The ability to adapt into new business streams will be critical for the success of small and medium businesses in the "new normal," Icehouse chief executive Gavin Lennox says.
Lennox, marking his 90th day since taking over the reins of the country's largest business incubator from founder Andy Hamilton, saidwhile the market had shifted, and would continue to do so for years rather than months, success was about how businesses "recognised and seized the opportunity."
He told a Trans-Tasman Business Circle webinar that those with capital had the opportunity to "get some very interesting returns," noting there would also be opportunities for startups that had the capital 'runway' to manage through.
It was about adapting the Kiwi "No 8 wire" approach, he said, to see what startups could do with the resources they had and then think about future strategies needed to address the next shock.
He pointed to Icehouse alumni that were able to reinvent themselves, including one South Island company moving its production from merino socks to face masks, while a distillery had switched to producing thousands of litres of hand sanitiser.
"These are critical short-term business opportunities but companies need to take a further look to where the opportunities will be longe term."
He suggested that the focus also needed shift to a local one, aimed at supporting the country's 50,000 small businesses, which employed about a third of all workers.
"Small business represents the backbone of our economy. We need to ensure we protect that by providing access to government funds for large businesses to pay their bills promptly."
He said banks also had to be "more courageous when dealing with risk associated with small business," including giving them a break from personal guarantees.
Scale up digitally
Lennox said Icehouse Ventures had looked at its cost structures and revenue streams early in the covid-19 crisis and realised that about two-thirds of its revenue was linked to "high-value" face-to-face training and interaction.
Firms can adapt the Kiwi "No 8 wire" approach and then think about future strategies needed to address the next shock. File photo
"Where we connect coaches and advisors we found that part is holding firm but at lower return rates.
"So it's an opportunity to scale up from a personal and intimate business, leveraging digital technology and retaining the personal interaction that we are famous for."
In deciding to access the wage subsidy scheme, Lennox said he had been "impressed and heartened by the level of trust where within a matter of days we've received funds."
The Icehouse had received just over $140,000 for its 20 employees.
He said the company had also been an indirect beneficiary of the government's business support programme under the regional partners scheme.
Deal activity
Business Circle moderator and Angel Association NZ chair Suse Reynolds said the rationale for early-stage investment in high growth tech ventures was "compelling in good times and bad."
She said a well-managed portfolio could deliver an internal rate of return of between 20 percent and 30 percent, which in an era of negative interest rates was appealing.
"We would expect deal activity in the venture capital market to stay the same through covid-19, though the dollar amount may tail off."
Lennox said that this was the time for high net worth individuals to "step up and take that investment step for companies looking to thrive in this situation and create jobs of the future."
