KEY POINTS:
At a private retreat for technology entrepreneurs this year, Selwyn Pellett, founder of software developer Endace, said: "As New Zealanders, we don't have to be second-class citizens. We are good."
As if to prove his point, many local software companies shone this year.
Contact centre software developer Datasquirt raised $8.6 million through listing on the Australian Stock Exchange. Entrepreneur Rod Drury listed his accounting software company Xero Live on the local exchange.
Search software developer Eurekster was mentioned by BusinessWeek alongside Web 2.0 companies that have grown up in Silicon Valley, under the title of "Google Wannabe".
WhereScape Software, a data warehouse lifecycle management company, won a prestigious Red Herring 100 Asia 2007 award, recognising promising private technology ventures in the Asia-Pacific region.
And Auckland company Biomatters won the e-science category in the United Nations World Summit Awards for its product Geneious. Yes, we are pretty good.
The Government is putting its money where its mouth is in supporting its "weightless economy" drive, funding (through the Foundation for Research, Science and Technology) a multi-university programme to help firms improve the process of software development.
According to market researcher IDC, overall IT spending in New Zealand will hit $5.4 billion this year and is set to grow 4.3 per cent a year between now and 2011.
Spending on packaged software will account for only 13 per cent of total IT spending this year but just over half of IT sector employment is software-related.
Indeed, the biggest worry most technology companies have now is trying to find qualified staff. On one job website, The Business counted 989 IT-related jobs, all posted within the previous six days.
However, the technology industry looks bright if the entrepreneurs profiled for this story are any guide.
Dr Richard Bloxham is a paediatrician-turned-IT buff who co-developed Go Virtual Medical, a software system that allows clinical procedures to be practised virtually.
After three years of scraping funds together and developing a prototype, Bloxham and his colleagues have a registered patent pending and are busy negotiating deals with surgical colleges in Britain.
Dr Alexei Drummond set up Biomatters to develop the prize-winning software Geneious, which allows biological data to be stored, compared and analysed.
Then there's Craig Cockerton, whose Masters research on visual communication technology resulted in a world-leading company in that field snapping up his Hamilton-based start-up Ectus two years ago.
And among the newbies is Ponoko, a design-led software system that ties in with 3D manufacturing technology, set up by the old tech hands, David ten Have and Derek Elley.
"We're mindful of what's future and what's now. A 3D printer is prototype only really, it's a specific market for architects and designers who want to do a prototype before they do the final version."
However, Elley points out, metal parts are already being produced from 3D printers.
For the designers, there's the similarity to software creation which attracted ten Have and Elley. "You get to build something and test it immediately, so if it breaks you fix it. You don't have to go through [the process] again."
Using a graphics programme such as Adobe Illustrator, or CorelDRAW, you draw your idea - examples on Ponoko's website include a wooden wine rack, a table and a perspex spinning top - upload the design file into Ponoko and select the materials. Once you've entered your credit card details, the file is downloaded by the laser-cutter operator which then cuts out the parts of your design. The parts are delivered for you to put together, a bit like assemble-it-yourself furniture.
There are six levels of copyright available plus a file-sharing option for designers who want to share their ideas or give people a taste of what they do and what their products are like.
Ponoko makes its money by facilitating the transaction.
Elley and ten Have came up with the idea while they were involved in carbon economy projects last year, including local online climate change blog Celsias, and surmised that if manufacturing were done locally it would reduce carbon emissions.
They pooled their own funds - Elley owns internet marketing company First Rate and ten Have had just sold his business software company Provoke Solutions - and convinced several local investors to back them. United States investors have expressed interest and, while Ponoko is aimed at the larger US craft and design market, Elley says the intellectual property will remain in New Zealand.
Although there have been only a handful of orders since its September launch in San Francisco, 1000 people opened an account in the company's first week and "a pile" of US laser-cutter offices have since expressed interest in working with the company. This doesn't translate into revenue, Elley concedes, but a week after its launch the software was bug-free, a "massive achievement" in software.
A laser cut above the rest
Got a brilliant idea for a product but don't have the means to make it? Ponoko is the frustrated designer's dream come true. Set up by software entrepreneurs David ten Have and Derek Elley, it's an online personal manufacturing platform, or, as Elley describes it, "software that allows you to make stuff".
Their vision is for everyone to be able to create on demand. So, users send a design to Ponoko and have the pieces cut out by laser and returned for assembly. The Ponoko website also allows designers to sell their creations directly to customers.
Manufacturing your own stuff using software, 3D printers and laser cutters will one day be the norm, Elley predicts, in a sort of digital-industrial age. "It's not geekville, it's a mass idea. We [Ponoko] talk about bringing the garden shed into the living room. When we were kids we were in the garden shed hammering our thumbs with a hammer and now, as adults, we sit around a living room breaking our thumbs on a console."
Right now the idea is limited by the types of file formats the system can handle and by the materials the laser can cut - choices now available include sheet plastics, plywood and hardboard - and also by the availability of laser cutters.
Ponoko is looking for laser-cutter operators throughout the world so items can be made close to the end user.
Another limiting factor is that the items that can be made are surface only - you couldn't make a pen but you could make its shell. Architects and designers already dabble with 3D printers to make prototypes (Neville Newcomb's 3D printer featured in The Business feature on future trends in March) but lasers are more flexible in the materials they can work with, Elley says.
Practice without patients
In his bush-ringed Silverdale office, Dr Richard Bloxham is halfway through sewing up an appendix when his phone rings. He downs tools and after an hour-long conversation returns to the operation where, at the click of a mouse, he's able to pick up where he left off. Welcome to the world of virtual surgery.
Bloxham's start-up, Go Virtual Medical, develops software that allows doctors and nurses to study clinical procedures - from taking blood to removing an appendix - and perform them virtually. The company, which launched its website last month, is targeting hospitals and surgical colleges, hoping the constant turnover of swotting students will provide the biggest chunk of its revenue.
It is rapidly becoming mandatory for medical graduates to prove - and keep proving - their abilities and to document their training rather than just pass exams, says Bloxham, and virtual operations could streamline the assessment processes. Each of the company's modules contains a logbook recording the user's time and performance.
Paramedics are another potential market and the company is negotiating with the Red Cross and several ambulance organisations in New Zealand and Australia.
The idea came to then-senior surgical registrar George Oosterhuizen in 2001 while he was revising for surgical exams. Frustrated by the amount of reference material, Oosterhuizen recognised a gap in the market for all-in-one, portable and interactive medical resources. He approached paediatrician-turned-IT buff Bloxham and GPs Douglas Annan and Harsh Bhoopatkar, all of whom agreed they'd have liked something similar while studying, and combed the market for similar products.
As far as they could see, their idea was unique in combining text, video, 3D anatomy graphics and simulation into a downloadable software package.
The business model is based on licensing fees: users can download a single-user licence for 12 months, by which time the product will be updated, or an institution can buy a licence for a fixed number of computers. The third and most expensive option is for the software to run from, say, a hospital server which would enable any number of users.
Their medical backgrounds meant the four knew exactly what was needed: condensed and relevant text, a brief video of "highlights" and an easy-to-use simulator.
The idea attracted the attention of software entrepreneur Craig Meek, who bought a stake in the company in 2003 and took a seat on the board. The next year, Geddes Dental founder Keith Pine agreed to become chief executive. Through Geddes' contacts at Auckland incubator the ICEhouse, the group raised enough money to develop a prototype module for an appendix operation.
The big break came last year, when the company was based in the ICEhouse. They attracted six outside investors and raised $1 million. Since then the company has set up office in Silverdale, north of Auckland, and produced 20 complete modules, each one dealing with a different procedure, of which just a handful have sold. But it's early days yet, says Bloxham. Once sales momentum kicks in he hopes customers will start requesting specific modules, although the company will steer clear of anything too rare or specialised until it has the funds.
Having a board of "hard-nosed businessmen" as opposed to the group of doctors has proved hugely beneficial, says Bloxham, bringing a wider perspective on IT marketing and previous experience with much larger IT companies.
There was no hesitation about getting business brains or computer specialists involved, Bloxham says, even if it meant conceding a little control and ownership. As well as much-needed cash, Geddes provided business nous and investor connections.
"We were doctors with a strong interest in IT and knowledge management, not [computer] programmers. I'm half doctor, half geek, but I'm not a businessman."
Bloxham, who took on the role of chief information officer, concedes there have been "differing viewpoints" between the business-focused board and the core Go Virtual Medical team, but nothing serious.
"They say, 'Why don't you have a committee for this?', and we say, 'Well there are only six of us and we're busy'. They're used to thinking in bigger numbers."
Oosterhuizen, who has since returned to South Africa, and Bloxham remain the largest shareholders, but the years of working on the project full-time with no pay took its toll and Bhoopatkar and Annan pulled out several years ago.
Outside investors now own about 40 per cent of the company and Bloxham sees many more fundraising rounds on the horizon before it can afford to diversify its products. A web streaming version of the software is in the offing but development is hampered by poor internet bandwidth.
Also on the cards are what are known as haptic devices, where special gloves and virtual reality headsets would replace the computer mouse, enabling users to move virtually in three dimensions wearing one or more haptic gloves.
So far, the haptic devices are but a gleam in Bloxham's eye - at the moment one glove costs US$7000 ($9000) - but they are gradually getting cheaper, he says.
Helping unravel genome puzzle
The unravelling of the human genome in 2000 has been described as akin to pulling apart a Boeing jet and laying out the pieces. Putting it all back together is still a mystery but Dr Alexei Drummond reckons his software will help scientists solve the puzzle.
Called Geneious, the software helps manage biological data collected by scientists and makes it easy to share and compare information.
Drummond is confident his product, released to the market last August, has got what it takes. Its free version has been downloaded by more than 75,000 unique users and last month won the e-science category in the UN World Summit Awards. And Drummond himself has won a Hamilton Memorial Prize from the Royal Society of New Zealand.
Drummond came up with the idea for the software while studying for a double major in computer science and biology. His studies coincided with a sea change in science: the amount of data being collected had been ballooning since the human genome was sequenced in 2000 and scientists needed ways of storing and accessing it.
Drummond let his idea percolate for a few years and in 2004 roped in his wife Athena, her brother Julio Ferreira and his ex-Peace Software colleague Daniel Batten to set up Biomatters to develop and market the idea.
It wasn't an easy ride from idea to commercial success. When the company was set up it couldn't get academic funding and there were no local investors willing to get involved in such a niche area. A deal with the University of Auckland in 2005 was the company's first commercial breakthrough: the university bought the software package for $250,000 and agreed to help develop it further.
The same year, the four also got a grant from Technology New Zealand, conditional on them finding further investment. After several fruitless pitches, Biomatters snared $340,000 from seven ICE Angels, the early-stage investors associated with Auckland incubator the ICEhouse, enough to take Cheesecake, the first version of Geneious, to market.
Outside investment also meant a number of people now wanted a say in how the company should be run. Suddenly the four founders had to argue their case for the direction of the company. The board thought Biomatters should go after the big pharmaceutical companies first, but Drummond and his colleagues wanted to target students and researchers by selling one-off licences and build up to commercial sales.
"We had a strong vision of what the best way to market this was and we fought hard to keep our vision. We really had to stick to our guns."
Drummond believes their decision has since been vindicated. The four knew of other software companies which had lost sales and development traction after becoming mired in corporate bureaucracy. By offering a free demonstration version for download, the four reckoned they'd get better worldwide penetration, word would spread and browsers would become buyers. About 15,000 users a month download the free version and more than 60,000 free versions of the latest product Geneious have so far been downloaded by 40,000 unique users.
Because the software stores data that could be used in personalised medical treatment, big firms would eventually have to deal with issues of patient privacy, something which will need to be worked through.
Despite the awards and sales, Drummond is only "cautiously optimistic" about how the company will perform. Of the four founders, he is the only one still actively involved and admits there is "always a niggling fear" about the future.
"We started with four people who knew each other really well; now there are four board members and about 20 people invested in the company. It's hard to let go, or at least to know which parts of the business would be best taken care of by other people, and to identify those people who have the same passion and drive for the product as you."
Batten stood down as chief executive in January and is now Biomatters' chief scientific officer. He still has a shareholding in the company. Candace Toner, his replacement as CEO, has a strong background in life sciences sales.
Toner is upbeat about Biomatters' future. She won't give any figures, but says the company has made "some sales" and that revenue has grown 40 per cent quarter on quarter in the 15 months it has been in business. It now has nine developers, six more than this time last year, has tripled the amount of code in its code base and this month released the Geneious 3.5 version.
