The Business of TechWe're joined by four stellar journalists who discuss what they saw over the last year and look ahead to what may be yet to come.
BusinessDesk’s senior markets reporter Rebecca Stevenson offers a deep dive into Rakon's failed takeover and unpacks Gentrack’s success – and the questions that success raises.
Rob O’Neill, senior reporter at IT industry news outlet Reseller, unpacks the waves of redundancies and talks about AI in big business.
Finn Hogan, a writer at startup-focused Caffeine Daily, talks through the coolest tech startup highlights, the ups and downs of finding funding, and the industries worth watching.
The Spinoff founder and media writer Duncan Grieve outlines his concerns over the future of the news amid big tech’s continued domination of the media landscape.
This week on the Business of Tech powered by two Degrees Business, the big tech news that define twenty twenty four and what may lay ahead for twenty twenty five.
It was just like thousands of hours of work and millions of dollars fielding a bed that was ultimately unsuccessful.
The industry's gone from a kind of a boom time to a time where we're seeing the potential for some kind of brain drain happening nuclear fusion.
It's almost this hubristic level of ambition, right.
Are you not concerned in the displacement of New Zealand companies to non tax paying tech companies? Am I crazy here? Or is this a bigger problem?
We're joined by the leading journalists who have covered some of the big tech stories from AI installed government IT projects, to takeover attempts, and some big exits for our startups.
I'm Ben Moore and I'm Peter Griffin with our eightieth episode of the Business of Tech and our penultimate episode for the year. Ben, Who've we got on the show this week?
We've got four journalists, each with unique perspectives on a particular aspect of tech. We've got our business desk colleague Rebecca Stevenson. She's the senior markets journalist who has been keeping an eye on our listed tech companies this year. There's Rob O'Neil, senior writer for Reseller News on the big movements in the enterprise tech space. Finn Hogan who writes for Caffeine Daily and also does some work for dig a tech focused PR company, and he's wrapping up what twenty twenty four held for our tech startups. And finally Duncan Greeve, founder and media writer at The Spinoff, who has been keeping a close eye on big tech this year.
Yeah, great lineup, and we were initially intending to have them all into ended MEHQ for one big conversation until we realize the challenging logistics of doing that. So instead we've got four short, sharp segments featuring this week's guests on various aspects of tech in twenty twenty four. Where shall we start, Ben.
Let's start with the z X and a couple of listed tech companies that have been on Rebecca Stevenson's radar this year. So you are the markets reporter, extraordinary business desk. If I say to you that what is the biggest story enlisted tech of the year in New Zealand. What's the first thing that pops into your mind, Well.
It would have to be two things.
I'm afraid break on Who's the advanced still high tech manufacturer of all sorts of interesting bits that go inside high tech systems and it's failed takeover bid was a huge story for listed tech companies this year. And then on the flip side we had gen Track, which is the utility software provider, which was also listed on the exchange. It just seems to be going from strength to strength and continually I guess, surpassing analysts expectations, winning customers, increasing revenue and doing incredibly well. So it's blasted into the ZX fifty last year and people thought, you know, well, maybe it would start to sort of top out sometime soon, not at all. It recently reported its full year result which was very strong, increased its revenue by about twenty five percent, and that sat its share price spike up really quite high on the day, up to about fourteen dollars at one point, I think. And then now its market cap is more than one point four billion, and it started the day while under that, so a couple one hundred million in a few days for gen Track.
Yeah, yeah, I think it's a We had Gentrack CTO new CTO Mark Ree, a former CTO of Zero, on the podcast not long ago, and the market for what they are producing globally, I think is really strong because there are so many of these utilities companies that are needing to upgrade their systems and get something modern, digital and flexible to meet the changing demands.
You know.
And that sounds like I'm literally spouting gen track pr but actually it's also true. So what is what has been the news and market response to Genrack's success. I'd imagine there'd be quite a bit of buzz. Yeah. I think.
Look, it's just the best performing share on the exchange, you know, and you really can date it back to the leadership of Gary Miles. I was crunching the numbers actually today and he started in October twenty twenty, and I think the shares are up more than nine hundred percent since he joined. So it's just been extraordinary, just a crazy ride in the share price since. And then somewhat ironically, perhaps that's also created some blowback, a little bit of blowback around his remuneration and the incentives for the senior leadership as I put it, they've kind of been hoist on their own petard a little bit because of the success of the share price they had to reach about ten dollars, Well it's gone way past that, trading today at about thirteen dollars ninety ish, and also had some earnings per shares targets that Gary Miles and the other senior leaders had to hit to get some shares, more than nine million shares vested to them for hitting these targets. But there's been a little bit of criticism about that from the New Zealand Shareholders Association, who.
Felt the thresholds were too low.
However, you know, as Gentrek would say, well, we certainly didn't think that last year. And you know when Gary started, Gary Miles started, I think the shares we wrote about a dollar seventy. So to be saying ten dollars was too high or too low, now, you know, it's the benefit of hindsight perhaps.
Yeah, that is interesting, the idea that you set these targets that you see as kind of almost outlandish, like had they ever reached that level, and then when you have a runaway success, you do end up with shareholders going, oh, hang on a minute, we hoped for this, but now we've got to clamp down and make sure that we're not spending too much where we're not supposed to be. Is that a common story enlisted companies or is this something that hasn't really been too much of a problem before.
Well, you have to be in it to win it, I guess, you know. And so in Genrack's case, they did have a special general meeting in September last year specifically for this issue and to change some of the sort of triggers around and the sort of rules around whether or not Gary Miles and the senior leadership team would be able to get those incentives and those new shares. Andy Green, who was the chair, basically said that we believe that we need to do this to keep them to perform well for the next three financial years. So this is for the twenty twenty four financial year, twenty twenty five and twenty twenty six, so it's not all a one hit wonder. They have hit the first earnings per year target for twenty twenty four because they just reported, but they're still twenty twenty five and twenty twenty six to come, and obviously it sort of ramps up from there. They have to hit higher targets to get that full whack. What Gary Mayles said to me when I met up with him recently was that they're in a really competitive environment for talent and private firms can pay higher. You know, they are public firms get the scrutiny and are benchmarked like this and everybody can see what they get. But also gen Track is competing in this global talent poll where you know, public tech companies can offer you know, really generous incentives. So he said that they're trying to strike a balance, and they say they've gone basically in the middle of what sort of a public firm perhaps benchmark New Zealand listing incentive scheme would be, and between a private equity listing because they want to get the best talent because, as you said, this is a massive global transformation program that's happening for utilities providers and they really they want to be number one here. They want to win all these contracts, they want to win across the world.
And all these different countries.
So you know, they believe they need to yeah, really be attractive and have those incentives in place.
And that's a big conversation generally, but in tech specifically, this idea of private companies being able to just splash around more money on talent compared to public companies. And I think it's especially true of New Zealand, where salaries are generally a little bit lower than globally in tech as well. So definitely worth keeping an eye on to get a sense of how that pressure is impacting a New Zealand company. Yeah, let's look now at the other story you talked about, which was Racon and they had a difficult time with a takeover offer. But companies get takeover offers all the time, right, and some work out and some don't. What made this one so controversial.
Well, it was a little bit fraught from the start. I mean it sort of popped up in December when we were lots of us were on holiday, and they felt that their hand had been forced, that they were forced by media reports in Austria E to make the bid public and then they were basically a sort of on record and they had a lot of pressure from shareholders to keep them updated because this was quite a juicy premium, you know. I think it was valued them at about a dollar seventy per share. Well, Raycon shares have been trading at about fifty nine cents lately, so you can understand why people wanted to know what was going on with this bit. Now, this sort of rolled on for a few months, this kind of not much going on in terms of updates. Raycon said, you know, look, when we know something, will tell you. But it was a difficult and expensive process for the business. You know, the chair got up at their own your general meeting and said, it was incredibly onerous going through this process with what we think was a Nasdaq listed Apple supply, a huge company called Skyworks, and basically they had to bring in consultants, they needed legal advice, yes, just management had to be available, you know.
The CEO, the board.
It was just like thousands of hours of work and millions of dollars actually as well that it cost Raycon and Fielding a bid that was ultimately unsuccessful. Since then, the share price has just been falling away really because you know, it felt a little bit like the one that got away. People were like, well, why did it fail? Raycon said it was material complexities were uncovered as part of the process, so really a bit of a question mark there about I guess potentially the future of Raycon. You know, a lot of people say it is really a good acquisition target now and it should perhaps be bought by someone bigger. However, you know they'll want the price to be right.
What does material complexities actually mean? Because in my understanding, if there is a material issue with a company, it needs to be disclosed if they're listed. So how does that interact with this concept of material complexities that prevented a takeover?
The thing is, we really we don't know much. You know, Raycon just continues to say that, you know, they're keeping the market informed of anything that they need to know. Basically, I mean, we don't know. There's been a lot of speculation about why this deal actually fell over. One person that I spoke to who has knowledge of these sorts of deals, pointed to just the general complexities of the markets that Raycon operates and you know, and sort of pointed me to the fact that, you know, we have a chip war going on between the US and China, and you know, Raycon is obviously active in those sorts of industries and it is incredibly complex, you know, tense, sort of secretive. People are worried about their IP and then you've just got this idea of you know, who owns the check apps as well at the heart of it all. So they said, you know, it's a really complex, difficult sort of agreement to get across the line when you're trying to sell a business like Raycon that is highly, highly technical, highly secretive, you know, customers, we're not even allowed to you know, they don't talk about their customers a lot of time or name them. You know, everybody's trying to protect their patch and protect their competitive advantage. You know, particularly, I guess with the rise and rise of artificial intelligence, cloud computing, data centers and all of that. You know, Raycon really wants to be playing in that sphere and be an important player. So there's a lot of commercial sensitivities and non disclosure agreements and things. So yes, they said, yes, it is materially complex.
The whole thing.
Interesting. Well just by out of time unfortunately, because there's so many more companies that we could talk about. Obviously, there was the big listing of being AI this year and some material complexities going on as we speak with being AI, so we'll hopefully get some stories about that coming out in the near term. Any other companies that you think are particularly worth a shout out on the tech listed front before we wrap up.
Well, look, I mean Spark has absorbed a lot of energy this year, which you're probably closer to, you know, than I am, But I think they're a classic example of perhaps some of the things that have also been affecting Raycon as well. You know, we saw the sort of infantry stock piling and a lot of expenditure throughout COVID as you know, mobile networks providers and things were worried about not having parts, so you saw Raycon and people like that, you know, get a bit of a blip.
From that, but all that has retrenched now.
So the global economic sort of pullback has really been affecting a lot of tech companies. In terms of a little company that I keep an eye on, there's our Frio, which is the refrigeration sensor and software company, which someone sort of perhaps sarcastically said to me, you know, if you had sort of a dollar for every time they said they were going to be making it, you know, you'd probably be quite wealthy. But you've got to admire the persistence of that business. But they've got some really interesting things happening as well, and kind of like similar to gen Track in a way. It's that, you know, looking at energy use and energy consumption.
Is a really a big theme. I think that's running through for a lot of these sort of listed.
Companies in tech companies, and how you can create savings cost savings and give customers more information about how they're using energy and how they can save energy. I think is going to be a huge trend for like a Freo, gen Track, et cetera in the coming years.
Yeah, and Eerod's another one who similar in terms of driving down costs around transportation duration and those kinds of areas.
Cool.
Well, thank you very much, Rebecca. It's super interesting and I look forward to seeing some more in the adventures of the zet X from you in the next year. It's tumultuous year for tech companies and speaking to Beck's later, she also said Vista Group had quite a bit of drama at the board level, which is worth reading about and you can check out Rebecca's excellent reporting on that at Business Desk as well.
Sort of mixed bag for our listed tech companies and that really went for the whole enterprise. It space to the big tech projects in the corporate world and in the government sector. Here's Rob O'Neil on some of the big developments he covered at reseller News this year. Rob O'Neil, Welcome back to the Business off Tech, the man who likes to get down in the weeds in enterprise tech, coming to us from fong Array. How are you doing.
Good? Good, good to be here, Pete. Thanks for inviting me.
Yeah, and we just spent some time together in California recently we went to a SpaceX launch together. So busy end to the year and a busy year for enterprise tech, which is really all about what companies are doing with technology. So what are your big picks for the big developments in enterprise tech this year?
Well, I mean the first one will come as no surprise. It's AI. It's not so much that AI is new.
It's been developing quite strongly over the last few years, but it has kind of reached that inflection point during this year where people are really starting to roll it out and develop use cases for it. But the real reason why there's been this breakthrough an adoption is because the vendors have developed the tools. You know, It's not like companies are trying to develop their own AIS or which some were you know, even just a few years ago, but the tools are now available, so you know, it's become much more achievable. Like with any I system, there will be integration challenges if you want to apply AI across systems and across processes. I think it's called multimodal AI, for instance, maybe incorporating sensors and IoT devices as part of that network. You know, that's really where things are going to be heading and trying to do that in a safe way, in a controlled environment where you don't get hallucinating AIS contaminated with external data of some sort. I think those are the things that will be going on right now.
We've heard so much about the supposed productivity gains that come with using the likes of Microsoft Co Pilots. Apart from the vendors who all quote great progress in this area because they're pushing their own services, have we seen any real evidence among our own companies that they I seeing those productivity gains. We saw report out from the Australian government which did a trial of Copilot and said actually the public servants using it saving you know, for thirty or forty minutes a day. Have we seen any more evidence like that, particularly here in New Zealand, that it's actually delivering return on investment.
You hear it anecdotally, don't you. And I think there's always the problem. You're going to get people who just want it now, you know, the early adopters, and they will build it into their.
Own work habits very very quickly.
And then you've got other people who maybe are not quite as quick on the on the uptake and need to be guided a little bit more.
Now.
It's the other thing about all of these software tools is that they bring creative possibilities. How the application is applied is a is a creative challenge for the user, and that's where some real innovation can happen because of course the users are the ones who are most familiar with the with the value as in the data, where the problems are, the need to be solved, what the problems are, and how to do that safely. So I think, yeah, those will be the sorts of issues that have been being grappled with now. The impact on jobs, of course is the is the follow on from that, and that's actually part of something we'd like to maybe like to talk about next.
Yeah, So talking about jobs particularly, one of the big trends this year really in New Zealand has been the head count reduction in the public sector. We've just seen in the last couple of weeks, you know, the proposals to really slash headcount again at health which will impact the data and dig division there, huge reduction. What's your take on how this is sort of playing out in terms of affecting government's ability to digitally transform. It's got a aggressive roadmap DEIA just put it out at Service Modernization Roadmap. It wants to do all of this sort of stuff. Do we actually have the resources to push this through now?
They've also come up with another one market lad initiatives, which will allow players in the market to suggest projects that might might improve service, so you don't necessarily have to go through a full tender process when you go through that. So they are greasing the wheels of innovation, you can say, with some of that within the public service. Let's just get some numbers on the public service cuts. For starters twenty two there were sixty two forty three public servants twenty three there were sixty three, five hundred and thirty seven and As of yesterday, eight hundred and sixty five layoffs had been reported. Right now, that's still relatively early days, but as you can see, it doesn't actually take us down below the twenty twenty two number. So everything's a matter of perspective.
Really.
I believe that some of those I haven't quite worked up the exact relationship, but some of those positions that are being vacated are not filled at the moment.
Anyway.
It could be an anticipation of these losses that the agencies have already decided to allow head counter shrink naturally when they have an opportunity to do that. That's probably my reading of it. But yeah, I mean, we think of them as huge cuts, and they could well be in the future huge cuts, but right at this point in time, it's not appearing that huge.
Still early days, We'll wait and see.
We heard so much at the start of the coalition government's term. They stopped three Waters, that was a big IT project, tip the Kinger. They sort of unwound that MSD has big transformation project on the go. What's really your sense on the state of some of these big government tech projects. There has been sort of freezing of some budget and that some of those big ticket items still rolling along the likes of three Waters.
Three Waters is basically pretty much right off.
It had advanced quite a bay, but not to the point where it could really be rolled out anymore. So you're looking at a two hundred and two hundred million right off of three Waters. In terms of TEA the King of they've they're still working on the project there. They've rejigged it so it's able to be a deployed individually, almost like a SaaS application, I guess, with an instance for each institution, and for the ability for institutions, the smaller institutions to group together and share an application like that, So you might have three smaller regional training organizations deciding to join forces and run on one set of financial systems and so forth. So that's really what's happening with TIFA Kinger. The right offs there have been very small. Yeah, of course, all of the stuff, you know, the loss of staff, they're clamped down on spending. The change in these two big keynote projects has a wash on effect into the industry, right so in things like employment within the tech industry. I was just having look at some staff numbers for data Coom. For instance, twenty twenty two, data Com had nearly seven thousand employees and in twenty twenty four they had six thousand, one hundred and thirty one. So that's pretty much a ten percent reduction in the space of two years. And I don't think that's stopped, so we might see some more news on that in twenty twenty five. So yeah, that's quite a deep cut. And the industry's gone from a kind of a boom time it was very very hard to find people to a time where we're seeing I guess the potential for some kind of brain drain happening.
Yeah.
So yeah, we're facing that sort of crunch on funding in the private sect there, amidst that, we've got transformation projects rolling on, some of them not going particularly to plan. Might A ten probably a big one that's got a lot of publicity this year for its sort of struggling SAP implementation.
Yeah, yeah, I mean it's one of a long line, and I guess on this topic, I've put it under the headline persistent project failure. So not particularly picking on MINA ten, but MITO ten is quite a spectacular example, and it's also the one that I think was hard to see coming. So it's been in trouble for a couple of years now. But I guess, I guess everything that I'm hearing is that the AS is part of the project understanding the processes that were actually being used in the stores and in the warehouses before you start rolling out software, before you even procure your software, that that might have been underdone. That's the story I've heard, right, and so that in that sense you could almost call it human error rather than take technology eraor.
In terms of green shoots sort of stuff. That's optimistic. I mean, this is the year finally after a lot of hype and talk that one of the hyperscalias is rolling out of data center region in New Zealand. Microsoft we saw from their accounts from recently doing very well in New Zealand one point three billion in revenue, but also spent the best part of a billion dollars on building these data centers in the New Ukan region.
Yeah.
Yeah, no, I mean this is this is potentially a big boon for New Zealand. You know, I think everybody likes the model of having your data within easy reach, within your own legal system and your own protections and that kind of stuff and still having the kind of backup of a company like Microsoft or AWS or whoever SAP for instance, if you on your ERP applications. So yeah, I mean it's finally happening. I mean it's been a long time, hasn't it. We've been reporting on these these deals for ages. And there's a bunch of other ones as well. You know, those are the headline ones. You know, there's a bunch of other data center players in there, including data com So it's an exciting time. The AWS one appears to be suffering from a few setbacks. They had a bit of a water problem on the site. It's a bit damp. You don't really want that around your computers. So I think they've done some engineering to get past that and they're underway again. So we'll just wait for them to come on stream as well. But yeah, I mean first mover advantage. That looks like it's going to be Microsoft.
And finally rob Looking to twenty twenty five, if there's sort of one thing that's going to be big in tech and in enterprise tech as well, what's your pick.
I'm really interested in the emerging battle between satellite and terrestrial broadband. You know, investment in fiber has been huge, obviously in New Zealand and around the world and still ongoing, but there is at least in the US a bit of a disinformation I think going on at the moment around fiber. You know, if people connected with Elon Musk perhaps sort of suggesting why are we spending all this money on Fiver when you've got satellite now, that there is a pretty good reason for that. It's that is that Fiver is still the gold standard. You may be getting very good service on your satellite connection now, but what happens when another one hundred thousand or two hundred thousand people decide to.
Go that way. The early adopters of Starlink.
And New Zealand, a lot of them in rural areas, were cocker hoop about it, and quite rightly so, because I mean, you know, they didn't have an option and it performed really well. But we just have to be a little bit circumspect, I think, And this is where that market lead lead development.
Things thing comes in.
You know, we had John Hannah from Tuaali First Fiber, which deals with a lot of remote customers, welcoming that idea that that somebody like Tuatari could propose very specific fiber rollouts and directly to government and get support for that outside of the UFB structure for instance. Okay, so that's that's one possibility for extending fiber further in the future, and it would be led to some extent by the by the telcos involved, and they would be able they're in the best position to work out how they can make a service like that, which might otherwise be marginal a profitable one one worth doing within the with fiber through a commercial construct or actually they might decide to use satellite technologies as well, who knows, but it'll be horses for courses, i'd imagine.
Yeah.
So yeah, that's that's an exciting time.
I mean, I think the disruptive potential of star Wars Staralink is obviously significant. We've got some numbers on that now they've become subject to the Telecommunications development and that means we know that they are only three point eight million in revenue in New Zealand starlink Wow in the twenty four year and they got thirty seven k customers at the end of the twenty four year, so that's very significant.
Growth from zero over maybe a couple of years. Yeah, hustlers keep it, keep an eye on that.
And of course that changes the way you can network things, you know, for instance, evasive networking, which which will become one of the fees that goes into the AIS we talked about earlier, where you have IoT devices distributed all over the country, monitoring and possibly connected to systems that can take remote action over infrastructure, for instance, when things start going wrong. So I mean, I think that's going to be open a world of possibilities.
A difficult year for enterprise and government tech twenty twenty four was there rather underwhelming year for capital raising for startups internationally, with venture funding down fifteen percent year on year by tech Crunch's estimate, But it actually wasn't a terrible year for our own startups. Here's Finn Hogan from Caffeine Daily and dig pr on some of the highlights. Hello, Finn Hogan, Welcome to the Business of Tech podcast. Thanks for joining us.
Always a pleasure to chat with you.
Ben. The first thing I'm kind of interested in, I guess is for you, what is the most interesting story of twenty twenty four in the startup world.
Well, there's so much to kind of chat through there, right, if you want to talk about like the big deals in any sense of the word, I feel like Kami or Trade to Phi has to be mentioned just in terms of like the amount of capital getting injected back into the system. You know, KARMI getting valued at that three hundred million dollar mark, sort of record returns for New Zealand Growth Capital partner Trade Phi over one hundred MILLI as well, just sort of really gave a boost in the arm of the ecosystem, really sets that confidence moving forward after what's been a pretty rough year across the board and the kind of macroeconomic climate. If you just want to talk about like the interesting nerdy heck stuff always which is exactly and I'm so glad you got me in for this, I think the open staff for me just has to be mentioned. Because nuclear fusion, it's almost this hubristic level of ambition, right, you're kind of harnessing the power of the sun and the palm of your hand. Literally. The plot of Spider Man two and the fact that New Zealand has a company that's actually taking genuine strides in that with some kind of really fascinating bits of engineering, and obviously I have done some work with them through my work with dig PR. So if anyone wants to just disregard everything I say as being a shell, absolutely understand. But I will back myself because I've been covering these guys for years, particularly since my time at news Hub, and I think their reactor design is fascinating. It's built on some work that happened previously overseas, but they've really innovated it. And the fact that they got first plasma this year and we actually got to see it, we got to see that bright purple flash. I think that was a really spectacular moment and it really speaks to the kind of ambition that the startup community is capable of.
Yeah, I think that that's been a fascinating story to watch play out. Seeing the video of those first sparks is pretty amazing. And you know, some people have said, you know, it's such a long shot, and the kind of response to that is, well, deep tech is a long shot, like it's supposed to be a long shot, but if it pays off, man, is it going to pay off exactly?
I mean, the concept of unlimited energy, carbon free for everyone forever is obviously sounds like a pipe dream, and yes, of course Fusion's always been thirty years away. But when you look globally now at the moves, it's not just open style. There's genuine momentum in this direction, and the idea that New Zealand has a hand on that ball on any level is.
Just Spectator absolutely a very cool company. So what were the things that happened in the startup scene this year that were maybe surprising to you? I mean, obviously the big strides in tech are surprising, but was there anything that you saw happened that you weren't expecting.
I think what surprised me just from twenty twenty four perspective was when I spoke to founders. When I'm interviewing people for CAFM, there's this real sense of carimaraderie and community in the startup scene, and there's this kind of willingness to help each other that I wasn't necessarily expecting when I came in. There's this this idea that this quite sharp elbows, that we're competing for relatively limited funds and so we're going to be really we're going to harbor our secrets and we're going to be competing in a zero S game, but every single person I speak to was just gushing with praise for another person in the community that helped them on their path and talked. Every time I asked them of who helped you, they would just rattle off a list of names from sometimes competitive company, saying, well, this person was so useful. This person connected me with this person, And it made me realize that the startup community in New Zealand is this lovely mixture of small enough to be a village, but large enough to sort of steed be a shining city on a hill, sort of vibe of that we've got these large, spectacular successes that get eyeballs on the community, but it's small enough that it can still have that community vibe of collaborating together and helping each other. And so I think that's what surprised me most year talking.
On that kind of concept. That small village thing can really be a benefit, but it can also have its downsides in terms of people don't want to talk about bad experiences, people don't want to kind of get on the wrong side of the village and kind of end up excommunicated. Have you had any sense of the darker side of the close knit community.
Yeah, I think that positive side is in some ways a shadow of what you're talking about. Right, Everyone is extremely positive about each other because they worry that if they say something negative, it's going to very quickly get back to that person.
Yeah.
So yes, I think, as often happens, a positive trait is in some way a shadow of the negative trait. And so I think you're absolutely right and on that kind of And I think the other element, in terms of that sort of small kiwi community that we have in the startup scene, it can work against people as well. And I was speaking to the guys from a grow Ai which recently closed a record breaking pre seed round, about how they went straight to San Francisco to get that raise, and they talked about how to do that. They really had to cast off this sort of reflexive village humility that New Zealand sometimes has, because it's such a baked in part of our DNA that we are reflexively humble, that tall poppy synd your own clean you know, insert cliche here, And they realized how much that would work against them when they're sort of fishing in that money pool in sand fram and they talked a lot about how harnessing our key weness, you can take the good parts of it, of the novelty. People are going to be fascinated by you. You know, insert Lord of the Rings joke, hare whatever. But you've really got to cast off that we've come from the small pool and we've just come in here on our jendles and please give us money. If you actually walk in boldly and back yourself, people are going to take you seriously. People already take New Zealand seriously, and you really need to take yourself seriously at the same time, otherwise going to do yourself at a service.
Unfortunately, New Zealand sometimes has its constraints when it comes to raising capital. And we saw a massive spike and raising and like twenty twenty one, and then we saw a real constraint after that. Where are we starting to sit now, How are people feeling in the industry about their ability to raise money, where that money's coming from, and you know that their outlook on the success if they do start something well.
I mean, obviously the macroeconomic climate has not been great just in terms of raising money for the past couple of years, but I think we're starting to see the kind of green shoots of that. Obviously, as the top tier interest rate comes down, money starts to get a little bit cheaper. But yes, every founder I've spoken to this year has talked about the difficulties of raising and it genuinely is a sense in the community that it's been a very, very tough year. People are watching their money very very closely. I think there is also a bit of a concern around that top tier, that top stream level of funding, which is usually taxpayer funded. We're coming from grants and coming from research institutions because that pool of money has been drying up over the last few years, and I think something that not a lot of people will be aware of in terms of the deep tech area, so much of that relies on sort of deep tech research funding that comes from government. Fundamentally, it comes from research institutions, whether it's counterhand or anything else. And I think, particularly with the moves we have seen from government recently putting those different criteria on the MARS and fund really cutting down on the ability of people to have that blue sky kind of thinking. I think companies that rely on having that before investors are even going to have a look at them that kind of research that is only ever going to be funded. From a university perspective, I think there is a real concern that some of that deep tech technology is going to really struggle to get off the ground because at that top end of the stream, that money's drying out.
Yeah, it reminds me of a company Captivate Technology. They're a carbon capture startup. Still, I think pre Seed and the founder came out of a university. He just kind of stumbled across this metal framework called muff sixteen. Tried to convince them it needs a name change. They weren't having it.
Idy talking about it.
That's great, but muff sixteen which captures carbon dioxide, right, And it was only because he was experimenting with these frameworks that he found it. It wasn't like he was like, I'm going to go and search for a carbon capture technology. And so that's that representation of how blue sky can actually lead to major breakthroughs, which there are plenty of. So yeah, it is sad to see. Well, it's important that we do have a focus on commercializing some of the technologies. I wonder if implementing that at the base stage of funding is probably that maybe the wrong place to put it. Well exactly, I'm opining here though.
No, I yeah, I think that's exactly right. I think so many of these innovations come from stumbling across something or having to front load proving where the benefit of this technology comes from. Is putting the cart before the horse?
Yeah?
Yeah, So we're at the end of twenty twenty four, twenty twenty five, what are we expecting to see. What is the perspective that you're hearing from the people you're talking to in the sector.
I feel like we're going to start seeing the rubber meat the road in terms of actual AI applications that really start generating value. I think a speaking to arcaneum AI. I think they're in a really interesting example of where a gentic AI or AI that's starting to act a little bit more autonomously is going to start proving itself as an actual real value creator and boosting productivity. And I think as these underlying models are improving at pace, even if that pace slows down, even if we see a modest increase in capabilities next year, most people applying this technology are still scrambling to harness the full potential of technology that existed six months ago, let alone what happens in six months down the line. So I think agentic AI is going to start becoming a bigger part of the conversation in twenty twenty five. I also think mid tech as well. I think when we saw the bio Aura getting their funding and looking to build a facility in christ Church, I mean there was some very very big numbers thrown around a quarter of a billion dollars added to GDP. But even if we don't take that seriously, I think the combination of advances and underlying technologies in the mid tech space, combined with the government looking to loosen some restrictions, particularly around advances in gene therapy and gene editing techniques, I think that's anaria that's going to be really interesting. I think mid tech overall is really undervalued. I think mid tech is such a massive growth industry, and I think it also from an investor perspective, is quite de risked because there's the underlying technology, There is so much R and D, there is so many hurdles that they have to get through from a regulatory perspective that I think it's not like a drug company just of this drug works. It either does or it doesn't. The technology itself has so much value and is dear risk because of so many regulations it has to clear before it can even get to market. So I think like a Cadear Health for example, looking at their rays this year, that was an incredible piece of technology, world first microcomputer brain implant, and they're very focused on a very specific illness, but the at potential applications of that underlying tech are incredibly broad, and so I really think the medtech space and our advances in that area are going to be a big story in twenty twenty five.
Cool.
Yeah, that is I think an area that has a lot of potential for New Zealand because we have a really strong med tech underpinning and bioengineering underpinning that people don't actually really know, so it'd be really exciting to see that grow super well. And that's about the time that we have, so thank you so much for joining us, Finn Hogan on the Business of Tech podcast. It's been a pleasure to talk to you and chat startups.
It's always a pleasure having back anytime.
Fantastic.
So we're going from startups to what they can become when left to their own devices, which is big tech companies, and between the battle for supremacy in AI and antitrust action against them in the US and Europe, they've dominated tech news once again. Duncan Greeve has done some great stories this year looking at the ways that they are increasingly influencing the digital economy in New Zealand and how little we really are doing to put checks on their power. It's been a busy year for you, Duncan and the spin off, a bit of a challenging year for anyone in the media. You've been really busy with the Fold, your own podcast about the media. You've also been keeping a pretty close eye on big tech companies, and a lot has happened this year. A lot of antitrust activity in the US really yet to bear fruition, but definitely some seismic changes potentially underway in the home country off these big tech companies, less so in our part of the world. You wrote a couple of weeks ago that the tough approach of Australia's regulators and policymakers towards big tech is paying off for its citizens, who are getting far stronger protections than New Zealanders. That was in relation to a move over there. The Australian government said that if you want to advertise on Facebook over there, you will have to verify your identity so have government issued ID to actually place adverts, which will potentially do away with a lot of the scams and fraud that goes on on that platform and other platforms as well. But really this year, I think what you've been tapping into in your stories is really just that dichotomy that there's all this activity going on just across the Tasman in comparison we're doing so little.
Yeah, it feels like the whole story of the year to me that you kind of have these two countries that you know, we've got a common economic zone and we like to think of ourselves as kind of siblings in a lot of ways. Big technology feels like it's the sort of signal challenge of our time is how you as a country retain your sort of sovereignty, take the good of what they do, and try and deal with the externalities that come with them. And yet Australia is arguably the global leader. You know, maybe the EU could could could be kind of considered that too. But suddenly as a global leader in dealing with them in a sort of joined up, in multifaceted way in New Zealand. Is just it's close to a zero, which is it's it's quite a hard thing when you're sitting here in one of the sectors that's impacted, but one means the only one to kind of watch with envy, to be honest at what's happening across the Tasman and see that there's just so little energy or interest from our politics and regulators over here.
In some of your pieces, you've sort of tried to get to the height of that. Is it a resourcing issue? John Smaller said, Look, we just don't have the budgets of the a triple seed to go after big tech, which has the best lawyers in the world. This is an expensive undertaking. We don't have the expertise to do it. But I mean we could have piggybacked on a lot of what the Aussies were doing this year. Maybe we would have had a lot more critical mass if we sort of joined force. It's not necessarily on everything. The social media ban, for instance, I think this terrible legislation and ram through in the last week of pil so we can pick and choose. But on the anti competitive stuff, I mean, Australia is about to potentially put a bill through which would mean that a company, at big tech company that was preventing a customer from switching to another platform or being anti competitive fifty million dollar fine. So they're going out with a really big stick on anti competitive activity in the digital economy. I mean, what's to stop us teaming up and going after this together.
Yeah, it seems really strange, right, because these are complex issues. I don't want to kind of downplay that. You know, the we've signed a lot of you know, free trade agreements which again, like so much of our legislation didn't imagine how just how borderless commerce and communication was going to become, and probably had we been able to do that, we would have taken note of the impact on our you know, just how complicated it would make legislating in some respects. But the the response of Australia is, you know, yes, maybe some of the tax ideas are going to be difficult, but at least we can try and find them into altering their behavior. And even sometimes you don't even have to get that far. Sometimes you can just assure a report that makes something plain and start the process of looking at it and magically things change, you know. You see that with Netflix, for example, which has got an ANZ office. It's tided to commission big Australian shows, but it's only doing that for Australia, and it's only doing that because the government made the fact of it's doing none of the local content stuff that TV networks are doing such a political issue that we'll try and get out ahead of it. Now that's an imperfect process, it's not finished, but it's transparently a better outcome for Australia the nothing, which is what we have with Netflix in New Zealand. And you can see the same thing with the scams, which are a massive problem here, you know, somewhere between two hundred million and two billion dollars a year. And yet Meta is almost kind of making fun of us, right like they're doing the absolute bare minimum, which is trying to verify that people advertising financial services in Australia are in fact Australian businesses. And when I ask them directly, are you going to do the same thing here? You know, would be a very easy thing to do. Google is doing it. They've just said no plans. You know that they will eventually, But the fact that we could be having just the most basic levels of consumer protections here, were we just to be talking about it publicly is It's shocking to me that it continues to be something that our ministers, our government, even our opposition parties, to be honest, don't seem to be making a big thing out of it.
Yeah. I mean, we've got this permissive environment here, you know, and I think a lot of MP's would argue that that encourages innovation, but we haven't seen all the innovation from big tech. They do the bare minimum here, They have a bare number of people here. They give us the same sort of vanilla offering that everyone else gets, but they don't have to jump through nearly as many hoops. And I guess the one area this year that there's actually been some activity and is the Digital News Bargaining Bill, which showed some promise bilateral sort of support for that. With the new government coming in, they took that up and ran with it. But by the end of the year it looks like it's very much in jeopardy that this thing is actually going to happen. What's your take on that this was one.
Of the most flawed in terms of not necessarily so early its intention, but the way it has played out, because what you've seen in Australia is that those initial deals that were struck between Meta and Google and no one else, which is one of the issues, they expired after three years. Google began the process of renewing, but Meta didn't, so it became effectively a single company tax and it wasn't a tax because you didn't have any transparency around what the scale of those deals was. There has been within media a bit of a divide about whether to sort of push through the legislation and see if Google, which has said it will pull out of news distribution and break all its seals, see if they're being honest about that or if they're bluffing, or others who say, actually, that's quite a dangerous thing to do in many respects. But it's by no means the only legislation over them, so they could have picked up other things and said that these can advance at different speeds. But the biggest thing, I think, the biggest reason that Australia has made so much progress is actually through the a Triple C, which has got a kind of a constantly operating sort of survey of digital spheres and competition in the same way that we do with telecommunications, with electricity and now increasingly with supermarkets. To me, it's so obvious that is a sphere that needs to be scrutinized in the same way as those other ones, arguably more than for example, tele communications, and yet the ComCom have said we're just out resourced or mandated to do it, so we're not going to do it.
Yeah, you've called for a Minister of Big Tech, which I absolutely agree with. Do you think anything is going to change under this government?
They're a year old, right, and you know I've spoken extensively to Andrew Bailey, who's the so called Minister for scams, met with and spoken with Paul Goldsmith who's the Media and Communications Minister, on multiple occasions. But they're not unaware of the issues here. So I'm not without hope that this could kind of raise up the political agenda.
On the social media ban. I mean you can relate to this. I guess you ran a harrowing story feature article about a young woman in Wellington and her horrendous experien parents with basically a stalker who was able to carry this on for years through online platforms, and just a woeful response from those online platforms which she repeatedly complained about it. So I guess we can all sort of relate to this and see the harm that is being done. But really, is this a workable solution technically and even costs wise. I mean, our government has been very reluctant to spend anything in enforcing any sort of rules in this area. That's going to be an expensive undertaking for the Aussies having a third party company running potentially a digital identity verification system. It's going to cost tens of millions of dollars.
Yeah, I think this is the hardest part, right is that? Think about YouTube and TV and zed as functionally, both of them have video content on their websites and they make their money by selling advertising that sits between that video content. TV and zaid employees. Well, it's less by the day, but it's around six hundred people. When it makes a profit, which it hasn't been this year, it pays company tax on the whole of that profit. And I just think it's a kind of a perfect little encapsulation of the way that the contributors to the economy, to the tax base, to the employment base have a huge amount of rules and both unspoken and literal legislative that they operate by. And then you have the big tech companies, which contribute no tax create all these problems which the tax paying companies ultimately have to fund. And I sort of just very hands off about those sort of externalities. And that's where, you know, one of the things I was trying to stand up earlier this year was trying to speak to the Minister of Revenue about this because I'm like, if nothing else, is there not a are you not concerned from our tax based perspective in the displacement of New Zealand companies to non tax paying tech companies, And you can't get people interested in At a certain point you're like, am I crazy here? Or is this a bigger problem than you're litting on?
No, You're not crazy, And you know, just finally dunk and looking to twenty twenty five, we've seen in the US a lot of antitrust action play out. The Department of Justice over there has taken suits against Google and others. Google was found to have a monopoly in digital search, and there's a decision pending on its digital advertising business. It also lost the Blizzard case around its app stores, so that may have to be opened up. Is a lot of this stuff and the frustrations we have going to sort of be overrun by bigger events in the US that may see some structural answers to this, or is do you think it's just going to roll on and on in court and appeals for years to come.
Court action remains probably the most likely source of sort of structural change in the industry. You can see that with it's not strictly court action, but courts have confirmed it with the TikTok ban, which could still happen in a bit over a month in the US, which would be an enormous change. But I think that that also points to one of the big problems, and it is that this is both a trade and a geopolitical issue as well, and that if you're the US, you know that these companies are behaving in ways that are anti competitive and using their scale and the opacity of their sort of systems and the ways that they can kind of combine their different audiences and products in a way that is kind of quite overwhelming, but on a sort of a the fact that those companies are global and everywhere, but still based in the US, so you derive enormous benefits to the fact that your share markets hold those companies to the vast bulk of their most and your employees are in your country, and that when they finally do repatriate money, it comes into this very dynamic in a very innovative economy that you still have. So do you accept some harm in your domestic interest because you're you know, your overall geopolitical interests or advanced. This is the thing that especially with you know, one of the great entrepreneurs of history right next to the administration, Elon Musk, I'm still not quite sure that they have an answer to that. So even with these cases going forward, I'm not one hundred percent sure that that won't kind of lead to it just a continuation of the sclerosis that we see, you know, around the world with a lot of this stuff.
So there we have it. In many ways, I think it's been a bit of a landmark year for technology in a lot of ways, everything from AI and these big enterprise companies that have had to do a lot of restructuring, the continued growth of startups in New Zealand and the startup industry, Big tex can virtial power being questioned, and the ups and downs of our nzat X listed tech. So overall, it's been an interesting year to be following tech.
Yeah, and I'm really interested to see what happens with the Trump two point zero administration. You've got I think I read somewhere his cabinet which has a lot of sort of tech related people in there, the likes of David Sachs, one of the PayPal mafia, is going to be his crypto advisor. I read somewhere that their combined net worth if you include Maska, isn't in cabinet, he's the doge Master, is about three hundred and forty billion dollars, so by far the richest cabinet ever. And these are all super smart, super ambitious, egocentric people, and a lot of them have very firm views about technology. They're techno optimists. They think tech is the answered to most things, and that unfettered innovation is the answer to climate change and all of these problems that we face in the world. So how is that going to manifest itself in policy in the Trump administration over the next four years. What will it mean for all of those lawsuits that are happening against the big tech companies. Is bees as going to be able to, for instance, influence Trump to the extent that he orders the Department of Justice to sort of dial back its action against Amazon. These are sorts of questions I think are going to be answered quite quickly in twenty twenty five. And then the other one really is where is AI going to go? We've got chat GPT five has sort of been delayed the technology underpinning that. There's a lot of talk in the industry that these large language models, the transformer technology is sort of running out of steam in terms of their capability. They've hit some walls in terms of what it's capable of, So there's a bit of worry about that. How are they going to overcome that. We've got Sora and things like that that are just now being released. So we will see the impact of AI generated video probably a lot more in twenty twenty five, and of course the rise of AI agents, which has been talked about and hyped up a lot in the second half of this year, but we haven't really seen them in action yet, So next year we will see them rolled out because a lot of them, the way they're designing them at Microsoft and Salesforce and others is to just drag and drop. You don't need to code or anything. If you've got the data, you can feed those into an AI agent to automate a sales process or a conversation. Companies will definitely be taking those up next year. Yeah.
I had a story just go up recently about the kind of expectations of the timeframe of a generative AI being integrated into enterprise company systems. I think it's something we need to keep in mind as well. You know, they are drag and drop, so you can just kind of feed them data. But at the same time, there is a certain level of integration work and data cleaning and all those things that you actually need to do to make them functional. So we're starting to learn a lot more about how the implementation of these technologies is going to what that's going to look like. I think it's been similar to kind of cloud migration. You know, it's going to take time and people are going to have to figure out how to do it and where the challenges are and what's actually most impactful. But once we get into it and things get rolling, we are going to start to see some pretty drastic changes.
Yeah, the in terms of some of the sort of ticky stuff next year, you know, I think the driverless cays, we've seen so much progress this year in the US in particular and China, so we're just going to see a lot more that, maybe in the UK an official launch there. We've got Kiwi Alex Kendall who's taking his technology to the US. We're just going to see that really start to hit critical mass. I think we'll also see some of the first prototype small modular reactors. Nuclear reactors go into development and maybe production in conjunction with the big tech companies that are funding them because they need more energy to run their data centers. And literally today Microsoft launched its own data center region in New Zealand. So we will see if that pays off for them, what demand is, like, is their good uptake off those services? They certainly think there will be. They put a billion dollars of investment into that, and speaking to them, they say it's going to be a slow burns. This is a long term commitment for them, but to what extent our company is going to accelerate their migration to the cloud as a result of having this hyperscale infrastructure on their doorsteps. And what is it going to mean for the economy? Will those productivity gains were so desperate to achieve start to be realized as a result of having all this great infrastructure. Won't happen in twenty twenty five, but will we start to see some really great use cases emerging that inspire others in corporate New Zealand to adopt it as well.
Yeah, I mean there are some big promises that big tech has to keep in terms of the return to the economy. Billions and billions of dollars, the numbers they've thrown around around how much this is actually going to benefit New Zealand Inc. So hopefully we start to see some of that playing out and keep an eye on whether that is actually happening to what extent. So, Yeah, in particular, those productivity gains are going to be highly anticipated, I would imagine by many people, So let's see if we can get there.
Yeah, we'll definitely be keeping an eye on all of that every week here on the Business of Tech. So that's it for this week. Thanks to resellers Rob O'Neil, Rebecca Stevenson from Business Desk, Finn Hogan from Caffeine Daily, and a spinoffs Dunk and gree for joining us links to some of the big tech stories they've covered in the show notes at Business desk dot co dot ezed. Head straight to the podcast section to find them.
You can stream the podcast there as well as on iHeartRadio or of course, your podcast platform of joyce and.
Get in touch with your feedback, ideas, suggestions for topics and guests for twenty twenty five. Email Ben on Ben at Business desk dot co, dot.
Zed Our final episode will be next Thursday. It will just be me and Peter are reflecting on some of the best, worst, most interesting, ridiculous technologies that we got our hands on in twenty twenty four, and.
We'd really like to hear your picks for the best gadgets you bought or test drove in twenty twenty four, the ones that were absolutely worth the money in your view. Head to the Business of Tech LinkedIn page to tell us what tech absolutely brought you joy or made your life easier.
Have a great week and we'll catch you one last time for twenty twenty four, Next Thursday.
See you next week.
