Hire some funky office space, grab a bunch of promising startups, make sure there’s a cafe somewhere nearby for those essential meetings, nurture them through the early days and wait for the inevitable success to follow. That’s the recipe for incubators anyway, and it appears to be a fairly convincing one. Since the incubator industry was established here five years ago, the companies it has nurtured have attracted more than $62 million in equity capital and generate annual revenues of $89 million.

In the following we celebrate the latest winners of the Gen-i New Zealand Incubator Awards, who are out there winning export contracts and developing world-class technology — which suggests all that nurturing pays off. But according to the award winners, the main reasons for success in business incubators are the networking opportunities and access to high-powered business advisors, which individual startups would never dream of.

Sohail Choudry – HTS-110: Startup Exporter of the Year

HTS-110 stands for high temperature superconductors. And the Lower Hutt-based startup is a world leader in providing high temperature superconductor magnets — which are used in sectors ranging from defence to medicine — using technology developed over 20 years at Industrial Research Limited, the Lower Hutt-based Crown Research Institute.

HTS-110 was spun out of IRL in 2004, although it is still based in the CRI’s incubator, and was named Startup of the Year at the 2005 incubator awards. Its shareholders are IRL, Endeavour Capital, and American Superconductor Corporation, one of the world’s leading developers of high temperature superconductor wire.

It exports almost 100% of its product, notched up the sale of two large magnet systems last year worth $1.2 million, tripled revenue over the last financial year, added another five staff to make a total of 14, has distributors in Japan, Taiwan, Korea and Germany, and late last year opened a sales office in Boston.

CEO Sohail Choudry reckons they’re on target to earn $100 million over the next five or so years. So why is HTS-110 successful? “The bottom line is it’s all about customers,” says Choudry. “It’s all about understanding what markets want and making it customer-pull or market-pull rather than technology-driving it so you approach it from the perspective of ‘what’s the problem we are trying to resolve? Where are the pain points?’ and develop the solutions and designs accordingly and you are on your way.”

It sounds so simple but, as Choudry points out, the success is based on 20 years of hard work at IRL, and the foresight shown by the CRI in bringing in partners like Endeavour Capital and American Superconductor Corporation.

“This is an example of IP-led innovation coming out of New Zealand which is not easy to replicate by China or India. Everything can be caught up but I think our last 20 years of research mean we have a good five years’ lead on anyone.”


Carmine Masiello — EBus: Joint winner Startup of the Year

Carmine Masiello hadn’t intended to start a business on arrival in New Zealand. His expertise was in post-production, specialising in commercials, and he figured it would be easier as a stranger in a in a new country to consult in that sector. But he spotted a market niche, firmed up several contracts and, in May 2005, started eBus.

Until Masiello turned up, the process of making television commercials and passing them along the chain from production to post-production to broadcaster involved shuttling digital tape around via courier. Masiello’s company uses the web and a specially designed interface that allows all participants to access the same files, which can repeatedly be sent backwards and forwards through the chain. He has since discovered the same market niche exists throughout Asia and the Middle East and eBus is rapidly expanding.

On arrival in New Zealand, Masiello signed up to improve his English at Auckland University and joined Ice Angels to network and meet some industry contacts. “I wanted to find a startup and join a project already in place because it seemed the easiest way to get into the market.”

He realised the market here was so small that he had just two choices: go into another industry or start his own company. He went down the startup route but his ingenuity lay not only in conceptualising and engineering the new system, but in getting four local production houses — Flying Start, Sauce, Digital and Oktober [check]— to sign contracts and buy shares in his company so eBus was cashflow positive right from the start.

Ebus began in March 2005, joined the Icehouse incubator in June, and went into production in October. It now employs five people, has opened an office in Singapore, and has taken on a new COO.

But then this is a guy who decided to buy a boat and sail around the world with his wife and three-year-old son — on limited sailing experience. Nothing to it, he now says, if you make sure you have a good boat.

NZTE provided invaluable help in introducing eBus to the Singapore and Dubai markets, and the Icehouse proved to be the networking facilitator extraordinaire, says Masiello.

“What I really got from them was an introduction in New Zealand. When you’re starting a company, it’s important to get access to the big companies like Ernst & Young or Chapman Tripp or Microsoft and for me it was even more important because I had only been in the country for six months. I probably wouldn’t have approached these guys if I hadn’t been introduced to them through the Icehouse.”


GARETH CROY – OpenEye Displays: Joint winner of Startup of the Year

Yes, the future is digital. And you can read it, touch it and smell it, thanks to OpenEye Displays, a resident at the Icehouse.

The company specialises in digital signage applications, which is a bit like saying Team New Zealand is a bunch of sailors — you get the concept but no idea of the complexity.

OpenEye is all about sensory media, says CEO Gareth Croy, who was in Sydney when Unlimited caught up with him and about to leave for London. The company has clients in Australia, the UK, Ireland and the US in sectors ranging from banking to supermarkets.

Research shows 52% of shoppers leave stores empty-handed. OpenEye develops advertising strategies for clients aimed at changing that figure. These strategies can be deployed across a variety of locations and are designed to appeal to at least one sense. You may look at a message on a screen, or hear a message, or your nose may detect a seductive scent, which is actually a message devised by OpenEye — the cunning blighters.

The beauty of these strategies for clients is they can reach different groups of consumers at any time of day and at varying locations, says Croy. To achieve this, the company has developed a bunch of online tools so clients can manage their brand campaigns and content efficiently while OpenEye creates the strategy. It also manages the networks, scheduling and distribution of content.

It’s more than just putting a bunch of screens in a few supermarkets, says Croy.

“You need to know where to position devices such as screens and also what content is effective. There’s a big difference between just deploying some technology, and deploying technology that produces an ongoing return for the life of the equipment.”


CARMINE MASIELLO – EBusJoint winner of Startup of the Year

Carmine Masiello hadn’t intended to start a business on arrival here. His expertise was in post-production, specialising in commercials, and he figured it would be easier to join a startup or a project already in place. But then he spotted a market niche, firmed up several contracts and started EBus.

Until Masiello turned up, the process of making television commercials and passing them along the chain from production to broadcaster meant shuttling digital tape around via courier. Masiello’s company uses the web and a specially designed interface that allows all participants to access the same files.

Masiello’s ingenuity lay not only in conceptualising and engineering the new system, but in getting four local production houses to sign contracts and buy shares in his company so EBus was cashflow positive right from the start.

EBus began in March 2005, joined the Icehouse incubator in June that year, and went into production in October. It now employs five people, has an office in Singapore, a new COO and is pursuing the same market niche in Asia and the Middle East.

But then Masiello is a guy who decided to buy a boat and sail around the world with his wife and three-year-old son — with limited sailing experience. Nothing to it, he now says, but make sure you have a good boat.

NZTE provided invaluable help in introducing EBus to the Singapore and Dubai markets, and the Icehouse proved to be the networking facilitator extraordinaire, says Masiello.

“What I really got from them was an introduction in New Zealand. When you’re starting a company, it’s important to get access to the big companies like Ernst & Young or Chapman Tripp or Microsoft and for me it was even more important because I had only been in the country for six months. I probably wouldn’t have approached these guys if I hadn’t been introduced to them through the Icehouse.”



HAMISH DEAN – Shapeshifter Technology: Innovation of the Year

Hamish Dean’s Shapeshifter software uses algorithms to minimise wastage when cutting patterns from rolls of cloth, an idea he developed while completing a PhD in mechanical engineering at Canterbury University.

He joined the Canterbury Innovation Incubator in 2002 with the idea of commercialising his PhD research and made his first sale in 2003, the same year Dean found an angel investor. The incubator was invaluable in arranging introductions to possible investors and in getting government grants for development and marketing, he says.

“They also helped, and still do, with shaping the best strategies to take Shapeshifter global.”
He’s since sold Shapeshifter software on every continent, although probably 80% of customers are in South-east Asia, typically contractors for brands like Nike and Adidas.

Shapeshifter, which is actually two software modules called SS-Auto and SS-Optimiser, sells for between US$10,000 and US$20,000 depending on options. Dean says it can add up to 10% to a company’s profit margin.

Dean was always confident about his invention, but taking it to market was tougher than he expected. “When I started, I had a product that could potentially save large clothing factories millions of dollars a year so I thought it would be easy to sell for a high price. But because it was a small startup, it was damn hard to convince factories to use the software, or even get the chance to convince them.

“There have also been many language barrier problems. Often it’s hard to know exactly what the customer wants and you can deliver the best sales pitch in the world, but if they don’t understand you, it’s not worth anything.”

He’s now a pro at travel — he flew back into the country from Hong Kong for just 12 hours to get his award — and the company and its software are steadily building a reputation, with annual growth of around 300%.


SAM NG & TRENT MANKELOW – Optimal Usability: Hall of Fame Award

Optimal Usability has evaluated automated phone systems, bank kiosks and a device for truck drivers.
“We help organisations take a user-centric approach to technology,” says co-founder Sam Ng. “We help companies create products which are easy to use.”

Yes, the company name is a pretty fair description of what it does. But when Sam Ng and Trent Mankelow started Optimal Usability in 2003, they were charting a new course in New Zealand. Ng came from an industrial design background, Mankelow from computer science. Both had been working for large IT companies and were familiar with projects that hadn’t been fully realised because not enough attention was paid to the customer’s point of view.

But they can’t take credit for the concept, says Ng modestly, as they’d spotted the trend offshore.
“We thought, ‘hang on, we could do this in New Zealand’. Kiwis traditionally are pragmatic and get some technology and make it work, but it’s harder to go to the next level. You have to appreciate that the technology has to work for people.”

That first year was hard work, says Ng, and they took on whatever work was available as they established the company.

“We weren’t sure how we were going to spin it because we had a few close friends laugh at us: ‘you’re kidding? Create a business model out of telling people their business model sucks and they should pay you a lot for that? You’ve got to be joking’.”

That’s where Wellington’s incubator, Creative HQ, proved invaluable, says Ng, in providing introductions to possible clients and exposure to business advisors like Deloitte, which helped package the idea in a more palatable way.

Now they’ve got 12 in the team and growth has rocketed, but that’s because they started from a low base, says Ng.

“We’ve pretty much doubled every year and now revenue is over $1 million. We get to work on some pretty amazing stuff, from an online dating service to large government projects, to fascinating products.”