Navman co-founder reveals how a big tech bet in New Zealand is now generating 2,800% revenue growth and could be bigger than Navman

By Andrew Patterson

Road Users Charges (RUCs) are a fact of life for vehicle fleet operators, something that most private motorists don’t have to put up with or even worry about.

So just imagine the headache that creates for businesses with large trucking operations needing to keep track of multiple vehicle records in order to ensure they have paid, but not over paid, the necessary charges to the government’s roading administrator, the New Zealand Transport Agency (NZTA).

Around a billion dollars is collected annually in road user charges, of which an estimated 70% comes from heavy transport, making it a significant cost of doing business. What’s more, these payments are required to be made to NZTA in advance.

Getting it wrong can be very costly with expensive fines for non-compliance. A technology solution beckoned.

Auckland based tech company EROAD has completely revolutionised the whole process saving both time and money for users.

In 2009, they created the world’s first nation-wide GPS/cellular based road user charges management system for transport companies.

Using a fully integrated platform, the systems in-vehicle hardware automatically collects all the necessary data from each vehicle and the operator uses a web-based service and payment gateway to manage and pay the appropriate charges online.

Once completed, this information is immediately displayed electronically on the dashboard monitor screen in each vehicle eliminating the need for paper licences and enabling easy verification by enforcement officials.

Steven Newman, former chief executive and co-founder of Navman, one of this country’s most successful technology start-ups, joined EROAD in 2007 as CEO when it was still in its infancy.

He believes the opportunities for EROAD in the future are immense.

Opportunity in the cloud

“Instead of being a paper based system, it’s now all the cloud. We have a distance recorder which measures the actual distances travelled by the vehicle electronically," Newman said.

That sounds simple enough, but you need to be measuring those distances very accurately.

Many companies running manual systems end up over paying in order to ensure they remain compliant, which hurts profits.

“To make sure you’re not non-compliant, transport companies are often buying much larger licences than necessary which means a lot of capital is tied up in the pre-purchase of road user charges. These charges, for NZ operators, are generally in the top four of their biggest costs. If you get it wrong it can get extremely expensive," he said.

What a customer thinks

Vanessa Milham, Managing Director at AOne Movers in Auckland, which operates a fleet of nine vehicles, has become a convert.

“It makes compliance a doddle. Instead of relying on drivers to tell you accurately how many kilometres they’ve travelled that’s a task they simply don’t do anymore. To be honest, I don’t know how people run a transport business these days without it," Milham said.

"Another advantage for us is that BP, our fuel supplier, passes on all our fuel card data to EROAD which then combines that information with the distances travelled by each truck and we can get very accurate information which enables us to run our business more efficiently," she said.

Not only does it improve efficiency but the system creates other tangible benefits including being able to closely monitor driver’s travelling speeds which in turn can lead to lower insurance premiums

Enormous export potential

EROAD was founded by Brian Michie, an infrastructure economist in 2000. These days he’s responsible for growing for global business development and is currently working on establishing a permanent presencefor the company in the U.S. market.

The export potential is immense according to Steven Newman.

“If I compare this back to my days at Navman this opportunity eclipses any one of the opportunities that we had in that space. Global problems around congestion, infrastructure management, funding and emissions mean that internationally, road user charges are inevitable. Quite simply, the existing mechanisms for funding and managing roads are fundamentally broken," Newman said.

Currently the company collects around 15% of heavy transport RUCs electronically, but expects to get to around 25% in the near future.

“The business is cash flow positive and we’re spending about two thirds of revenue on further product development. Just this month we clocked up a new record of NZ$100 million having been collected in road user charges for NZTA.”

However, when it comes to those moments during the start-up phase that might have resulted in sleep loss, EROAD’s CEO is unequivocal.

A massive R&D bet

“I think spending a lot of R&D money without any revenue coming in certainly makes you lose a lot of sleep and of course you’re on a promise from shareholders to deliver something great and we’ve done that. From a New Zealand perspective this is one of the bigger technology bets around. We had about 45 engineers and developers working on the project for two and half years before we went to market,”

EROAD's success was recognised in both the most innovative product and service categories at the 2010 New Zealand Hi-Tech Awards, but the company isn’t resting on its laurels.

“Our percentage growth in the last 24 months has been 2800 per cent," he said.

Currently the company has 32 staff, but is looking to grow by another 50% in the next year.

However, like many high growth technology companies, getting qualified staff is a big issue, something the company has overcome with an incentive of its own.

Employee ownership and staff retention

The staff themselves own 80% of the company.

“The only way to build a technology company quickly is the 100% retention of quality staff. The employee share purchase scheme that we put in place has been a key part in retaining and also attracting staff and definitely share holder ownership by employees is a very important part of our future,” Newman said.

"We are fighting for a scarce resource, but I think we have an exciting story to tell and an exciting future ahead of us and that helps us a lot.”

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