
How Australian Tech Companies Can Think About Silicon Valley - nreece
https://muru-d.com/blog/article/how-australian-tech-companies-can-think-about-silicon-valley/
======
Innercode
While the US will always be dominant, there are some advantages for Australian
Tech companies to take advantage of:

Cheaper tech teams with less competition. Australia has a lot of talent in the
software space, but without the eye watering wage bills. Even in the most
expensive cities of Sydney and Melbourne, software developers generally cost a
lot less than in the Bay Area. You can get even better value if you can build
your team outside of Sydney/Melbourne.

You can build more slowly, there is alot less pressure to build grow fast and
fail type startups. While venture capital heavy startups are the most
celebrated in the press, there are plenty of great smaller scale self/revenue
funded startups that can build up over time. Most of our celebrated tech
successes built their business models over a long time and focused on building
a good business first.

There are also great incentives to keep the development team in Australia. As
a pre revenue startup you can get over 43.5% of your development cost back
through the R&D Tax Incentive. While its a tax incentive, the way that they
designed it was to provide tax refunds to loss making companies. Plus there
are other great grants/incentives you can also take advantage of. (disclaimer:
I'm a consultant for software startups/companies in this area)

The best course of action is to take a global approach, don't limit yourself
to selling or developing in only one location.

~~~
ianhowson
This is a great post. I'd like to add:

> You can get even better value if you can build your team outside of
> Sydney/Melbourne.

So much this, but talent outside the big cities is _rare_. I lived in
Queensland for a while and would have taken a massive pay cut for _any_ tech
work... but there just isn't any. I knew more people working in Sydney (fly-
in-fly-out) than working in local companies.

You can pick up uni students cheaply. They're grateful for relevant work.

I knew a few founders living cheap but pretty much all knew that moving to the
US was an inevitability.

> focused on building a good business first

This is a massive plus of starting in Australia. The business _has to make
sense_. Local funding sources aren't as willing to build perceived value and
flip the company -- it's important to have a genuine sustainable business with
customers and cashflow.

> 43.5% of your development cost back through the R&D Tax Incentive

Probably half of my lifetime earnings have been paid for with the R&D Tax
Incentive and other grants. It's such a good deal that every incorporated
company with a tech component should be trying to claim it.

I'm not grumpy or anything, but in Queensland, claiming government grants for
tech companies is probably more lucrative than working in a tech company.
There's an abundance of funding and a shortage of people able to use it.

> don't limit yourself to selling or developing in only one location

I forget who gave the talk, but it was from Muru-D at Co Spaces in the Gold
Coast, and guy said (paraphrasing):

"New Zealanders have an advantage over Australians because they _know_ from
_day one_ that they will have to sell overseas to make their company a
success. Australia is big enough that you can fool yourself for a while, but
it won't take long before you reach saturation and need to move anyway. Better
to get it done sooner."

~~~
stephen_g
Where in Queensland? There is plenty of tech going on in Brisbane if you look
for it... I suppose it depends on your specialisation though.

~~~
lukego
Just curious: what is some cool stuff happening in Brisbane these days? I grew
up there but I moved away to find more interesting work a long time ago. It
would be nice to hear about interesting things happen there nowadays.

~~~
stephen_g
We have dev offices for quite a few majors (Oracle, SAP, IBM, ToughtWorks,
Boeing, Boeing Defense etc.), but lots of little interesting companies too.

I’m in Systems programming/electronics design - it’s probably a different
story for a front end dev - I don’t think there’s much of that at all!

One little company I used to work for was in traffic systems, basically
IoT/sensor networks before it was cool (all on private networks though!) and
we developed a system that GPS tracked ambulances and fire engines, and
predicted their likely path (destination was known) and ran interventions on
traffic signals to both minimise travel time for the emergency vehicle and
minimise disruption to other traffic. It’s a lot more effective than the dumb
IR blaster systems used elsewhere. We also had a ramp system that staggered
cars coming in down on-ramps near chokepoints that significantly increased
highway flow and reduced nose-to-tail accidents (from the stop-start traffic)
by something like 30%. I think they’re rolling out that tech now with some US
cities departments of transport.

Now I work at a little company that makes class-leading satellite/microwave
equipment, including maritime and road-vehicle satellite-tracking terminals,
frequently up- and down-converters, etc.

There’s actually a surprising amount of microwave engineering, and lots of
aviation/defence work (some in the city with Boeing Defense and some out in
Ipswich at Amberley), as well as Virgin Australia being headquartered here.

~~~
lukego
That's great to hear about, thanks!

------
jwilliams
One of the common mistakes I see Australian (and other incoming) startups make
is "hiring/setting up a sales person in SF".

It seems like a highly leveraged thing to do. Surely someone in-market, full-
time, with sales experience should do 10x.

But you learn so much in the sales process. If you have someone remote, new
and purely incentivized on sales you lose much of that information.

Quite often the sales person "fails". The company notches it up to being the
wrong person, fires them and tries again. However, more often it's the
product, the positioning, so many other things.

~~~
garagemc2
So what is the correct thing to do here? Do the selling yourself or go along
to sales meetings?

~~~
danieltillett
You can’t sell remotely from Australia via a US sales team. You either sell
directly from Australia (with all the downsides this involves) or you move the
management team to the USA.

~~~
sharkdesk
The third option is to acquire a US competitor, let them sell your product
into the US market, and make sure they have the same executive decision making
power as the team in Australia

~~~
danieltillett
Yes - I am actually considering doing this right now. The difficulty is the
massive mismatch in valuation between Australian and US companies makes this
difficult.

------
stephen_g
One massive advantage of our company doing the build local, sell global
strategy from Australia is that in our game (satellite/microwave comms, mostly
for the defence industry) is that if we were in the US, our products would be
under ITAR. Not having to do all that paperwork is a huge selling point for
our European and Asian customers. I do spend a lot more time on planes than I
might otherwise, but at least we are close to Asia.

------
nopassrecover
The liveability of places like Adelaide (and even Melbourne, Sydney, Brisbane,
and Perth) is such an undersold secret. Personally I'm so torn between wanting
to tell everyone how good we have it and wanting to keep it to ourselves.

Melbourne, Adelaide, and Perth are all in the top 10 cities to live in the
world.

Taking Adelaide for example (1.2 million people), we can live within 10-15
minutes of the CBD in a roomy townhouse for highly-affordable rent, get paid
pretty well, be 20 minutes from the beach, 20-60 minutes from four different
world-class wine regions, have a great festival culture, delicious local food
and wine, and a highly safe and welcoming culture.

If you want a larger city you have Melbourne (3.9 million) with a fantastic
bar and food culture and endless high-paying work.

As a company, and this is somewhat anecdotal, you have high availability of
highly-educated workers who are used to working collaboratively and doing
whatever's needed to get things done to cover the work of N other people (low
population after all).

~~~
ianhowson
I want to drink your kool-aid.

I feel like they are highly livable _if you do not need to work for a living_.

Otherwise:

\- Adelaide: It's cheap but there are no jobs.

\- Brisbane: It's cheap(ish) but there are no(t many) jobs.

\- Perth: It's expensive but there are no jobs.

\- Sydney: You can't afford it. A one-hour commute is starting to look
appealing.

\- Melbourne: Can't complain.

They are lovely cities to visit as a tourist. As a worker, there are much
better opportunities out there. Australia tech workers have easy access to
working visas in practically every country in the world.

Australia will always be there for retirement.

~~~
nopassrecover
I can agree there are more opportunities elsewhere, but ive never met a
developer or similar in Aus struggling to do well, and have generally found US
devs shocked by our salaries and living costs.

On the other hand, if you want career advancement there's something pretty
cool to the US idea of "have managed 15 people after 2 years experience" which
just doesn't happen here in Aus.

~~~
ianhowson
As soon as we had a child, we went from "doing OK on two professional
salaries" to "losing money even with a modest lifestyle."

Outside Aus, we only need one income to support the family. That's a pretty
amazing quality of life improvement.

------
gsvclass
In my view with Australia cancelling the 457 visa that a lot of tech talent
uses its pretty much over for everything tech related in AU. If you're looking
for a fast growing tech city thats less expensive than the valley then head to
Toronto

[https://www.gostudy.com.au/blog/australian-457-sponsorship-v...](https://www.gostudy.com.au/blog/australian-457-sponsorship-
visa-to-be-cancelled/)

~~~
ta444555
It was being abused to bring down local salaries. Good riddance.

------
jacques_chester
I think that an Australian business going deeply into the US market is going
to struggle with the E3 visa. It is so easy for a talented technologist to be
recruited by a US firm that once someone works it out, you will see a rapid
turnover unless you offer US rates.

------
hyperpallium
> Build local, sell global. This is the ideal. Hire the local talent (keeps
> government people happy) but sell into the big market.

Yes. But if you're selling components (pretty rare TBH, most sell a service
provided via a web page, or maybe a desktop or mobile app), you have to pay
"royalty" tax to the IRS. Only about 5% IIRC under the us-aust tax treaty, and
you're not double-taxed by the ATO - but it's paperwork, complex, and a little
scary. Being subject to one jurisdiction's set of tax legislation is bad
enough....

~~~
stephenr
Can you provide some reference, or even the law/statute name that you're
referring to here?

~~~
hyperpallium
Was a few years ago, I'd have to google it myself.

google: US australia tax treaty; search: "royalty" within it (has a particular
meaning in the act). The term "component" is _not_ actually used, IIRC. When
the IRS audited a US firm I know, they had to sort it out with their non-US
component suppliers.

I'm not at all sure, but maybe "w8-ben" is the relevant form (though it serves
several purposes). Whatever the form is, I noted that Atlassian had a pdf of
it on their site, and avoided all the complexity because their products were
used directly by users (i.e. aren't components).

HTH!

~~~
stephenr
All I can find is about if a contract between parties involves royalties, it
may be taxed. Maybe that's what you meant?

~~~
hyperpallium
Doesn't sound like it but unfortunately that's not enough information for me
to tell. It might be. BTW a "contract" includes pretty much every transaction,
even if immediately performed.

From ATO tax treaties: [https://treasury.gov.au/tax-treaties/income-tax-
treaties/](https://treasury.gov.au/tax-treaties/income-tax-treaties/) to USA
DTA (double taxation avoidance) "Convention between the Government of
Australia and the Government of the United States of America for the Avoidance
of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes
on Income"
[http://www.austlii.edu.au/au/other/dfat/treaties/1983/16.htm...](http://www.austlii.edu.au/au/other/dfat/treaties/1983/16.html)

> Article 12 Royalties

> (4) The term "royalties" in this Article means:

> (a) payments or credits of any kind to the extent to which they are
> consideration for the use of or the right to use any:

> (i) copyright, patent, design or model, plan, secret formula or process,
> trademark or other like property or right;

So, by 12.(a)(4)(i), if a customer pays you so they can redistribute your
copyrighted code (i.e. a component), it's a "royalty".

BTW Reading it literally, this "right" includes the mere _use_ of copyrighted
material - but here it's meant as more serious aspects of copyright, like the
right of (re)distribution.

IIRC, there's a wrinkle: in something like a compiler, which is used by the
customer and not redistributed, but includes some part that _is_ redistributed
(like stdlib), this anxilliary distribution doesn't alter the character of the
primary transaction. IIRC, the ATO stated this in what I think is called a
"tax note" \- a decision made internally (i.e. not held by a court). tl;dr you
can get away with a _little_ redistribution

~~~
stephenr
Right. As usual the software is never the fucking hard part, its the ancillary
shit like law/tax etc.

Open source code + paid services/support seems like it'd be the easiest way
around this for small organisations, no?

~~~
hyperpallium
It's a barrier to entry, favouring big caps that can afford international tax
law specialist accountants/lawyers.

I think that works: free means no royalty paid; and the convention above
specifically excludes ordinary services (IIRC). It includes "scientific" etc
advice in the next point (ii), and I never looked into exactly what that
covers... services/support for an ordinary component doesn't sound like it's
covered (and if it was, it wouldn't be because it was a component - the issue
I raised).

As a separate business issue, there's other problems with getting people to
pay services for something they already have - in that sense, it's not "a way
around". Of course, some market segments do really want that support. And if
that's already your business model, well no problem.

I can't think of any examples of an open source _component_ with
services/support. SleepcatDB and ghostscript are opensource components, but
are dual-licensed (i.e. have a second proprietary license permitting
redistribution as closed source). MySQL? Cygwin? Hibernate/JBoss? Red Hat?...
not sure these are components that are often redistributed (though of course
users could, license permitting).

------
jamix
> You’re starting a journey of effort, consideration and perseverance
> because...

> You can succeed there.

Just bear in mind that "you can" doesn't mean "you should".

------
jlangenauer
One of the strange things about Australia's startup scene over the last decade
or so is the sheer number of what I like to call "meta-entrepreneurs" \-
people who help other people become entrepreneurs, and present themselves as
experts on technology, business, Silicon Valley etc, but have declined to
actually do the hard work of setting up a business, let alone growing it to
success.

So when Australians give advice about "how to start a tech company", the first
question to ask is "How many have you personally started? And how did they
go?".

One of the things that I've come to understand about Australia since leaving
(I've live in Berlin now, before that I was in London) is that the average
level of professional work is quite mediocre by global standards - this is not
just in tech, but across all industries. Australians have had it very easy for
about 2 decades now, getting rich through a property boom and a mining boom,
but most have never had to really compete on a global level. An awful lot of
people cruise in their jobs, doing something that's good enough for the
Australian market, and they've had a comfortable career doing it. So why
change?

The problem is, that if you do achieve PMF in an economy that operates
primarily at this level, you're not going to have PMF in an economy that
operates at a higher level of sophistication and competence. That's why I
think the strategy of "start local, grow global" is a fool's errand, and risks
turning into "start local, burn some cash trying to go global, stay local".

I also dispute that there is an advantage to keeping a tech team in Australia.
The salaries are still quite high (particularly in Sydney) but the talent is
again, not that good. This is both in tech and tech management, however there
ARE exceptions[1], and the situation is improving - Atlassian have produced a
lot of people who know what it takes to run a global, successful tech
business, and now we are starting to see a second generation of top-notch
people being developed in fast-growing Australian startups like Canva and
SafetyCulture[2].

There are plenty of companies who have sold into the US market from day 1 from
outside the US. HotJar from Malta. My current employer, ChartMogul. Travis CI,
also from here in Berlin. There are hundreds more, but those are the ones that
just jumped to mind.

If you want to be a global company, then think like a global company from day
one. This is as true in Australia as anywhere else, but it's taken a long time
to sink in there.

[1] Of course, the exceptional people generally know it, and command matching
salaries. As an aside (to this aside), I'm currently reading Camille
Fournier's excellent "The Manager's Path", which is like a museum of
management practises that I've never seen in Australia.

[2] SafetyCulture is an exception to my "start global" thesis. They did start
locally, then grow. I think this is because of two main things: In health and
safety things, Australia does generally lead the world, or come close to it. I
used to work in construction in Australia, and am continually shocked at the
practises I see in the EU and the US when I visit. The other thing is that
I've seen SafetyCulture hire a lot of very good people, which is never a bad
thing for a business to do.

~~~
oldandtired
I find your comments about technical competency of Australians being less than
elsewhere interesting. My own experience over the decades is the opposite. I
have had to deal professionally with various fly-in gurus (from the US and
Europe) and they have had little success in understanding how we implemented
the projects we were involved in.

what was more ridiculous was the major discrepancy in pay. If US or European,
then you were paid 3+ times the Australian rates. Yet you couldn't solve what
we thought were simple problems.

There is no doubt that there are many who claim technological acumen here who
have much less than they advertise. But there are many here who have much more
technological acumen than what you find overseas.

The biggest problem is the extensive need to use buzzwords in the various
technologically based industries. If you are not up with the latest buzzword
craze, you are considered backward and inferior, even though those buzzwords
are just a renaming of various "stuff" that has been around for decades.

~~~
sloxy
> they have had little success in understanding how we implemented the
> projects we were involved in

I don't think I've ever had trouble helping people to grok the
implementation/architecture/whatever of any system I've been involved in.

~~~
oldandtired
What I actually found was that they were unable to think outside of the box
they were stuck in. They were in a position of "you can't do that" when the
problem at hand required that "you need to do that" so find a way to do it.

I think one of the problems of today is the limited education that many in
technical fields have. They are taught how to do something in one language or
system and they do not get to see that other ways are possible in other
languages and systems.

One of my former colleagues (from decades ago) was a brilliant programmer. We
had a particularly pernicious problem to solve. He had spent some hours
programming a solution around the problem and had written about half the code
needed. In discussions with him, I brought up that old chestnut of Karnaugh
Maps and Don't Cares. He had never heard of either. Once explained to him, he
fixed the entire problem with 5 lines of code, throwing away all the previous
work. He was very capable of thinking outside the box.

I have worked with many very capable Australian technical people over the
years and they have been less valued than foreign people even though the
Australians were vastly superior to their overseas counterparts.

