It was announced today that Dunedin tech company, Timely, has been acquired by a US company for an amount “in excess of $100 million.” As is traditional at times like this, headlines have been screaming about “another Kiwi company sold to an offshore organisation.”

Timely’s co-founder and CEO (and, for the record, bloody good bloke) Ryan Baker, was at pains to say that the parent company’s intention is to keep staff locally and, in fact, grow headcount. Ryan is an awesome guy, and he’s saying what he needs to say, but the truth is more nuanced, but no less positive (in fact, to the informed, more positive) than that.

There is a traditional model when offshore companies buy local ones. They articulate their intention to remain local and build the team and that they do. For a period of time. Then once the leader’s lock-in periods are up, and attention has moved elsewhere, the slow but inexorable journey towards shutting down the local establishment begins.

At which time everyone howls in protest about these evil companies going against what they promised and somehow New Zealand being left out. It’s a fairly boring trope but feeds a parochial and closed-minded culture that exists in some places.

Let’s look at two scenarios for a minute:

  • Under scenario one, the big bad foreign company actually follows through on what it promises. It continues investing in New Zealand and hires more people. New Zealand gets some tax revenue from local employment and locally declared income (assuming they haven’t already structured things more cunningly). Seemingly a win, right?
  • Well, maybe not so much. Under scenario two, the new owner slowly moves the business out of New Zealand. All of those employees, likely having enjoyed a sweet salary for a period of time and also likely having a bit of exit cash in their pockets, are inspired to start their own startups. Or maybe they go and work for an earlier stage company. In either scenario, they’re increasing the wealth within the system and directly creating the “rinse and repeat” mantra that is so often talked about. We don’t lose anything in terms of PAYE take, possibly lose a bit of corporate tax, but potentially spawn a huge number of new entities which will, in turn, employ many and pay their share of taxes

We’ve talked for years about making New Zealand’s economy more vibrant and less reliant on selling commodity product on a price-taking model. While I don’t subscribe to the view that tech will dominate our economy, I absolutely believe that stories such as that of Timely (and that of Vend before it), deliver the economic change that we need in this country.

It’s also worth noting that the Timely team prove this contention directly – Timely isn’t their first startup and the fact they sold a previous initiative, BookIt, to TradeMe before embarking on the Timely journey is an example to this.

Rinse and repeat, lads. And enjoy the validation.

(Full disclosure: as a shareholder in the Punakaiki Fund I’m an indirect investor in Timely. Similarly for Vend. I’ve also been an investor and board member on Kiwi startups that have sold and remained onshore (SwipedOn) and sold and moved offshore (Appsecute))

PS – Ryan, I chose that specific picture to remind you of how youthful and boyish you looked back in the day 😉

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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