How entrepreneurs meet investors

Published in the National Business Review of 29 February 2008

Bill Payne is a rich white American in his mid 60s who trained as a ceramics engineer, now has a touch of arthritis and a golf handicap of 15. He lives in the town of Henderson, outside Las Vegas and travels the world helping entrepreneurs and angel investors to get to know each other.

"Entrepreneurs typically have never sold anything and they aren't deal makers. On the other hand angel investors are either entrepreneurs who have exited their businesses well cashed up, or they are people who have otherwise made a fortune by being deal makers."

After selling his own business in 1980 he became an angel investor. He's invested in 45 businesses. "Some were successful, others not. Most angel investors stick to the knitting. Mine is in software, but I have lost money in low tech, high tech and no tech."

Angel investment is a key source of capital for the 60% of companies not represented in the public markets, according to a background paper prepared by the New Zealand Seed Company for the angel investment workshops Mr Payne held in Auckland and Wellington last week.

He's affiliated with the Kauffman Foundation, founded by a Kansas City businessman who sold his business to Merrill Dow in 1959 for $6.3 billion and gave $1.3 billion to the foundation to promote skills in entrepreneurship.

Blackout blues weren't there yesterday

Published in the National Business Review of 8 February 2008

This is a tale of warm air, hot water, no wind, resource consents, and inter-company rivalry and co-operation arising from recent incidents of grid emergencies in the electricity system.

There was a three and half hour "grid emergency" on Monday night where Transpower asked major users to cut usage and for generators to increase supply.

This follows four other grid emergencies in December, three in the Upper South Island due to "insufficient generation and reserves" and a fourth involving a loss of supply on the West Coast according to incident reports from Transpower filed with the Electricity Commission.

All three Upper South Island incidents required demand management from Transpower.

A combination of low lakes levels in the South Island, no wind in the Tararuas, the closure of Contact's New Plymouth plant, scheduled maintenance at its Stratford plant and the loss of some transmission capacity from the South Island to the North Island means both generation and transmission are operated within tight margins.

Low lake levels in the South Island are not unusual at this time of the year, and the normal response would be to run the coal and gas fired power station at Huntly to allow lake levels to build up water for the winter.

Get real on cost of carbon neutrality says business

Published in the National Business Review of 8 February 2008

Business and energy interests have given the government a blunt 'get real' on the cost of its carbon neutrality policy, but Climate Change Minister David Parker has dismissed the group's economic analysis as "scaremongering."

Business Roundtable chief executive Roger Kerr says the government should be more open about the cost and implications of its policy of making New Zealand carbon neutral by 2050

The Business Roundtable and Petroleum Exploration and Production Association of New Zealand (PEPANZ) commissioned a report from Infometrics economist Dr Adolf Stroombergen, who had previously done work for the government's Emissions Trading Group.

His report models three scenarios including a business as usual case and concludes that the government's twin ambitions of carbon neutrality and a high rate of economic growth are mutually exclusive.

Based on the assumptions of an annual growth rate of 4%-5%and a shadow carbon price of $300/tonne, the model shows that the cost of the government's carbon neutrality policy would be $19 000 per household by 2025.

Electricity prices would double. Petrol prices would rise by 50% and carbon emissions would still be 40 per cent higher than 1990 levels.

The shadow price of $300mT factors in the (yet to be determined) trading price for carbon emissions and the cost of related policies such as ban on new thermal plant.

Who will assume the mantle of 'Legend of New Zealand' now that Sir Ed has gone?

Published in the Dominion Post on of 25 January 2008

The death of Sir Edmund Hillary raises an important question - whom do we now admire, trust and respect the most?

Prime Minister Helen Clark got it right when she said that our greatest hero was gone. It's a prosaic and awkward question, but who is our next greatest hero after Sir Ed? And why?

There are not a lot of outstandingly obvious candidates, just as few, if any, rivaled Sir Ed's status when he was alive.

There are a group of aging sportspeople, mostly male, and almost all white. There's some ageing politicians, a few of whom may be on the verge of statesmanship status. And there is a collection of currently popular stars, and some quiet achievers. There is no one whose status is so high, whose reputation so strong that they can take the mantle of "Legend of New Zealand" that Sir Edmund put down.

What are the qualities that make up reputation in a New Zealand context? First, the person's achievements have to be significant in an activity of importance to New Zealanders. That puts a lot of sports people in the frame, but probably puts All Blacks, cricketers, and Silver Ferns above the rest, if sporting achievement alone is considered.

Tender commission row deepens

Published in the National Business Review of 14 December 2007

Another tender for survey research work has been withdrawn from the government's compulsory tendering system in the wake of continuing controversy over a company seeking to extract commission for handling bids for work offered by government agencies.

The Ministry of Economic Development (MED) had previously told the firm, The Research Broker, to cease immediately making statements that the Ministry of Economic Development or GETS has approved or endorsed their tender process. The firm seeks ten percent commission from the successful bidder.

The mandatory rules of the Government Electronic Tendering System (GETS) say that "Departments must receive, open and evaluate all tenders under procedures that guarantee the fairness and impartiality of the procurement process.

This might not rule out having evaluations of tenders undertaken by third parties, but the rules of GETS do no make any provision for the payment of commissions for procurement and assessment of tenders.

Departments are required to post tender notices on GETS for contracts for goods and services worth over $100,000 (over $10million for construction services).

A tender for survey research offered by the Department of Labour has now been pulled from the GETS website. Two other tenders for research from the Chief Electoral Office of the Department of Justice and from the Auditor General were withdrawn previously.

Broker in GETS system told to back off.

Published in the National Business Review of 7 December 2007

An attempt to extract a ten percent brokerage fee from businesses bidding for market research work through the government's GETS system has raised the ire of both officials and suppliers.

The Ministry of Economic Development has told the firm, The Research Broker, to cease immediately making statements that the Ministry of Economic Development or GETS has approved or endorsed their tender process.

Two contracts involving The Research Broker were withdrawn from the GETS system this week.

A complaint about the firm has been lodged with the Market Research Society alleging a breach of its code of ethics.

One of the two withdrawn tenders related to a survey of voters and non voters commissioned by the Chief Electoral Office. The other tender was from the Office of the Auditor General and sought expressions of interest in conducting the office's annual client survey.

In both cases the tender documents state that The Research Broker will evaluate the tenders.

The documents direct enquiries to that firm and say that "the successful provider will need to have signed the research broker Service Agreement."

Growth Group wants sound currency

Published in the National Business Review of 30 November 2007

The pro growth lobby group, Foundation for Economic Growth, is pushing a sound currency as one of the basic elements of a national growth strategy.

The Foundation's Chief Executive Phil Scott says governments shouldn't be allowed to get away with just printing money.

"Currencies these days are just paper backed by government promises," he said.

The group (formerly called Parties for Growth) is promoting a pro growth message through advertisements in newspapers in Auckland and Wellington.

The ads show a graph of New Zealand's economic living standards declining from third in the world in 1950 to 38th spot currently. This is accompanied by the message of smaller government, lower taxes and more individual freedom.

"We are trying to get the population to think about the factors that cause growth and why we are not getting it at the moment. We provide cast iron examples of how growth can be obtained and these are on our website.

"What do other countries do? They have less government, lower taxes, regulatory reform and a sound currency," Mr Scott said.

While the group sees paper currencies as inherently risky, it is not seeking a return to metal backed currencies or the old "gold standard".

Export year boosts domestic lobbyists

Published in the National Business Review of 16 November 2007

The government's showcase programme, Export Year 07 winds up with a breakfast in Auckland this morning where a new 'platform' document on future government business partnerships for exporting will be launched.

The export year programme has $6m of government funding (plus private sector spending) but it is not subject to outcome measures. Officials and business leaders are saying it was a success with improved government business relations one of the main gains.

"We are having a better conversation with NZTE now than we were at the start of the year," Business New Zealand Chief Executive Phil O'Reilly, a member of the Reference Group formed to advise on the Export Year programme said this week.

Ministry of Foreign Affairs and Trade Deputy Secretary Derek Leask said officials were "reasonably pleased" with what had happened.

Achieving a specific boost in the value of exports had been rejected as a goal because it was unachievable in one year, although the programme had set up a range of activity based KPIs to measure its impact.

The platform document records "the common understandings" between government and business for further export activities over the next three to five years.

It addresses issues of exporting and global competitiveness and is "strategic and aspirational," the pair said.

Business raises stakes on climate change

Published in the National Business Review of 9 November 2007

Business interests are divided over whether it is possible to reverse the government's policy on climate change and on whether it is therefore better to seek to slow down its implementation.

A report from economic advisors, Castalia, has called for a drastic rethink of emissions trading policy while an earlier report from the New Zealand Institute sought to slow down its implementation.

New Zealand is unique in seeking to develop an emissions trading scheme that covers all sectors of the economy and all six greenhouse gases and to have this largely in place by 2013.

The Castalia report was paid for by the Greenhouse Coalition, an alliance of energy intensive users. Spokesperson Catherine Beard said there had been a sea change in business attitudes just recently.

"The reaction to the government's announcement of its emissions policy was rather muted, but our businesses later saw that some of the key things they were seeking just weren't there."

Attitudes had hardened since the government's initial announcement on 20 September, and there was now discussion about whether it was possible to reverse rather than just revise the government's policy.

The Greenhouse Coalition believed the proposed emissions trading scheme "was just bad policy", Ms Beard said.

Housing PPP exposes government hypocrisy

Published in the National Business Review of 02 November 2007

Labour's attitude to public private partnerships has been exposed as hypocritical amid revelations that the government has expanded considerably a nine year old scheme in housing.

National is trying to use this and recent statements from cabinet ministers to attack the government's reluctance to consider such partnerships to build infrastructure.

In the housing scheme, private investors owning suitable rental properties lease them to Housing New Zealand, which then rents the houses to its clients. This extends the supply of affordable rental housing while giving landlords a secure income stream.

National MP Murray McCully started the scheme when he was the Minister of Housing in the mid 1990s. The number of properties in the scheme has more than trebled rising from 846 in June 1998 to 2,883 properties currently.

This is four per cent of Housing New Zealand Corporation's rental stock, and the Corporation intends to continue to use home leases as a tool for providing state housing, a spokesman said.

In the 2002/03 period, the Labour led government showed some interest in public private partnerships (PPPs), but a Treasury study published in 2006 is sceptical about the benefits.