Inside the Flick Electric headquarters in Wellington.
Australia is at the top of the list of potential markets for New Zealand energy retailer Flick Electric, which has convinced more than 10,000 customers in its homeland to sign up to its digital platform.
In the space of less than two years, Flick Electric has changed the way many New Zealanders think about their energy consumption, thanks to an online platform that gives those consumers access to information about how the energy they are using is produced and more importantly, why it is priced the way it is.
Using the Flick app, customers can use this pricing information to help them decide when to consume and when to turn off – and once they’ve made the decision, they can access the wholesale price from the spot market.
In a market that is largely dominated by just a few retailers, Flick grew by 37% each month throughout 2015. On a net customer basis, Flick was the second fastest growing energy retailer in New Zealand last year and the fastest growing retailer in the country in April this year.
From a founding team of six, the company now employs a staff of 45 in Wellington, including an in-house customer service team.
To date, Flick has raised NZ$8 million ($7.6 million) from New Zealand investors and is in the midst of another capital raise that co-founder and chief executive Steve O’Connor told SmartCompany will provide some of the resources the company needs to progress plans to enter the Australian market.
O’Connor, who is the former chief executive of startup incubator Creative HQ, says the likes of online energy retailer Powershop have paved the way for a company like Flick to cross the Tasman.
“We love the Powershop guys and what they’re doing and they’ve shown the way that New Zealand energy and innovation does do well offshore and I think Powershop is doing very well in the Australian market,” O’Connor says.
“They’ve shown the pathway for us.”
When Flick Electric does venture into Australia, O’Connor says it will likely be through a partnership.
“We would very unlikely go in there and do it all ourselves,” he says.
“As a retailer we’d probably find partners and whether that’s licensing our platform or joint ventures with partners, we would want to find people that understand the Australian market and we would focus on delivering a platform that delivers that differentiation and value in the market.”
Disrupting an industry
Flick Electric was founded by a group of six people, four of which had previously worked in the energy industry, including for New Zealand energy generator and retailer Meridian Energy.
O’Connor says that experience is what drives Flick Electric’s desire to put the customer at the centre of everything it does.
“I think it’s really important. We’re a bunch of entrepreneurial people, we’d worked in an industry which we knew wasn’t really putting the customer at the centre and we realised it wasn’t really using digital technology to the best of its ability,” he says.
As O’Connor puts it, “energy has just not changed for decades and decades [and] the same old people have been doing the same old stuff”.
“It’s kind of hard for these big guys because they have these legacy systems that they can’t move away from.”
And so entering the New Zealand market meant finding a way to change the rules of the game, says O’Connor.
“The New Zealand industry is strewn with companies that have tried to come into the energy industry and beat the big guys but the challenge is most of them realised they were just putting a model in place that was just trying to beat the big guys at their own game,” he says.
“And you’re not going to beat them at scale because they’ve already got that.”
Instead, Flick focused on breaking down some of the barriers that have long existed between the suppliers and retailers of energy and end consumers.
“We wanted to really change consumers’ experiences of how they use electricity and actually start to value it again,” he says.
In New Zealand, O’Connor says the majority of consumers have either “completely disengaged” from the process of buying electricity or it’s a “disgruntled purchase”. Despite energy being one of the most valuable products most people consume on a daily basis, there’s a “complete disconnect” with consumers.
“They don’t know what it has cost them, they don’t know where it’s come from, a whole range of things where in a whole range of other industries, that’s an accepted thing,” says O’Connor.
“A good reference point is if you go into a supermarket at certain times of the year you can buy a punnet of strawberries for $1 and at other times of the year you buy a punnet of strawberries and it costs you $10. And the $10 purchase is simply reflecting the fact they’re scarce, they’ve probably come from somewhere else, flown on a plane to get here.
“Consumers are used to that level of transparency, choice and control in their purchase decisions but the electricity industry has just never given it to consumers.
“We decided to get Flick off the ground because we believed, using our own smart technology and digital platform aligned with smart meters, you could honestly … give consumers full transparency in the choices they make, you can give them choice and control, and you could engage with them and they could actually start valuing the product again.”
When customers sign up to Flick, they are given access to a platform that spells out all the costs involved in their energy purchase: the cost of generation, wholesaling, moving the energy around the country, the meter costs and the service fee that goes to Flick.
“It builds the level of trust with customers that we, being the retailer, are not just absorbing these costs … we’re telling you exactly what we’re taking,” O’Connor says.
“So if we put our price up, it’s really obvious. If the rest of the industry needs to put its prices up, it’s obvious. Sometimes the prices actually fall and retailers traditionally haven’t passed that on, whereas with us, it flows straight through to the customer.”
The next element of the Flick model is about giving customers access in real time to the different price signals in the industry, such as during peak times when the cost of generating energy increases.
“First of all, it’s the principle of showing customers scarcity and abundance of resources because we should never think there is just infinite energy resources. There simply isn’t,” O’Connor says.
“It also means customers who struggle to pay their bills at the prices they’re paying, they get really good choice about what they pay for things they want to do.”
Flick customers can also check a running tally of their bill throughout the billing cycle and using the digital platform, opt to receive notifications if the price of their electricity is getting close to their pre-set thresholds. They can also access information about how the energy they are purchasing is made.
According to O’Connor, an average household’s energy bill in New Zealand is NZ$2000 a year and Flick customers so far are saving an average of 19% or NZ$412 a year.
“There are no customers that are worse off, so you’re always better off on this system than not,” he says.
When it comes to taking the Flick model to other markets, O’Connor says the company is fortunate that energy markets operate in similar ways in all Western economies.
“Someone generates it, someone moves it around and someone looks after the customers in general terms … [the difference] is just how it is organised in terms of regulation that is put in place to make the system work,” he says.
“So we’ve just got to make sure our platform is adaptable to those different circumstances.”
The market itself also needs certain characteristics for the Flick model to work in it, including smart meters.
“For example, Victoria in Australia is good because they’ve gone and done that,” O’Connor says.
While there is no firm date for when Australian consumers will be able to sign up to Flick, O’Connor says the company’s plan for 2016 includes “resources to get on the place and start doing that work”.
“We’ve done enough desk-based kind of research to understand the different markets and how they’re roughly organized and whether there are smart meters and some of the things we need,” he says.
“So we’ve done probably as much as we want to on the ground here in New Zealand.
“It’s part of the current capital raise that gives us the resources to start to focus on that step.”
Why energy markets have to change
O’Connor doesn’t shy away from bold predictions, telling SmartCompany the change that will occur in the energy industry will be no different to the way ridesharing companies like Uber had altered the taxi industry.
“The industry has literally been a very small number of large players who generate and move electricity around and you have no choice, you pay whatever, they you how much you’re going to pay … and it’s not possible to have a different choice,” he says.
“It’s no different from Uber who’ve said, ‘we’ve got people who want to go somewhere and we’ve got people who’ve got vehicles. Why is it this industry that controls a fleet of cars and decides how much they charge for it?’”
O’Connor believes the energy industry has not kept pace with scores of other sectors that have handed consumers more control.
“Change is coming, it’s happening. And it’s much broader change than just new retailers like Flick that are putting the customer back into the centre and delivering extra value,” he says.
“The reality is consumers have never had a choice, have never had control and transparency and new technologies are going to make that happen. Soon consumers are going to be able to choose to power their own home, they’ll be able to decide whether they store power with battery technology … and that fundamentally changes this command and control.”
As for Flick, O’Connor describes his team as being “patiently inpatient”.
“You have to be inpatient being a growth company and a startup … you’ve got imperatives that you have to drive on but on some things you have to be patient,” he says.
“We’re trying to be really conscious of the bits that will be good for our customers and the bits that will be good for our business.”
SmartCompany travelled to Wellington as a guest of the Wellington Regional Economic Development Agency.
Video collaboration startup Wipster may spend all of its marketing resources in the United States but the Wellington-based company says its New Zealand identity was one of the keys to it unlocking an exclusive deal with US giant Vimeo earlier this year.
Wipster is an online tool that allows creators to share feedback on video projects.
Wipster was founded by former filmmaker Rollo Wenlock at the end of 2012 and was one of the first startups to come out of Wellington accelerator program, Lightning Lab, in early 2013.
To date, the startup has raised NZ$2 million (A$1.9 million) in investment from local and international investors. It employs a staff of 15, 13 of which are based in Wellington.
Wipster’s video review tools are now used by 2,500 subscribers in 150 countries and according to chief operating officer Kristen Lunman, the company is recording average month-on-month growth of 15%.
This growth is being driven by Wipster’s partnership with Vimeo, which was forged in February this year.
Lunman told SmartCompany approximately 70% of Wipster’s user base is in the US and because of this, the company is directly all of its marketing resources to the US.
“Organically you just grow … so we do have a base in Australia and the UK, Germany and Canada, but the US is where we actually spend our resources,” she says.
“It’s where the largest number of people are that are going to use the product but it’s also where the ecosystem is. When we’re looking for partnerships, we’re looking for integrations, even co-marketing partnerships, all those companies are in the US.”
So how does a self-proclaimed “tiny company at the bottom of the earth” score a deal with a tech giant like Vimeo?
Here are Wipster’s four tips for landing a deal with a large corporate.
1. Generate buzz
“The first rule is to look bigger than you are,” says Lunman.
“I think we did that.”
For Wipster, looking bigger than they are meant working with influencers in the video industry and doing what it could to generate press coverage in the lead up to the largest trade show in the US, NAB.
“When you’re a tiny company at the bottom of the earth, your life is dependent on influencers and people that are bigger than you,” Lunman says.
“So we used several key influencers and we also used media in the industry … to tell our story.”
The Wipster team met Vimeo at NAB last year and while Lunman believes the US giant wasn’t interested in a partnership at the time, “they were intrigued by the amount of press we’d received and thought, ‘okay, this is interesting’”.
“That’s where it started. Really, look bigger than you are,” she says.
2. Proactiveness pays off
James Findlater, head of product at Wipster, told SmartCompany Wipster “danced around them [Vimeo] for while” until he and Wenlock came up with an idea for how Wipster and Vimeo could work together.
“We thought ‘they’re never going to go for this but we should just pitch it anyway and something will come of it,” he says.
“We put together a proposal and sent it off and the proposal was that we would advertise underneath their player. There would be a seamless integration where you could shuffle your videos back and forth between the two systems.”
Despite the Wipster team believing Vimeo would “never let us be in their player”, Vimeo loved the idea.
“I think the lesson there was to be proactive,” says Lunman.
“We essentially just did everything for them. We said ‘this is your product, this is who your target market is, this is our product, this is who our target market is, and they overlap.
“When you’re a large company, I think it is very insular and you are looking inwards a lot of the time. You’re not able to pick up on some of these opportunities and so for us to be proactive really sealed the deal.”
3. Be willing to take a risk
Wipster took a gamble by spending time and money building out their proposal for Vimeo and there was a chance that work would not have landed them the deal.
But that’s simply part of being the smaller business, says Findlater.
“It was us who did all the work, we took all the risk, which is fine,” he says.
“It’s the nature of being a small player against the big one.”
4. Stay true to your identity
Once the Wipster and Vimeo teams started working together, Findlater says it quickly became apparent that “they’re not that different”.
“It felt like the same kind of company,” he says.
And it’s this alignment of values that Lunman says likely put Wipster ahead of other potential partners for Vimeo – as well as Wipster’s New Zealand identity.
“We’re approachable, we’re honest and we don’t hide the fact that we’re in New Zealand,” she says.
“They’re people just like us who love video, love the industry, that are passionate about their brand.”
“They actually said to us, ‘when we go on your website and use your product, it actually feels like Vimeo’.
“We care deeply about design … and developing world-class customer experiences. We care deeply about our brand and how it is presented in the public. So I think there is a real alignment there.
SmartCompany travelled to Wellington as a guest of the Wellington Regional Economic Development Agency.
Ask members of the Wellington business community what makes their city special and chances are their answer will feature the same word: collaboration.
Home to the household names such as Trade Me and Xero, and the Oscar-winning film production studio Weta Workshop, Wellington is carving out a name for itself as an innovative and technologically savvy city thanks to the close ties between the businesses that operate there.
“It’s an easy place to do things like this,” says James Findlater, head of product at video software startup Wipster, when reflecting on Wellington’s business community.
“Everything is very compact … you can pretty much go and see the right people very easily.”
By international standards New Zealand’s capital city is small, with just under 500,000 people living in the Wellington region and approximately 200,000 residing in Wellington City. But the size of its market is what makes the collaboration not only possible, but for some, essential.
“We need to be really innovative because our market is so small,” says Tim Pointer, founder and chief executive of digital marketing firm Uprise, which is readying to launch into international markets later this year.
“The method that we’ve almost been forced to create because New Zealand is so small … that’s what is going to be our point of difference moving into these other places, that’s a benefit of coming from New Zealand and working in such a small market.”
An estimated 400 startups call Wellington home and with the local government’s focus on technology, this number will undoubtedly only increase.
According to the Wellington Regional Economic Development Agency (WREDA), 56% of Wellington City’s employment is in knowledge-intensive service industries, compared to 32% nationally in New Zealand.
That’s not by accident, says Wellington Mayor Celia Wade-Brown, who told SmartCompany the digital infrastructure that was first established by the council back in the 1990s made it possible for digital businesses like Trade Me to get off the ground.
“We’re an ambitious city,” she says.
“In the last 15 years, our population went up by 20% and GDP [Gross Domestic Product] went up 35% … we have an open door to the world but a great, convenient lifestyle at the same time.”
This collaborative culture has its grounding in Wellington’s growing startup community.
Creative HQ is the powerhouse behind many of the local startup initiatives and in its 12 years of operation, has supported the likes of well-known New Zealand startups SilverStripe and Wipster.
Chief executive Stefan Korn told SmartCompany one of the key aims of Creative HQ is to increase the density of entrepreneurs in New Zealand.
“What we’re going to see over the next 10 years is actually global competition for entrepreneurial talent because entrepreneurial talent is basically a leading indicator for economic activity in a particular region,” Korn says.
“So if you can increase the density of entrepreneurial talent in the region, in the long term, that region’s likely going to do well.”
Creative HQ’s goal is to produce at least 1000 entrepreneurs a year through its incubation and acceleration programs, including Lightning Lab XX, which has a particular focus on encouraging startups with female founders.
The first Lightning Lab XX program ran in 2013 with nine teams, which collectively closed NZ$2.3 million in investment at the end of the three-month program. The second cohort went through the program in 2014, with a third program now underway.
One of the startups currently in the accelerator is Music Ecademy, an interactive web application designed to provide music teachers with resources to help their students learn.
Founders Jaroslav Novak and Helen Jones told SmartCompany the support they received from the mentors at Lightning Lab is invaluable given this is the pair’s first business venture.
“We want to be the number one music teacher resource” Novak says, adding that being part of Lightning Lab XX has taught them they can “back” themselves.
Creative HQ has developed a pool of some 250 mentors, who Korn says give up their time to helping young founders without payment. The mentors come from all walks of like.
“They all do it for love,” he says.
Also in the latest group of startups to spend time at Lightning Lab XX is GeoAR Games, a developer of mixed reality games that use GPS technology to build digital playgrounds.
The startup recently raised more than NZ$10,000 through a crowdfunding campaign for its “Sharks in the Park” app and secured a trial with Wellington and Porirua Councils to pilot the game in city parks.
For co-founder Melanie Langlotz, being part of an accelerator means being challenged and even uncomfortable.
“You only grow at the edge of your comfort zone,” she told SmartCompany.
Langlotz says the program “keeps you so focused”, while at the same time, opening up doors to new contacts and potential investors, especially at the program’s ‘Demo Day’, where the startups pitch to a room of hundreds of potential investors.
“Where else do you get that sheer opportunity?” she says.
Helping corporates innovate
While Creative HQ is wholly owned by WREDA, the organisation receives less than 25% of its funding from government. The remaining of its revenue is sourced from its programs that teach larger businesses adopt the same innovation processes as its startups.
In fact one larger business that recently completed an innovation program with Creative HQ is Trade Me, which has been operating for more than 10 years.
These corporate programs are based on McKinsey’s model of the three horizons of innovation, says Korn.
“Innovation doesn’t just happen, it’s a structured process and there are three buckets of innovation. The first is horizon one, which is about continuous improvement, all large organisations do this well,” Korn says.
“The second one is horizon two, it’s adjacent innovation and that’s about launching new products or services in an existing market or entering a new market with a modified offering. That’s a little bit harder [and] a lot of organisations don’t do that well, certainly in NZ they don’t.”
“And the last one is disruptive or transformative innovation and that’s about all the new technologies that are coming, completely new business models and markets,” he says.
“Everything is new so you can’t base anything on what you’re doing at the moment. So everyone does that really badly.”
While Korn says “conventional wisdom” is for companies to allocate 65% of available resources to horizon one, 25% to horizon two and 10% to horizon three, in reality, companies in New Zealand are only allocating around 1% of resources to horizon three-type innovation.
“One of the key things that everyone forgets is that in the end, innovation is quite structured,” he says.
“When you look at how innovation happens, it’s a really kind of diligent, structured process you go through. So we bring the programming and the process to organisations.”
Collaboration in action
Nowhere is the power of collaboration more evident then at BizDojo, one of Wellington’s creative business hubs.
While it looks just like a co-working space for business founders, Wellington regional manager Jessica Manins says BizDojo does what all other co-working spaces don’t.
“It’s not just a desk,” Manins told SmartCompany.
Instead, the focus is on what each business can bring to BizDojo and new members are selected after a trial period to see if they are the right cultural fit.
The 60-odd businesses at BizDojo Wellington participate in regular seminars and workshops with experts and the space is designed to offer young businesses the support they often need after going through an accelerator program like Lightening Lab.
“It’s a risk to not be in a space like this,” Manins says.
One of the startups based at BizDojo in Wellington is crowdfunding platform PledgeMe.
Anna Guenther, who founded PledgeMe as part of her Masters in entrepreneurship four years ago, told SmartCompany the exciting thing for her as a Wellington-based business owner is “there are more spaces where we can collaborate and interact”.
“I think there’s more people coming into the space, more awareness, more places to hang out, we’re all using technology better as well,” she says.
“I think that’s also just the nature of Wellington being a compact city,” she says.
“It’s really easy to bump into people and have conversations on the street about how you should do things together. We’re really supportive of each other as well.”
“We all know that we’re on the ass end of the earth and if we want to get anything done, we probably have to work together,” she adds.
SmartCompany travelled to Wellington as a guest of the Wellington Regional Economic Development Agency.