadzki if they could use it.

Today Zawadzki is based in Silicon Valley. His rationale for being there echoes that of Willie Sutton, he says.

"The mix of appetite for risk and availability of capital is unrivalled. In Silicon Valley you're playing in a casino, but every year or so some people walk out with billion-dollar payouts. That just doesn't happen elsewhere really. This stuff permeates the air - walk into a Starbucks and there is a start-up at every table - this is not a gross exaggeration."

Even so, having so many of the world's technology venture capitalists in one place can be a mixed blessing, says Nathan Torkington, head of partnerships at Hapara.

He is a New Zealand-based technology start-up veteran and well known in local developer circles.

"Growing start-ups need capital, connections, customers and a clever crew. Most start-ups find all those in America. In particular, Silicon Valley is full of other companies doing the same thing," he says.

Having all those other companies nearby means there are great people to hire - but he warns they are also expensive in that part of the world.

"There are also incredible advisers and people who have done it all before but that means the competition is strong too. And there is plenty of money for investment - not to mention potential buyers if your company is taking off," he says.

Torkington and Zawadzki agree that US technology investors take a more sophisticated view than Kiwi ones here. Torkington says they will often take a smaller slice of a new business than NZ investors. At the same time, they usually offer better connections and advice.

Zawadzki says it helps Hapara that educational technology is recognised as an important growth sector in the US. When he tried interesting people in NZ they didn't understand it was such a vibrant market.

He says the Silicon Valley connections Torkington mentions operate on a different level to connections anywhere else.

"I heard once that what we think of as Silicon Valley is roughly two thousand individuals who are networked through shared investments, work experience and so on. I suspect they are the most connected group of people in the world. The value of these connections increases geometrically with scale of the company and its aspirations.

"Outside of Silicon Valley investors are all about funding companies. In Silicon Valley they fund ideas."

Torkington says "hanging out there exposes you to the latest technology, the latest thinking, and the latest opportunities ... you don't feel like the only founder in the village".

It's not all positive. Silicon Valley tends towards groupthink.

Torkington says the danger of that is "you'll think the clever thing to do is to found 'Uber for bedding' or 'Groupon for Bitcoin'." Another aspect of that groupthink is there is an entire category of Silicon Valley start-up that exists to replace the founder's mother: laundry, food, housekeeping, even packing your suitcase.

Torkington says being in NZ "lets you steer clear of that kind of kool-aid". That's why many Kiwi firms split their time, team and attention between the US and NZ. "They're trying to get the best from each."

Although the Kiwi Landing Pad was set up in San Francisco in 2011 to help Kiwi tech firms get a toehold in that market, Torkington says there's no clear pattern to NZ companies setting up shop in California.

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