By Andrew Patterson
Being born in an icehouse might not sound like the most appealing proposition for most of us and yet for many successful start-ups over the last 12 years they owe their very existence to the Auckland based business incubator.
Designed to speed up the commercialisation process, The Icehouse is intended to give businesses the opportunity to fast track their early development phase by connecting entrepeneurs with networks of experienced contacts who can provide capital, professional advice and perhaps most importantly, mentoring and advice.
It’s a very different proposition to many early business pioneers in this country who invariably worked at growing their business organically but often paid a price with slow growth and limited profitability that frequently ended in failure within a short time.
Started in 2001 as one of a series of initiatives that came out of the Knowledge Wave conferences, The Icehouse has gone on to gain a profile and a reputation both here and overseas as the country’s premier business incubator.
12 years on...
Under the watchful eye of founding CEO Andy Hamilton who, 12 years on, has lost none of his passion and enthusiasm for the job, The Icehouse continues to flourish.
“12 years on I think what's really important is that you continue to evolve, and you continue to be maybe on the edge and slightly paranoid and not comfortable, because if you’re comfortable then I don't think you're going to be able to do the stuff you need to do to help new businesses get to market.”
“Sometimes I get concerned that we're not fresh enough, and that I'm not fresh enough, but when I look at the stuff we're doing now, versus a year ago, two years ago, three years ago, let alone when we knew nothing, we’ve certainly come a long way.”.
At its 10 year anniversary in 2011, The Icehouse committed itself to the ambitious goal of trying to create 1,000 sustainable high quality businesses from a pool of more than 3,000 start-ups by 2020.
While Hamilton says it’s an audacious goal, he believes it’s important that stretch goals such as this one feature more prominently in the NZ business landscape
“As an organisation, and as a board these days, we've got this rallying cry of turning creating 1,000 high quality business success stories. Later this year, we'll come out with a new framework called Businesses of International Quality which is the measurement framework behind that along with some qualitative criteria. Then next year, which is really exciting for us, we're going to be redesigning all our programmes in the context of this BIQ framework.”
“That's scary because we're going to throw stuff out that doesn't enable us to achieve that BIQ endgame. We've been going through a lot of learning as well because Icehouse itself has grown quite a bit in the last two years. At the same time, we've hit some speed bumps like all businesses do, along the way, but we've learned from those."
The Icehouse as a business
What is sometimes forgotten is The Icehouse is a business itself and while it doesn’t have a strictly commercial objective of returning a dividend to shareholders, it doesn’t have the luxury of simply spending at will to achieve its outcomes.
Like any business, expenditure must be matched by income, though the usual performance metrics don’t always apply. A spirit of cooperation and mutual support are also important drivers of success for The Icehouse.
“As the Chief Executive, when people ask me how I'm going, I say: well, we've got 29% year-on-year growth, and our EBITDA is this and they look back at me strangely because their expectation is I will simply talk about the companies. That's true, because we are about the companies growing, but at the same time, we have to run a business. While I think we're going really well, making a profit is largely irrelevant as long as the money doesn't run out.”
“What we've observed is that we need to generate the margin so that we can actually invest in getting more really good people through our programmes and offer better products that actually help companies. What we don't want to be is the lowest common denominator. We don't really want to help the bottom of the barrel, no-chance business start-ups. We want to help the people who have the potential. So as a business I think we're going well, we're really lucky that we can lean on a bunch of successful entrepreneurs.
“For instance we can call up Don Braid [at Mainfreight] and say: Can we come and talk to your guys to understand how you did this? People like him are incredibly generous in sharing their learnings, not only with us but others as well. We've also been incredibly lucky with people like Boston Consulting Group, who've actually said: you guys don't understand strategy, how about we send one of our guys to help with that?”
“And just the other day one of our Ice Angels rang me and said: hey, I've got two weeks free, I'll give you some pro bono time to come in and do some consulting to help you work out how you're going. It's just incredible how generous so many people are with their time to support our endeavours.”
Building the right culture
But while all the support can be positive in one sense, Hamilton is also aware that it can be counterproductive in terms of building a competitive culture.
“Lots of people from the outside of the New Zealand ecosystem will say: Oh, we all need to collaborate. I think collaborating for a purpose is important, but for any other reason it's irrelevant. What we want to be able to do is get great talent around companies and accelerate them.”
“I do think we all need to increase the speed and pace of how we work. Jim Collins in his book Good to Great talks about facing the brutal facts. I think all of us can never get too comfortable. In the Icehouse we're constantly sitting here saying how fast are these companies going, what more could we do to help pick that pace up. They’re the questions all businesses should be asking. You only need to get on a plane and go to Shanghai or San Francisco, and it's electric and the pace is frenetic. I don’t think we’d describe ourselves in those terms here.”
International performance benchmarking is important for a country like New Zealand. While it allows us to measure our output against other countries, some might question whether we’ve been ambitious enough?
Hamilton believes it’s important that you get the balance right.
“All of us should draw off what other people are doing and then adapt it into our own environment. For the owner-managed family businesses, they don't want to be like the Facebook’s of this world, but they do want to build the best business they can that's the most profitable, that's the most sustainable, that employs local people, in essence a business that that they're very proud to own.”
“If you take a business like Prolife Foods in Hamilton they're very aspirational about their growth objectives and they're demanding about what is the best way to achieve that growth. What we all need to do is really think about how we can use that approach to best practise, but we shouldn't copy. We will never be like Silicon Valley, that’s obviously not realistic.”
“I think you see that there needs to be more pace generally, and that you can't get away from competence. I often say you really only need two things in business, aspiration and competence. Funnily enough, start-ups have massive aspiration and no competence; established businesses on the other hand often have quite minimal aspiration and good competence.”
New age entrepeneurs
With many younger entrepeneurs willing to try their hand at starting a business their approach can often be reflective of their age and also their ability to cut costs.
“What I love about the young start-up entrepreneurs now is that they just get on a plane, and they go and camp in San Francisco for a month, backpacker style. They don't go and stay in the flash hotels, they sleep on couches, they use AirBnB, couch surfing, and they're out there really doing it.”
“Part of my advice these days is to just get on a plane, go and check it out, and then come back with that knowledge of the market because then you're not making assumptions.”
“I think what's happened here over recent years is that we’ve lost that very linear approach to the way we used to do things. You went through primary school then you went to secondary school then it was on to university then you went into business. There was no overlap. So I'd love to see the opportunity where kids get exposed to business a lot earlier, and they overlap in that regard. I think that's how you advance and we’re starting to see that happen more and more as youngsters really understand the opportunities that technology offers them to get into business.”
Kiwi Landing Pad
The creation of the Kiwi Landing Pad (KLP) in San Francisco has been a valuable addition to the global eco-system for kiwi start-ups. Established in 2011 and funded by several prominent technology investors along with the Ministry of Business Innovation & Employment, entrepeneurs now have a shared space and an address they can access at minimal cost.
Hamilton says it’s a practical example of how you can really support start-ups effectively.
“What I love about the KLP is the impact it’s had across the spectrum. For instance, I know of a couple of executives from the Bank of New Zealand who called in to check it out recently and when they came back they said: okay, we get it...we understand. Now we've got to do this in China."
“You've only got to spend time offshore and see the struggles the companies have to know we are not doing enough. We are not being as effective as we could be and that doesn't mean we need more resources, it means we need to utilise the resources more effectively and work smarter. The KLP is a really good example of that type of thinking.”
“The number one issue for me ultimately is the capability we have in our teams to grow the company successfully. There're some amazing leaders who are doing incredible stuff, like the Xeros of this world, that we all need others to follow in that regard. I do think we could do better, I think there are challenges around investor returns, but when I compare it to 2001, people didn't understand then what a term sheet was. Now they do. Now there's more sophistication around exchange rate management, there's less whinging around compliance, and more focus around how to access great talent.”
“While I'm encouraged by what we've achieved and very proud of our outcomes it’s good to step back occasionally. I’m always thinking how we could tweak the model in a way that would make it even more effective from an economic perspective.”
For the Andy Hamilton’s of this world there’s always more that can be done to row the boat faster.
We all need to be thinking the same way.