Queenstown

This stunningly beautiful alpine retreat in the deep south of New Zealand has lakes, fields and mountains to die for. It’s a year-round playground for skiers, hikers and mountain bikers. And yet despite all the fun, beauty and adventure to be had, there’s a dark side to Queenstown: its reliance on tourism has created an economic fragility. 

While the wider region is home to fewer than 100,000 people, before the pandemic it hosted close to three million visitors a year, with tourism clocking in at around 60% of GDP. Such a concentration makes Queenstown vulnerable to economic shocks.

The upshot is that the region needs to diversify its economy urgently. Tech is an obvious candidate — with low environmental impact, high wages and productive benefits for other sectors. 

The Back Story

NRP’s founder Roger Sharp also chairs an ASX-200 digital travel company, Webjet, which like many travel companies needed to recapitalise urgently during the pandemic. In dire circumstances in early 2020, the company raised over half a billion dollars (and has fortunately emerged from the pandemic in excellent shape). 

Immediately after Webjet completed its financing, Roger received a call from the founder of Magic Memories — a global tech scale-up based in Queenstown. Hearing of Webjet’s success in riding out the pandemic, John Wikstrom asked the team at NRP if they’d advise on the recapitalisation of Magic Memories.

During that process — also completed successfully — it became apparent that with the borders closed and with 60 percent of local GDP missing in action, Queenstown was in dire trouble and urgently needed to diversify its economy. 

The seed of an idea was planted. With NRP so deeply involved in the tech sector, and its founder living in town, the solution seemed a no-brainer.  

The Numbers

At 1.8 percent of GDP (versus a 7.2% national average), Queenstown’s tech sector holds lots of promise. By contrast, in the USA, tech sits at around 11 percent, while in California it’s 19 percent, and in San Francisco, it’s 28 percent of GDP. 

With New Zealand’s tech industry growing towards 10 percent of GDP, there’s plenty of upside in Queenstown. If we can collectively get tech to 20 percent of Queenstown’s economy over 20 years, more than half a billion dollars will be injected into the local economy each year. The question is: how do we get it there?

Plan of Attack 

To try to make sense of the opportunity, we assembled a diverse team of experienced people to write the region’s first ever ten-year tech strategy. We formed a not-for-profit trust to lead and fund this initiative. It’s led by the private sector with support from local Government, central Government, the University of Otago, and a range of stakeholders including Ngai Tahu, the region’s powerhouse Māori tribe.

There’s a hive of activity underway, with multiple workstreams in train as we pull everything we learn together into a plan. A leading policy advisor has been seconded to Queenstown to run the initiative, an economist has modelled out the economic impact of tech, global giant Accenture is leaning in to provide its input on the skills needed to build an ecosystem, and  three eminent university professors are working on the strategy. 

On our journey of discovery, we learned that other mountain towns around the world had started to transform their economies during the pandemic, becoming hotbeds of tech as distributed workforces moved to the mountains in search of fresh air and a healthy environment. To add some real-world experience to the project, Roger embarked on a 3,200km road trip through a dozen US mountain towns to understand how they’re diversifying their economies through tech. 

The Local Tech Scene 

Queenstown’s fledgling tech scene has a lot going for it.

The interesting thing about Queenstown is that while it has never had an organised tech sector, it is a magnet for tech professionals. The area is home to a formidable tech diaspora. Senior people who made their fortunes building and selling large tech companies now live there. The founder of SaaS accounting powerhouse Xero lives near Queenstown, as does a former President of Singularity University. He’s a global authority on AI and Robotics. There’s also an international SaaS expert coaching start-ups from Queenstown. On top of that, there’s a burgeoning workforce of remote tech workers who relocated to the area during the pandemic, and now work for tech companies around the world. There are too many remarkable people to name, proving that you really don’t need to live in a large metropolis to be an effective contributor to the tech world.

The town has a range of educational facilities — including an innovative secondary school called Liger Academy, and an accredited tertiary training institution, QRC, that recently launched machine learning courses. The 150-year-old University of Otago has plans to scale up its presence there.    

Property infrastructure is being built in a precinct called Remarkables Park — a facility that will house R&D activity and tech companies. The town also has a high-quality coworking space called Mountain Club that is a key part of the tech community.

There’s a highly promising start-up community, led by a government-funded organisation called Start-up Queenstown Lakes. 

And in the recent mayoral election, one of the town’s mayoral candidates even ran her campaign on a platform of diversifying the economy through tech!

That’s a lot of firepower if we can bring it all together. What we need to do is join everyone’s efforts through a coherent strategy.

Secret Sauce

We’ve been studying the ingredients that drive success in tech communities painstakingly — reading books like Brad Feld’s Start-up Communities and the Start-up Community Way, interviewing hundreds of people, and even visiting mountain communities overseas.

It’s clear to us that the secret sauce for building a tech community varies from place to place, and that there’s no fool proof playbook. Having said that, here are some building blocks that many successful tech towns have in common:

• a sophisticated tech workforce that’s rich with entrepreneurs, underpinned by tertiary education (preferably a university, and research facilities);

• infrastructure including fast broadband, great working spaces, affordable housing and a decent airport within striking distance of large population centres;  

• a clearly articulated strategy; 

• a collaborative environment in which champions across the different parts of the ecosystem work together; and

• access to capital.

With these ingredients in place, over 10–20 years we should be able to build a functioning tech flywheel, comprising a healthy start-up community, scale-ups, remote workers and multinationals, all underpinned by talent and education. 

American towns like Bend, Oregon and Boulder, Colorado (and increasingly Spokane, Washington and Bozeman, Montana) provide working examples of robust tech ecosystems. While each community is different, their tech flywheels are spinning, with interplay between tertiary education, start-ups and scale-ups, remote workers and in some cases, multinational tech companies. 

These communities understand that it in the years it takes for the start-up community to generate a positive impact on GDP, the other parts of the flywheel can generate significant activity. However — most importantly — things work best when they’re all growing in unison.

The Soft Issues

On top of hard issues like infrastructure and housing, there are critical soft issues to consider. Communities need to decide what they want success to look like. Is there a peer they want to emulate? Do they want to be like Bend, like Bozeman, or like Boulder?  Or none of those?  

It’s important to be clear on one thing: Queenstown is never going to be Silicon Valley. What it can be is a skilled niche hub in the world’s deep south, with a time zone advantage and arguably the best lifestyle imaginable for techies.  

What we know from the US experience is that when you think about planning the future of your town, you need to ask what your values are, and what is it about your district that you want to preserve and enhance over the medium and long term? For example: how would your community feel if traffic got worse? Or if housing became even more unaffordable? Do the downsides outweigh the potential upside?

As we weigh all of this up, it’s important to remember the advice given by the former mayor of Telluride in Colorado: towns that don’t grow, die. 

What Will Success Look Like?

Getting tech as a percentage of GDP to the national average, or even higher, would inject hundreds of millions of dollars into the local economy. The impact could be quite profound.

However, it’s not just about GDP. To any parent in Queenstown, success looks like their kids not having to leave home to get good jobs, but being able to score them in Queenstown, and earn world-class wages doing world-class work from the mountains. It’s a shared dream across most mountain communities. 

This is going to be a long-term process. It’s going to take at least a decade — maybe even twenty years — to see material change. One insightful professor I met recently in Bend at the University of Oregon - Cascades said: “you’re planting trees whose shade you may never sit under”. 

That’s OK by us. The way we see it, someone needs to plant those seeds. 

Obstacles and Solutions

There are several obstacles to overcome. Our job is to find a way. 

Affordable and available housing, producing talent at scale, attracting large companies to the region — these are but a few of the challenges we need to overcome, if the dream is to become reality.

We have deliberately given ourselves a long runway to solve these problems, and by funding the initiative through the private sector, we aren’t going to be slowed down waiting for the electoral cycle to solve problems. We must find solutions ourselves. 

Our Role

Queenstown is the spiritual home of North Ridge Partners. We believe that doing business comes with an obligation to support one’s community. We found that opportunity under our noses, in Queenstown. 

So, the firm is giving some of its expertise, time and capital to help plant the seeds of a vibrant tech community. We’re building a great team to strategise and launch this strategy, and we’re proud to be involved.

And — as an added bonus — we’ve found this journey to be really good fun!