Local CyberElves plan to deliver US magic

By Yoke Har Lee

Venture company no-8.capital has taken a new tack with its investment in Wellington-based web development company CyberElves, backing people and a concept, rather than an existing operation.

The company has taken an idea, found the people to manage it, and then the investors who are willing to support it.

The company has also staked out its presence at 44 Wall St, making it possibly the first New Zealand venture firm to have a Wall St office.

If all goes according to plan, CyberElves will inside three years be listed on the Nasdaq exchange, a move which will provide no-8.capital with a showcase for its efforts to promote New Zealand as an international web development centre.

The venture capital company is also working on three other projects which it hopes it will provide a basis for further fundraising.

According to one of the founders of no-8.capital, Philip Carden, CyberElves is likely to undergo rapid development. Its elves have already clinched three deals within the past four weeks, some with overseas clients.

"If all goes according to plan, the company will be needing to hire one or two people a month over the next few months. It has fairly aggressive growth ambitions," Mr Carden said.

CyberElves' two founders are former Telecom employees. Managing director Brett Bailey is a former Telecom business development manager and chief technical officer Phil Henderson was involved in managing e-solutions for that organisation.

Mr Carden first met the pair when they approached him for something else. What transpired was a recruitment process to put a team of people together to form CyberElves.

"It is the kind of company that most of the new venture companies in New Zealand would not fund. It's brand new - the company was only set up four weeks ago.

"There is no track record. Basically, this is indicative of our approach."

Because no-8.capital is not strictly a venture capital fund, it has more latitude in assuming risks.

"We are not bound by investment mandates because we don't have a fund. There is no limit on our risk profiles.

"If someone's prepared to run with those risks, that's all that's needed. We think this is a great deal."

What no-8.capital is planning to do is to help fund and manage CyberElves for the next six to nine months while it grooms the company for a further round of financing.

How fast CyberElves grows would hinge on what type of people it could find.

He said what CyberElves was all about was meeting the need to develop web solutions as quickly and as effectively as possible utilising time zone differences.

When New York goes to sleep, the New Zealand "elves" work through the night to provide New York companies with round-the-clock services.

"A typical example would be a guy at Madison Ave working with a client, who late in the working day, let's say at 4 pm [East Coast time], wants changes made to its web site.

"The New Zealand elves can work through the night for them [when it is our day time].

"This should substantially reduce the development cycle faced by web-based companies there."

He said New Zealand was also well positioned to meet the skills gap brought about by the brain drain to Wall St.

"They can't get the people, so they are more prepared for creative solutions," Mr Carden said.

Locally, there are some five companies which Mr Carden classified as having expertise in e-commerce development. They are Advantage Group, Glacier, Software Mechanics, Datacom and The Web.

"The challenging thing is finding the points of difference. At the most fundamental level, it boils down to the quality of the people you have."

He said CyberElves had that point of difference, but declined to specify what that was for commercial reasons.

In global terms, New Zealand and Australia were ahead of Europe and Asia in e-commerce development, he said.

One limitation was the absence of large e-commerce sites in New Zealand which matched the size of US sites.

While the development of e-commerce had stormed ahead, full convergence between the internet and telephony was still evolving, he said.

"Achieving full interaction with customers is a trend in development and broadly recognised as strategically important, but no one has done that.

"That is a development that we will be focused on over the longer term," Mr Carden said.

CyberElves' Web development approach will be focused on building customer trust.

"A lot of that comes from design, from building something that works in a predictable way."

Mr Carden has returned to New Zealand after a five-year stint working as a consultant with Renaissance Worldwide, on projects for major blue chip names in the US such as Lucent, GTE, IBM and JP Morgan.

Mr Carden's ambition is to help leverage what New Zealand can offer by way of technology, to both the US and global markets.

"It [no-8.capital] is a great way of creating brand new export opportunities for New Zealand, leveraging the technology available.

"How you vote at the election isn't going to make much difference to the country. But for me, it is very gratifying that CyberElves is creating export potential, and are raising New Zealand's profile in the US."

If India could make it to Silicon Valley marketing its software development skills, there was no reason why New Zealand couldn't do so in web-development.

It was a feather in no-8.capital's cap that high net-worth US and local investors were willing to stake money on a New Zealand venture with no track record, he said.

The US was a marketplace crying out for new ideas and there was a lot of "bored" capital.

However, investors were more easily found for deals under $US1 million and over $US10 million.

He said no-8.capital was not about to rush CyberElves into a mode of destruction by demanding growth at all cost.

"There is way more business out there than there are people available to do the work. You can only grow as fast as the quality of the people out there."