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What's all the fuss about startups?

 
 
 

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What’s all the fuss about startups?

Bureaucrats and politicians coo over new startups like grandparents doting on new-born babies. The Key government is no exception. Back in October they rolled out a system of repayable grants (or, if you prefer, “forgiveable loans”) for new technology companies starting out. If the company fails, the government will write off the cash.

That should help plenty of young technologists wanting to set up new manufacturing operations. If a newly-formed company goes belly-up, it has no show of repaying borrowed money. Startups need years to build up their income. Often, they spend the first few years of their existence developing products, burning through cash from loans and equity and paying their staff in shares which might be worth something if the company achieves profitability. Understandably, new startups find it difficult and expensive to borrow money from commercial lenders.

We like new startups because we hope they will grow into mature businesses that contribute new wealth to the community. Some of them invigorate society by bringing exciting new products into the market.

If we’re looking for rapid job creation, a new company with a handful of employees cannot compete with a mature manufacturer. Ten percent growth in a company with fifty employees means about five new jobs. Ten percent growth in a new company means everybody works harder and longer, because there’s no money to hire an extra person, unless they accept shares that might be worth something. Someday. Maybe.

I think there can be little doubt the government’s repayable grants will help young technologists get started. There’s every reason to think New Zealand will get some excellent new manufacturing companies that might not have made it without this scheme.

Technology Valley must take a broad view of wealth creation in our community. Of course we should support new startups. We must recognise, however, that they are not the wealth creators. Not yet. The mature manufacturers, the ones who’ve been going for several decades, who know their markets, and who can compete in those markets without grizzling about exchange rates or government policies, they’re the ones who create jobs and inject new wealth into our economy.

They are also the ones who know how a technologist with a good idea can turn that idea into a profitable business. They’ve been there. They’ve done it.

That’s one of many reasons why we want experienced Hutt Valley businesses to tell their stories.

 

Kevin Cudby is a Wellington-based Freelance Writer and Parametric Modelling Consultant who loves writing about cool new technology. Email him to discuss your requirements: hello {a} kevincudby.com

 
 
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