Where the rubber meets the road

Photo: Jason Dorday

You've reached your goal: your company has attracted the attention of an international suitor. You pocket the sale proceeds, head off to your lifestyle block to play with the kids (after all they’ve practically forgotten who you are), take a professional director course and sit on a few boards to keep the grey matter active.

That was the idea for Steven Newman, former chief executive of Navman, but within a couple of years the reality was nice but not exactly challenging. So Newman took his knowledge — and a large chunk of the cash he’d made — to a new technology startup called Eroad. It was October 2007 and the turning point for the company, says Brian Michie, Eroad founder and an infrastructure economist.

Michie started Eroad in 2000 to develop an electronic alternative to the often frustrating Road User Charges (RUC) system for the country’s heavy truck fleets, but the company lurched uncomfortably through its initial years.

“I’m actually 31,” jokes the white-haired Michie when questioned about those years. “We basically had two false starts with other technology partners. And what with that, raising money, shareholder changes and the research, it was quite tough.”

Things ground to a halt, says Michie, but he knew what he was doing was a no-brainer; even the government had signalled that an electronic, internet-linked RUC service was the way to go. It was just a matter of finding someone who really understood how to do it all, he says.

Enter Newman. With his knowledge from Navman of fleet tracking systems, Newman had some understanding of the industry and found the business concept so compelling that he bought a majority stake in Eroad, injecting some much needed cash and know-how.

The fundamental needs of any startup are good people, good management and a sound financial model, he says. “If you don’t have that knowledge in your senior management team, then you are most probably in a very scary place.”

Everything checked out for Eroad, apart from the model. It was trying to separate what it did into two different parts: development of an electronic hubodometer to replace the current mechanical hubodometers attached to truck axles; and development of the infrastructure connecting the hubodometer to the government’s RUC database and the truck’s home base.

“Because of the vastness of the task, the business model got split and that’s where most of the problems were,” says Newman.

The vision is big. Many of the country’s 160,000 larger trucks incur more than $100,000 a year in RUC, amounting to up to 20% of a freight company’s business costs. RUC licences must be bought in advance for intended weight carried and distance travelled. Truck companies often end up paying more than they need to, as they try to cover themselves against the heavy fines imposed on those failing to pay enough. Add to that the heavy compliance costs paid by trucking companies, the government, and the police (tasked with enforcement) for calculating, buying and servicing the RUC system, and a more accurate, automated system should help everybody.