Here we go again.
Another New Zealand tech company has gained critical mass, only to be snapped up by an offshore giant.
Microsoft has bought Wellington-based company GreenButton, a maker of technology that speeds high-performance cloud computing.
Financial terms were not disclosed (see GreenButton revenue estimates end of story).
GreenButton customers including Boeing, Nasa and Pixar use GreenButton's platform to help them manage computational-intenstive "big data" applications.
The company has 18 staff. Founder and CEO Scott Houston tells NBR he will stay on during the transition, but step away later this year. After years of slog to build the company, Mr Houston says he wants to spend more time with his family.
Both Microsoft and GreenButton tell NZ they are committed to keeping employees in NZ.
GreenButton, formed in 2006, evolved fom InterGrid, a company that managed the massive digital renderings and virtual set pieces on Peter Jackson's The Lord of the Rings trilogy as Weta Digital sought a way to store, access, share, and collaborate on huge digital files.
"This purchase is a real shot in the arm for other New Zealand companies. It shows that if you take your ideas to the world stage, Fortune 500 companies like Microsoft might just notice. It happened to us, so it's entirely possible it could happen for other Kiwi start-ups," Mr Houston says.
The CEO said Microsoft was a natural fit given the two companies' close relationship.
Microsoft will now integrate GreenButton’s intellectual property into its Azure cloud platform. The two companies have been partnering since 2010.
Shareholders in GreenButton, now 100% controlled by Microsoft, previously included Mr Houston and other founders and managers, plus NBR Rich Lister John Holdsworth, ICE Angels, Movac and the NZ taxpayer, via Crown-owned NZ Venture Investment Fund (NZVIF).
GreenButton is the latest in a long line of high tech startups that have reached critical mass, only to be sold to an offshore buyer - often based in or around Silicon Valley. They include Navman, EMS-Cortex, Endace, Sonar6, Simcro, eBus, Right Hemisphere, BioDiscovery and LanazaTech.
Often, startups are the recipients of capital or direct grants from the Crown. On some occasions, the taxpayer has come out ahead, but in all cases, control of the intellectual property created by those investments - and the future profits it will generate, are lost to NZ.
And in some cases, including Navman and NextWindow, initial promises to keep staff in New Zealand have melted away amid management changes. LazaTech has led a biotech drift offshore, relocating most staff to Chicago.
NZVIF CEO Franceska Banga would not comment to NBR on the sums involved, but in a statement said, "The deal amount is confidential – has resulted in a very healthy return for the many New Zealand investors.
"The return to NZVIF exceeded all government funding support, not just the NZVIF return. That money will go straight back into backing another five to 10 companies.
"Having taken the company into international markets, GreenButton now has the international partner it needs to achieve scale.
“When angel investors get cash back, they are generally well disposed to re-invest into the next generation of start-up companies entering the pipeline. So this not only an excellent outcome for New Zealand angel investors but also a good boost for our early stage capital markets.”
Neither Microsoft nor Mr Houston would comment on GreenButton's revenue, profit/loss or customer numbers. Mr Houston did say the company has customers in 87 countries.
"We've seen significant growth, mostly driven through overseas customers like Boeing."
The NZTE and Callaghan-Institute-backed TIN100, which ranks NZ tech exporting companies by revenue, estimated GreenButton's 2013 revenue at $3.4 million — a 104% increase over 2012, and enough to place it number 7 on TIN's list of the Top Ten Hot Emerging Companies.
2011 revenue was $550,000 by TIN's estimate.
The revenue figures are modest. Unknown is how much value Microsoft placed on GreenButton's intellectual property.
"The majority of technology company exits are tradesales. [It's just a shame we don't have large scale NZ corporates who could become the acquirer," NZVIF's Ms Banga says.
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