Ireland puts out welcome mat to Kiwi companies
Updated: Nov 3, 2018
Tue, 02 Oct 2018
New Zealand Trade and Enterprise's Barry Soutar has the gift of the blarney and never more so than when talking about the thinking behind T3W (Te Tira Toi Whakangao).
The government-funded not-for-profit company has a strategy of jump-starting Maori tech eco-systems in the regions.
The long-term goal is to build 100 Maori tech companies nationally, earning $500 million in annual revenue, creating 2500 jobs, operating from 30 regional tech hubs in Maori communities, with $200m of capital into Maori venturing.
The model is based on Chicago's technology and entrepreneurship centre 1871 and aims to create an eco-system of young Maori entrepreneurs, investors looking to diversify the Maori economy, companies looking for solutions, tertiary education providers and customers.
The problems T3W wants to resolve are a disconnection in the existing tech venturing ecosystem, Maori investors not being players in the tech game, and regional stagnation.
As part of the efforts to achieve its ambitious goal, Mr Soutar, T3W's executive director, is leading a second delegation of 24 Maori and non-Maori tech companies, investors and local government officials to Ireland in November to learn from its regional tech clusters. The first visit resulted in $19m worth of deals, with another $18m yet to close, he claims.
The coming visit is equally deal-focused with an intention to sign agreements ranging from investment and memorandums of understanding through to distributorships, IP transfers and shared business models. Sometimes the deals have been between players on the bus.
"Steve Saunders [Robotics Plus owner] says 'never underestimate the conversation on the back seat of the bus,'" Mr Soutar says.
Why Ireland? T3W has identified Silicon Valley and Dublin Tech as the two examples from which Maori could learn the most and benefit from potential deals, investment and incentives. It's also a chance for experienced Kiwi tech exporters to get a handle on a Brexit risk and mitigation strategy.
Ireland's foreign direct investment agency, the Industrial Development Authority (IDA) can boast 210,000 jobs or 10% of the total workforce created by multinational companies operating in the country. It is more than willing to put out the welcome mat to T3W and any other Kiwi company interested in the Irish and EU markets.
The IDA's sales pitch, post-Brexit, is that it will be the only English-speaking country in western Europe with direct access to the 500 million consumers in the EU market.
Its other advantages include a low corporate tax rate of 12.5%, a stable political environment, a competitive cost base, a young and educated workforce, easy access to industry skills training, incentives such as pre-permitted industrial land available for long-term lease for an office or factory base and subsidies for research, development and production carried out in Ireland.
From a New Zealand perspective, Ireland has a cultural affinity given one in six New Zealanders claim Irish heritage. For Maori in particular, Mr Soutar cites a shared sense of hospitality and a love of music, their indigenous languages and oratory skills.
"I think one of our wakas from Tahiti got blown off course and went north – and they can dance, they give us a run for our money on the haka," he jokes.
Downsides include a lack of infrastructure in regional areas, high cost of housing in Dublin and the weather (the average number of wet days with more than 1mm of rain ranges from about 150 days a year along the east and southeast coasts to about 225 days a year in the west).
Ireland remains one of the world's most attractive locations for FDI with the 2018 Foreign Direct Investment Confidence Index ranking of9th overall, up one place on the previous year.
The economy The economic outlook is also good with projected GDP growth of 3.5% in 2018, well above the average 1.9% in the euro zone. The former Celtic tiger has had a remarkably quick recovery from its basket-case status during the global financial crisis when it required a bailout from Europe as its banks and over-heated property market tanked.
The Irish Fiscal Advisory Council warned in early September it was inevitable the Irish economy would suffer adverse shocks from Brexit, rising protectionism (particularly in the US) and changes to the international tax environment.
That makes FDI even more important to the Irish economy, including an opportunity to attract UK or UK-based companies post-Brexit. Some 40 financial services companies have already announced plans to establish and/or move functions to Ireland, and many more are going through the regulatory approval process with the central bank.
"Economically, the main impacts [of Brexit] will fall more on the indigenous side of the economy, particularly the agrifood sector will be impacted, and from an FDI perspective it is driving investment to us. But net, net, we see it as a negative," IDA chief executive Martin Shanahan says.
Huge uncertainty remains on the impact of Brexit on Ireland, given no exit solution has been worked out between the UK and the EU. But analysis shows it is likely to be between 1% and 3% growth foregone as an opportunity cost, he says.
"Then it depends on what type of Brexit and what type of trade deal is negotiated between the UK and EU."
Finance Minister Paschal Donohue is due to announce Ireland's Budget 2019 on October 9 and he told a visiting Australia/New Zealand company delegation I attended that "we have an economy that by any measure is doing well at the moment but we have big challenges afoot as well we need to deal with. We're going to find a way through them and part of having to deal with that is to ensure the external trading part of the nation is diversified."
Mr Donohue said with the kind of change happening in the EU and the pressures that Atlantic trade is under from the different political context, "there really is a need for countries all over the world who value and have the same prominence in relation to trade and in relation to multilateral co-operation to really engage with each other and do even better, particularly when you look at it from an Irish, European, Australia and New Zealand perspective, culturally the relationships are only positive and good."
New Zealand has just appointed diplomat Brad Burgess to be the first resident ambassador to Ireland and his immediate goal is to support the country's interests in Ireland and Europe as the negotiations on an EU-New Zealand free-trade agreement progress post-Brexit.
Mr Donohue says the Irish government will work within the European Commission to help reach an agreement.
"Of course, there are going to be difficulties on either side but we know what they are, we have to see if we can work our way through them and we should be able to."
Of course, being Irish with their fixation on rugby union, he mentioned the All Blacks' pending test in Dublin in mid-November, when he was looking forward to Ireland winning on home soil and again at the Rugby World Cup in Japan next year.
Kiwi players in Ireland The IDA has a list of about 10 Kiwi companies that have set up a base or have staff on the ground selling into the Irish market. They include the likes of herd improvement and agritech company LIC, technology solutions group Gallagher, software as a service company Cemplicity and engineering fabricator NDA Group.
The IDA wants to increase that number as part of its diversification strategy for FDI, which has long played a major role in its economy. Of the current FDI in Ireland, 68% is sourced from the US, 20% from Europe and the rest from other growth markets, including Australia and New Zealand.
"Australia and New Zealand are very important to us; they probably didn't feature as heavily in the past. We really doubled down in Australia and New Zealand from 2014, which is our current strategy, and increased the resources there," the IDA's Mr Shanahan says.
The IDA's sales efforts in New Zealand are run out of Australia, though Mr Shanahan says that may change depending on the level of success it has here.
"We see a number of areas where there is potential. Emerging tech companies are always a target from our perspective. I think the agricultural sector is also important to us and financial services we're always interested in," he says.
Invivo Wines is one Kiwi player that has a well-known brand in Ireland thanks to the pulling power of megastar Graham Norton. Invivo did a deal with the Irish-born television host in 2011 after co-founder Tim Lightbourne made a cheeky phone call asking him if he'd like to try some of their wine.
Mr Norton has not only put his name to a range of Invivo wines but also personally blended them and owns shares in the company. The range was launched into Ireland two years ago and has already grabbed 10% of the NZ wine market in that country.
"All the buyers up there talk about 'our Graham.' He's like the Richie McCaw of Ireland," Mr Lightbourne says.
Graeme Norton wanted his branded gin to be made in his home country.
Invivo is also planning to sell a Graham Norton-branded gin in partnership with an Irish producer in Cork next year.
"We had to spend a lot of time in the market to build relationships," Mr Lightbourne says. "You can't sit in New Zealand to do that."
A window of opportunity has opened for New Zealand agritech companies in Ireland, where farmers are being offered substantial subsidies to upgrade their technology by 2020.
A number of New Zealand firms were represented at the storm-disrupted National Ploughing Championships last month (the equivalent of New Zealand's annual Fieldays at Mystery Creek), including dairy technology manufacturer Waikato Milking Systems, which has staff based in Ireland but has yet to set up a subsidiary there.
International sales manager Grant Wisnewski says the Irish government's goal to double milk production by 2020 means there's a huge amount of dairy development going on and an opportunity for Kiwi suppliers given the industry is also pastoral-based. Up to 15% of WMS' exports are now to Ireland after entering the market only 18 months ago.
Auckland language services provider Straker Translations, which is about to do an IPO on the ASX, has an Irish subsidiary and an office in Dublin after acquiring local translation company Eurotext in 2016.
Chief operating office Merryn Straker says the company originally set up an office in Killarney in the southwest because the chief revenue officer – Australian Dave Sowerby – wanted to return to live there with his Irish wife.
"Dave likes to call it the Queenstown of Ireland, we like to call it the Invercargill. There's a slight difference of opinion," Mrs Straker says.
Straker closed the Killarney office (apart from Mr Sowerby) some years ago because of difficulties attracting the skilled language staff they needed in that location but that hasn't been an issue in Dublin where non-Irish staff have been happier to settle.
It now has 68 out of 120 staff based in Europe and wants to be set up in attractive locations so it can switch staff easily between offices as customer demand dictates.
The IDA, which also puts resource into aftercare of multinational companies that shift to Ireland to ensure they "stick," has been supportive from day one, Mrs Straker says.
"They're very proactive about putting relationships together," she says.
Mrs Straker is also on the board of T3W and has set up an office in Gisborne as part of the pilot T3W Maori tech hub in that region.
The firm has some financial incentives by way of staff accommodation and co-working space provided by the local economic development agency. "If we want to break the cycle of inter-generational welfare we can't stick all the jobs in the cities," she says.
The key for her support of T3W is a well-known entrepreneur she won't name saying to her at an awards dinner one night "are Maori any good at tech?"
"I found that an appalling statement." Her husband, Grant Straker, is Maori.
The Irish pathway will be important to regional tech entrepreneurs because it can be difficult trying to make the right connections and relationships on their own from New Zealand, she says.
Small but growing Ireland has attracted most of the world's top tech companies including the likes of Google, PayPal and Microsoft.
The IDA's Mr Shanahan says the relatively small scale of Kiwi companies is not a deterrent to setting up a European base in Ireland.
"All companies are small to start out with. Apple was a small company once, Amazon was a small company once. LinkedIn, when it arrived in Ireland, had three people and it now has more than 2000," he says.
"For New Zealand companies that want to grow and are trying to internationalise, access to the EU has to be the No 1e advantage and that's why so many of those US multinationals are here, among other things."
While Silicon Valley is another obvious destination for tech companies who like to cluster within an innovative eco-system, Dublin offers a similar eco-system at much less cost, he says.
"You can probably get more done in terms of cross-pollination because all the companies are of a scale and size that they can talk to one another. They are not quite the behemoths that they are at HQ somewhere up the 101 in California."
NZTE is responsible for FDI into New Zealand in the same way the IDA is, although it also helps Kiwi exporters through a sister agency.
NZTE chief executive Peter Chrisp, on the same delegation I attended in Dublin, says FDI into Ireland has been spectacular with its long-term strategy of a low corporate tax rate, skilled workforce and access to the EU market.
But he's not so sure that's an argument for New Zealand tech and food and beverage companies to set up a base there.
"Why would they not set up in the market itself in Europe that they are targeting? Why not locate in Hamburg or Milan?"
One of the reasons he went on the trip to Ireland was to see what Brexit would mean – it could be that Ireland is a good location for Kiwi companies in the UK that want access to Europe. "It really depends what happens with Brexit," he says.
That view is shared by Nick Swallow, New Zealand's newly-appointed trade commissioner for UK and Ireland. His feedback from New Zealand companies is their main interest right now is in selling into the Irish domestic market, particularly for agritech companies like LIC, WMS or Te Pari, rather than access to Europe.
Brexit also offers an opportunity for Kiwi companies to sell more into the much larger UK domestic market and "we'll continue to focus on that," he says.
Ireland by the numbers
* 5% unemployment rate
* over 40% of all commercial leased aircraft are managed or leased out of Ireland
*10 of the world's top 10 pharma are based in Ireland
* 13 of the world's top 15 medtech companies are based in Ireland
*Ireland has the highest GDP growth rate in Europe
*15 of the world's top financial service companies operate in Ireland
* Ireland joined the EU in 1973
* 210,000 people employed by multinationals in Ireland
* 49% of Ireland's population is aged under 35
* 50% of 25 to 35-year-olds have a third level (tertiary degree)
* one-third of the world's contact lenses are made in Ireland
* 80% of the world's heart stents are made in Ireland
• Read more tomorrow on how FDI has helped regional growth development in Ireland. Fiona Rotherham travelled to Ireland courtesy of the IDA and the Trans Tasman Business Circle