There are disputes playing out between businesses every day in New Zealand.
Then there’s the type of dispute that Auckland startup Manaaki/We Are Indigo has found itself in, one involving allegations of bullying and unethical behaviour towards its business partners, leaked due-diligence reports and the resignation of a board director at government innovation agency Callaghan Innovation.
If you want a succinct summary of the bitter saga that’s distracted the tech startup community and resulted in a barrage of LinkedIn posts in recent months, you need go no further than Duncan Greive’s detailed and even-handed account of the events to date published on The Spinoff on Monday.
This has been a painful episode to observe, even more so because the key executives and investors involved in Manaaki/We Are Indigo are Māori and Pasifika. Robett Hollis, the entrepreneur who has been very publicly calling out the company founders’ alleged bad behaviour, is also Māori, as are some of the founders he claims to speak for.
A digital boost
Manaaki.io first emerged in the bewildering early days of the lockdown in 2020 as an online support network for small businesses suddenly facing financial ruin as they were forced to shut their doors and digitise their operations.
Manaaki co-founders Pat MacFie and Andy Hamilton, the former long-serving chief executive of business incubator and coaching centre The Icehouse, spent hours every day in message forums, offering advice on how to set up e-commerce platforms, manage remote workers and claim government relief. The focus on helping Māori and Pasifika-run business owners in particular was incredibly valuable in trying times.
Manaaki/We Are Indigo then picked up around $5.5 million in various contracts, including supplying services to the Ministry of Business, Innovation and Employment’s Digital Boost programme offering free digital skills training online.
So, what went wrong?
Some saw Manaaki/We Are Indigo as being opportunistic in pursuing so much government-funded work in a short period of time. But the suitability of the company to deliver those contracts isn’t in question. What is in question is the conduct of Manaaki/We Are Indigo as it partnered with other small companies to deliver the contracted services.
Those concerns and details of a data breach related to a separate venture Manaaki/We Are Indigo was involved in, were documented in not one but two due-diligence reports prepared for Callaghan Innovation as it scrutinised Manaaki/We Are Indigo’s response to RFPs (request for proposals) issued earlier this year for yet more government work.
I haven’t seen the full contents of the due-diligence reports, but they were clearly concerning enough for Callaghan Innovation to eliminate Manaaki/We Are Indigo from the running for those contracts, one of which was related to the Founder Incubator and Accelerator Programme, which would have been very much in Andy Hamilton’s wheelhouse.
Callaghan shared the due-diligence reports with MBIE, but it has declined to release them under the Official Information Act to Hollis and numerous media outlets that have requested them.
That decision is ultimately what led Callaghan Innovation board director Rachel Kelly, a health tech startup founder who had been on the board for 16 months, to resign her board position last Saturday.
“While I cannot fault or argue the legal logic and complexities of choosing to withhold details, I cannot reconcile the human part and therefore cannot stand united with my peers,” she wrote on LinkedIn.
Callaghan believes it has followed a sound legal process but, in the eyes of Kelly, failed to address an ethical issue the due diligence process uncovered. At least one party has appealed to the Ombudsman to have the due-diligence documents released.
Where to from here?
The whole episode has cast a shadow over the startup community, Manaaki/We Are Indigo and Callaghan itself.
As Duncan Greive notes, “the startup and technology space in New Zealand is relatively small and gossipy, particularly the spaces closest to government money – a complex web threaded through multiple different entities”.
Given that interconnectedness and the important lifeline Callaghan funding represents to startups, an independent review would give the business community certainty about the due-diligence process, the disclosures involved and how Callaghan’s board has input into the decision-making process as it considers reports on prospective contract and grant recipients.
My personal view is that if business owners are applying for government funding, they should be prepared to subject themselves to a high level of disclosure under the Official Information Act.
Manaaki/We Are Indigo maintains the due-diligence process it was subjected to was biased by a “conflicted investigator” and doesn’t want the damaging content aired publicly. At this point, I think that’s a tenuous argument.
Given the innuendo swirling around MacFie, Hamilton and their company and colleagues, it would serve them better to authorise the release of the reports and present their side of the story in the same forums where they have been so roundly criticised. That would obviously need the consent of other business owners referenced in the reports.
The startup community also needs to get better at dealing with these sorts of disputes before they escalate. The tragedy of Unfiltered founder Jake Millar last year highlighted the damage that can be done when a dispute between, in this case, a co-founder and his investors isn’t dealt with adequately.
Better dispute resolution
Businesses have several avenues for solving disputes with partners, from mediation to the more expensive route of legal action. This whole debacle is a good reminder to make sure your business dealings are well-documented and everyone’s contractual obligations are clear.
But the startup community would also benefit from some sort of semi-formal dispute resolution process run by people who are deeply familiar with the startup world, and people who understand the specific challenges minorities face. This is something that should be on the agenda for the newly established Startup Advisors Council.
Sir Ian Taylor has joined Hollis in calling for those due-diligence reports to be released before calling for an independent inquiry.
The veteran Māori entrepreneur and elder statesman of the tech community is exactly the sort of person who could have played a valuable role in defusing the situation – if he had been approached early on.
There are, similarly, many more people with mana in the tech sector who could play that crucial role in settling disputes before they boil over into social media fights, legal action and ruined reputations.
Originally published on BusinessDesk.co.nz.
PETER GRIFFIN 