Wednesday, 9 May, 2012
The past few years have been all about growth for software development company NetValue – acquiring companies, securing venture capital backing and nurturing a high-level team. It’s exciting and fun, but it’s also hard work.
The number of businesses built to take advantage of the opportunities presented by the online medium has exploded. All you need is a computer, an idea and a little bit of skill. Right? Technically yes, but there are two main problems with that theory.
One: it’s easy to get distracted by how many associated and complementary services you can also offer your client – it’s kind of like pulling that loose thread and unravelling your whole sleeve. And two: it’s hard to come up with products and ideas that are difficult for others to replicate.
For NetValue, the solution to issue number one has been to acquire niche technology companies that already have the capacity to offer some of those complementary services. CEO Graham Gaylard points out that it’s by no means the easiest option, but it has proven to be effective.
“Acquiring companies that were established in areas we wanted to get into was always a main strategy, but each time it’s a decision between whether we develop those skills in-house or acquire a company that already has them. Being able to merge with another company and develop it so that it runs as an effective part of your business takes around six to eight months. We’ve made a number of acquisitions and taken the best bits of each company.”
The latest two mergers were with WebSpring (which is now their web development brand) in 2010 and DigiCreative (search engine optimisation) in December last year.
While some of those external brands have been taken into the fold, the company differentiates its services under three main retail brands: Webspring; Interspeed for hosting; and NetValue for the end software.
For issue number two, NetValue brings some serious firepower to the table – how does six PhDs and a professor in computer science sound?
“The problem with the internet is that if you have a good idea it’s very easy for people to replicate it. We have put in some serious intellectual property which is very hard for people to replicate. That’s our competitive advantage.”
An example of their work is Infovet, a groundbreaking software program they built and operate for Pfizer. It is now the benchmark for best practice information management on the farm.
Another is SLIM SearchTM software, which has the potential to help leading researchers and corporations make breakthroughs in gene-based science. It has also enabled NetValue to establish itself in the global market. After heading off to Silicon Valley, Gaylard and NetValue managed to secure the backing of an international venture capital firm, partnering with Catamount Ventures in the USA to launch Real Time Genomics Inc in 2009. Gaylard says not a lot of New Zealand companies have successfully done that, but “we showed that raising US money for innovative projects can be done”.
While Real Time Genomics is based in San Francisco, research and development will still take place in Hamilton. Gaylard sees it as NetValue’s “core engine” to help fund standard operating areas, freeing up funds for strategic projects. “It’s always a balance as to how much are we putting in for R&D, which is a longer-term payoff. And then you get hit with financially difficult times … It’s about having the right people, the right sales team and the right growth strategy.”
Staffing challenges include finding quality employees and keeping a team that is operating at a high level motivated and excited. Cash isn’t always the answer. “We want to provide a great working environment and part of that is the other people. We want to attract good developers and there is a bit of self-selection involved – the good people attract other good people.” And the not-so-good people? “In a good environment, those who don’t perform, often end up leaving of their own accord.”
Gaylard says one of the benefits of being based in Hamilton is the quality of the educational resources. “Hamilton has the number one management school in the country in Waikato University’s business school as well as the computer science school, so there is a good talent pool and a lot of our team came through there. The Wintec IT school is pretty good at delivering skilled people, as well as their applied research and applied learning resources.” Gaylard studied at both institutions.
Most of NetValue’s business lifecycle has been focused on growth, and Gaylard says that means they’ve come up against a number of “glass ceilings” as the business goes through each stage. “Getting to two or three employees is quite difficult and then you go well until you get to about 14 and then you need another layer of management,” he says. “Then once you get to 45 or 50 people you need to punch through again to get to 60 to 70 so you can support the different layers. It’s been fun but it’s hard work.”
Especially over the past two years. Gaylard says the measure of a good business is how you do in a recession. “Diversifying and getting US capital has helped because we’re not playing in the field in New Zealand as much. It’s a new normal and we need to look at how we balance the business to deal with that.
“One of our strategies is that no single customer account is more than 15 per cent of our revenue, otherwise you run the risk that if one customer leaves or goes under it threatens the business – if they sneeze you catch a cold. We have kept that strategy from the beginning, and it has slowed growth, but it’s worth it.”
Source: Nous Magazine Winter 2012 http://viewer.zmags.com/publication/29a45aa3#/29a45aa3/8