Why we kept our startup in Australia

https://macropod.com/blog/why-we-stayed-in-australia/

by rodgerd • 11 years ago

129 83 11 years ago

adventured• 11 years ago

Companies like Atlassian have shown what can be accomplished in Australia. When it comes to funding, Australia is one of the richest countries on earth, with a median adult net worth higher than the US, Japan and Germany combined, and twice that of Norway and Switzerland.

Obviously the VC funds are different, and nowhere near the scale that they are in the US or China right now. Still, there is a lot of wealth in Australia seeking investment opportunities.

It would seem to make perfect sense to stay domestic and contribute to building up the tech scene there.

There are problems with the generalizations in the article though. The author talks about American entrepreneurs being, basically, obsessed with get rich quick schemes, and that outcomes are more binary in the US - that's mostly a Silicon Valley cultural thing. There are tens of thousands of successful tech companies all over the US that have grown themselves slowly, are great businesses, but are not unicorns, and are not an all-or-nothing proposition. Why didn't the author look at other tech start-up cultures in the US as an alternative? Alternatives exist in every major city. I get that, in that scenario, it makes as much sense to stay in Australia - so then why mess with Silicon Valley at all, by now it's pretty blatant what it's all about. That contradiction left me confused.

tajen• 11 years ago

"If I were starting Atlassian today, I wouldn't have stayed here"

- Scott Farquar, CEO of Atlassian

http://www.computerworld.com.au/article/557248/atlassian-ceo...

Besides, Atlassian is now officially a UK company.

Australia is indeed a rich country. Lots of funding is probably available. Laws seem simpler than in Europe. I don't know whether Scott is comparing Australia to UK/US or to other more latin countries like Spain or France.

johnnydoebk• 11 years ago

I don't know whether Scott is comparing Australia to UK/US or to other more latin countries like Spain or France.

Both Spain and France are European countries.

solve3• 11 years ago

have shown what can be accomplished

That was never the proper question. The proper question is what's the relative difference in the magnitude & probability of success, between the different regions. This matters, because success is so extremely difficult to achieve in startups already.

outcomes are more binary in the US - that's mostly a Silicon Valley cultural thing.

It's an investor thing, not a cultural thing. If the business doesn't reach an exit, then the investor (nearly always) gets absolutely nothing, no matter how many millions the company is profiting per year. Tech startups generally never pay out dividends. All that money goes back to the employees and other expenses. Nothing to the investors. Never exiting = equivalent to the company imploding as a completely failure, from an investor's financial perspective.

stay domestic and contribute to building up the tech scene there.

If startups want to build up their ecosystem, the more effective approach is to go to where the money is, get the money, and THEN take that money and success back to their home community. Exactly as the Skype guys did for Estonia, or as many founders have done for Israel. #1 get the money #2 bring it back. 2 optimized steps, not a single step.

This small town concept of just guilt-tripping the poor desperate founders to never leave their home town out of loyalty simply hurts everyone. It's backwards thinking like this that keeps the smaller towns smaller and less successful.

jsankey2• 11 years ago

Unfortunately the investment culture in Australia is a lot more risk averse. There are exceptions, but raising money for new tech here is much harder than it should be given the relative strength of our economy.

For bootstrapped companies of course this is less of an issue, the high cost of living and small local market are more of a problem. The beauty of software, though, is we can sell online into the large (and culturally-similar-enough) US market, which is where most of my customers have always been.

danieltillett21• 11 years ago

Yes the key to success in Australia is bootstrap and export. Now the dollar has come down from its ludicrous level to just somewhat over valued this is more viable. I do still miss the days when I got A$2 for ever US$ though, but it is better than in 2012 when I was getting A$0.90 for every US$.

nailer3• 11 years ago

The author talks about American entrepreneurs being, basically, obsessed with get rich quick schemes, and that outcomes are more binary in the US - that's mostly a Silicon Valley cultural thing.

That's true, but the US VC isn't going to fund you to move to Portland or Austin or Boulder. I'd love to be proven wrong though.

justincormack2• 11 years ago

Most of the capital is effectively controlled by large pension companies, advised by a small number of pretty traditional consultants, and little goes into VC.

cbaleanu• 11 years ago

This (Used to work for the largest of them all) and one of the slowest internet speeds of the western worlds. Almost everything in Australia is a monopoly: kmart, target, the biggest grocery chain are all owned by one company. 90% of the internet infrastructure is owned by a single company. Yet people dont react because real estate exposure.

vorg3• 11 years ago

Australia is one of the richest countries on earth, with a median adult net worth higher

Certainly true if you take the net present value of the resources buried beneath the huge outback and apportion it against the low citizen count. Canada has the same geography and demographics so would be in the same net worth per capita situation. If you instead use the demand from potential immigrants and supply of unused and repurposable land to measure net worth, you'd get a similar result. But to compensate against the risk of invasion, both countries have had to become the 51st and 52nd states of the USA from the defense perspective.

marcus_holmes2• 11 years ago

Who the hell would invade us? There's no-one even close. This is pretty bizarre

Australia is one of the richest countries in the world because we imported a decent work ethic and have lots of natural resources. We also core very highly on "great places to live" lists because we all live close to the beach.

It's awesome here, and if we can just get rid of the catholic idiot in charge and get someone in who understands about the intertubes and the NBN and why investing in tech is a good idea then we're all set :)

ikonst• 11 years ago

Uh, wait, does the US have a "startup visa" now?

hobo_mark• 11 years ago

There's the E-3 specifically for Australians, I've been told it's fairly easy to get but I am not sure how it applies to founders.

https://en.wikipedia.org/wiki/E-3_visa

danieltillett21• 11 years ago

It does not apply to founders. I could move to the USA and take someone's job there, but it is impossible to bring my business to the USA and employee Americans and pay masses of taxes to the U.S. Government. Visas are one area where Australia leads the USA.

pyrophane2• 11 years ago

The E3 requires employer sponsorship and doesn't offer a ready path to a green card, so it isn't friendly to starting a company in the US. It is fairly easy to get because it has its own special quota just for Australians so they do not need to compete with immigrants from other countries as for an H1.

nailer3• 11 years ago

The former conservative Prime Minister of Australia provided soldiers to invade Iraq, and in return got AUSFTA a free trade agreement which, amongst other things, created the E-3 visa just for Australians to enter the US. US Congress was told a trade deal with Australia would "strengthen the foundation of our security alliance” [Sydney Morning Herald 15/11/02]

Edit: source https://www.unisa.edu.au/Global/business/centres/cags/docs/a...

jacalata• 11 years ago

There's the E2 visa (http://www.quora.com/How-can-the-E2-visa-help-US-aliens-to-w...), or if you have an established company outside the US you could use the L1 visa (intra-company transfer/opening a new office).

danieltillett21• 11 years ago

Running a technology company from Australia is totally insane (this is coming from some who has done exactly this for the last 15 years). Unless you have a family reasons for staying then leave right now.

On the positive side Australia is a great place to live, just a massive up hill struggle as a place to build a technology based business.

parkie• 11 years ago

Reasons?

joshschreuder• 11 years ago

Share schemes and tax is probably a big one: http://www.afr.com/technology/tech-startups-back-overdue-emp...

danieltillett21• 11 years ago

There are so many but here are a few:

1. Lack of real VCs. 2. Lack of non-predatory Angels. 3. Lack of a start-up culture. 4. Risk adversion from everyone especially customers. 5. Geographical distance. 6. Cultural cringe towards anything developed in Australia. 7. Time zone difference. 8. Overvalued currency. 9. Cultural obsession with real estate speculation as the way to get rich.

justincormack2• 11 years ago

The local market is very small, and still spread out. The population is half that of Spain, or the same as southern England, so if you are selling to a domestic market you need to cover the whole country. If you are selling to the rest of the world, the timezone is not great, and getting to see clients is slow and expensive. Internet access is not good and expensive.

Despite that there are success stories.

acyacy2• 11 years ago

Once 'angel' with quite a big reputation 'brainraped' us a few weeks ago.

The environment isn't very conducive to success.

cybergoat2• 11 years ago

I'd like to mention another local success story. Hidden away in Fisherman's Bend in Melbourne is Blackmagic Design (http://www.blackmagicdesign.com). 99% of sales are overseas and they compete with the likes of Canon and Sony. The company was grown organically without any external funding, and does engineering and industrial design in-house. This is not an easy thing to do (hardware is expensive to develop!) but it can be done.

disclaimer: I used to work for Blackmagic

danieltillett21• 11 years ago

I have always been impressed by Blackmagic. Yes the key to success here is to bootstrap. If you go down this path Australia is one of the better places in the world to do it.

jondubois3• 11 years ago

I think it's hard to find funding because all wealthy people in Australia made their wealth in mining. If you want to open a coal mine in the middle of the Outback, you will find investors easily - Just show them the report on soil composition; they'll get it instantly. If you want to start a tech company; good luck.

vacri2• 11 years ago

Not to mention that the current federal government is pretty hostile to tech- and research-based industries.

larrysalibra• 11 years ago

This is similar to the complaint you hear from startups in Hong Kong: it's hard to find funding because all wealthy people in Hong Kong made their wealth in real estate.

startupoz• 11 years ago

The other big issue is that startup people in Australia don't support other startups.

They don't have the time to even listen or try out new products, give feedback even when requested.

I have even asked for explicit feedback and that hasn't been forthcoming. Obviously people get support from within their own groups but anyone outside it is largely ignored.

They go to listen about disruptive startups and maybe talk about it but no doing and no encouragement for the doers. They do pay a decent amount of cash to attend workshops on innnovation / disruption though.

Even the so called experts won't know a disruptive idea if it bit them in the rear. Plus you see the same "experts" parading as mentors in the usual circles. The appetite for risk is very low. Have a gawk at the startups funded by couple of accelerators, the same tired ideas. I have been to enough meetups to discover the lack of hustle in Australian startups. They talk a good game though.

danieltillett21• 11 years ago

I have to say I am guilty of this. I don’t spend any time mentoring anyone and I probably should.

On the positive side I don’t both going to listen to any of the so-called experts.

marcus_holmes2• 11 years ago

I spend huge amounts of time listening to and giving feedback on new ideas and startups.

But I've come to recognise this tone... are you sure you want actual feedback, which is usually negative, or do you want people to just agree with you that your idea is awesome?

Remember, truly disruptive ideas do look unworkable to other people [1].

If you're really a "doer" and you really have a disruptive idea, then you don't need encouragement and you will get nothing but negative feedback. Your next step is to figure out how to make your idea happen on your own and prove everyone wrong.

1: http://www.paulgraham.com/swan.html

Gatsky• 11 years ago

One area where I hope things might be different is biotech. The markets are always global, and there is a lot of scientific talent here. The disadvantages compared to other countries is less I think just due to the nature of biotech. There are going to be big opportunities as healthcare in Asia is transformed by increasing personal wealth in China and South East Asia.

danieltillett21• 11 years ago

My business is technically in the biotech area and if anything biotech is worse. The problem is biotech takes long term susustained funding to succeed which Australia lacks the will to provide. We have great scientists who are incredibly inventive, but turning this opportunity into viable businesses seems beyond us. We would rather as a nation speculate in residential real estate than use our very competitive science skills.

chris_wot4• 11 years ago

Ah, now I know where you are coming from. Yeah, we have amazing potential around biotechnology, but the current government cut funding to the CSIRO by $111 million and scrapped the Science Ministry when they won government, then recreated it last year and put as its head Ian MacFarlane who said of Scientists who weren't happy about a lack of a dedicated Science Minister:

"But I hear it constantly from some of the precious petals, can I say, some of the precious petals in the science fraternity, and if you can’t guess, I won’t accept it.”

So I'm not surprised you don't think startup culture is great in Australia!

jondubois3• 11 years ago

Ah yes, the Sydney real estate situation is horrible. It seems that the Australian government is desperate to attract investors to buy Australian property. I even started getting telemarketing calls from random people asking me to invest in their property funds. It definitely looks like a housing bubble.

I'm seriously hoping that it bursts soon, rent is just getting ridiculous.

jondubois3• 11 years ago

I can totally relate to the points made in this article. I have worked in 6 different startups in the past 4 years in Australia (Brisbane and Sydney) as an Engineer - All at different stages of growth. I also hang out with the startup crowd in Sydney (I've been invited to a couple of events and was able to talk with founders/CEOs and engineers of some of these startups).

One thing that really stands out about Australia is that tech startups here last a long time (they don't seem to ever 'run out of money'). Investors are patient and they invest cautiously; in fact, if they like your idea, they will 'keep tabs' on you and they won't invest a single dollar until you have some meaningful numbers to show them - And by numbers that means either decent revenue (yes, REVENUE) or exceptional user growth (coupled with a clear monetization plan).

That's both good and bad. It means it's very difficult for early starters to get funding in Australia, but it means that once you do get that funding, you can expect the investor to stick around. I have worked for 2 startups which had been operating on a modest loss for 5+ years - One of them had almost no growth and little potential (in my opinion), the other had modest growth but high potential. These startups don't seem to have problems raising further rounds of capital year after year.

I found that Australian startups are lean and have a low marketing budget - They tend to spend everything on the product and generally don't like hiring sales people or paying for advertising unless it gives them an immediate, measurable return - They don't spend money just to create hype.

Australian founders tend to dismiss the importance of advertising - They believe that if they put all the focus on product development, that eventually, the product will become so good that it will just blow away the competition (who have wasted all of their funding on advertising).

US startups generate a massive amount of noise in the market - Spending on advertising at the moment would just create more white-noise - You won't get a return on that. At least that's the general belief.

danieltillett21• 11 years ago

You raise a great number of points here that I can really relate to especially the reliance on the product selling itself. I am pretty sure that this is a mistake, but it is hard to try and compete against all the noise when you are running a lean startup.

solve3• 11 years ago

In other words, lifestyle businesses, i.e. businesses that plan to direct nearly all profits and investment capital to the founders / employees / other expenses while the investors end up getting nothing (unless they do something extractive to the company e.g. via seizing control and extracting value for themselves via that) -- versus "non-lifestyle" where the company optimizes for a big exit through which investors can be compensated.

Remember, tech startups nearly never pay dividends. Making a ton of profit but no exit = good for founders and employees, big problem for investors.

danieltillett21• 11 years ago

There is nothing wrong with lifestyle businesses :)

The problem basically comes about because almost all startups here are forced to bootstrap for a long time before they even get the possibility of raising funds from an investor. If as a founder you have managed to get your business to profitability by bootstrapping why would you take on any outside investor who you expect will try and screw you over?

vacri2• 11 years ago

The feeling I get is that it's more about being distant from the "startup" world of SV, which is something of a religion. Investors here are more interested in businesses. A startup is a particular kind of small business - and if you are going to invest in a business, you want it to be sound.

Just a guess. I work for a 'startup', but I'm nowhere near the money machines. I've just always been amused at watching people discuss startups like they're completely unrelated to the more mundane world of small businesses. :)

simonswords82• 11 years ago

Interestingly I'd say a lot of your points are true for the investors here in the UK.

Investors want to see growth, they want a business/marketing plan, ideally they want traction...overall they're simply more cautious than our American cousins.

fffernan• 11 years ago

It's not even "when you will come to the US". It's when will you come to Silicon Valley. The rest of the US is considered inferior in S.V. from the community here. We live in a global economy. You can build your company where it suits you best. There are many quality investors all over the world. Good Luck.

maramono• 11 years ago

I can strongly relate to this experience too. As the founder of Ortask, my company is not successful by Silicon Valley measures, but it is successful in my terms because it makes me very happy.

For example, I’ve learned so much by deploying my two products, doing marketing myself, and am currently developing a new breed of test management tool that integrates other of my own technologies that actually help with managing testing (IMO, current test management tools are simply glorified DBs with dashboards) — something I have been very passionate about for years.

Also, I have never identified (or agreed) with the new mentality in the US for creating companies a-la Amy Hoy. At the worst case, such “strategies” teach you how to steal someone’s idea and build something for which you feel no passion, just to become rich.

I wish them and their company the best and hope it grows in a way that keeps making them happy.

Thanks for posting this article!

fuzzieozzie• 11 years ago

As an Australian who has lived in Silicon Valley for 20+ years it’s good to hear the perspective from home. I co-founded, bootstrapped and sold my first startup to a public company. There is room to not “pursue” the unicorn model in Silicon Valley – but you need confidence in your approach. Needless to say, I am on my third startup now – and having done it “my way” I intend to continue doing it my way. Good on you and good luck — I think you’ll enjoy your life alot more doing it the way that feels right to you.

timr• 11 years ago

"in the US you have to talk a lot of bullshit. No matter what your company looks like, you have to talk as if it’s the next Facebook. You have to pretend you’re a Unicorn even when you know you’re not. I never once met a founder that when asked, “how are things going?” could give me an honest answer. Everyone is killing it, smashing it and blowing shit up. You have to be moving fast and break things. It’s all a million miles an hour and to hell with the consequences. There’s no room for words like “considered”, “mindful” or “deliberation”. You move now, or GTFO. It’s as if everything and everyone is in a Hollywood production."

For what it's worth, this is a "post-unicorn" phenomenon. San Francisco has been overrun with entitled assholes as it has become the trendy new place for get-rich-quick schemes. It wasn't that long ago that it was considered insane by investors to put a company here (for good reasons, actually: it is insane to have a company here. People now just arrogantly want to change the existing city to fit their greed, rather than go somewhere more practical.)

A lot of the people who were doing startups before the Rise of the Unicorns -- many of whom are now famous and powerful people -- were, frankly, lunatics. I wouldn't say that they were modest, exactly, but they also weren't exclusively focused on money -- it wasn't clear that anyone was going to make any money! Maybe I'm being romantic, but it seems like there were more interesting people, doing interesting things, and hoping to have a good time along the way. There was more thought, because there was less money, and people had to be careful.

Today, the interesting people are fewer and further between, and the question is less "how can I make something great?", and more "how can I get investment?" Nobody gives much of a shit about anyone else, because if there are any externalities, hey, that's just "disruption", bro. It's awful, and has probably destroyed the culture that produced those unicorns in the first place.

carboncopy• 11 years ago

I have to admit that I ended up skimming over the rest of the article after the false choice of "unicorn or nothing" that the author characterized about SV. Even limited to YC companies, what percentage are unicorns? And is every company expected to be a unicorn? The vast majority of YC companies are moderate successes or moderate failures.

The whole "there's no Australian Secret or Pets.com" really sounded like sour grapes to me. Do Texans (people from a region of similar population size and GDP to Australia) boast about their lack of spectacular technology company failures?

Why not just say, "Australia is bloody awesome, it's home, and we've decided to stay for that reason. We're living proof you can flourish as a startup in Victoria. It turns out that we decided that we didn't want to move to the Bay Area."? I'd really be interested in the details of how they actually got it to work (marketing, customer relationships, developers).

That being said, I'm very grateful that they posted a blog about it. I've found Australian companies to be fairly tight-lipped in comparison. The more exposure there is to Australian technology companies, the more opportunities for customers and investors will materialize.

Why we kept our startup in Australia

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