
Startup Australia - dtalic
http://www.linkedin.com/today/post/article/20130314130000-921366-startup-australia
======
jacques_chester
A lot of the VC funds that have launched in the past few years are actually
seeded by government funds. Not a model that lends itself to genuine risk
taking.

Just imagine the headlines:

    
    
        TEN MILLION WASTED ON PHONE APPS
    

I live in Perth. Fellow ex-UWA folks of my acquaintance have the same
complaint as me, which is as follows:

Perth has buckets and buckets of capital. This town is stupidly flush with
cash. And Perth's taste for risk is much higher than the rest of country. You
can raise tens of millions of dollars for high-risk, high-reward ventures in a
relatively short time.

But there's a catch: this only applies if your proposal is to take some
geologists and a drilling crew for mineral exploration.

The lifecycle for startups is ostensibly quite similar, but ... no dosh. The
local investors don't really want to know about it.

edit:

That said, I wonder if Australia's intelligentsia will ever get over
fetishising whatever industry and country which happens to be in the news a
lot. I remember endless song and dance about Japanese cars. Now it's Silicon
Valley.

Eventually it will be, I dunno, rockets and jetpacks. From Montenegro.

Meanwhile Australia is one of only 3 countries left with AAA rating and is the
only country in the world that has had a growing economy for umpteen years.
You can go a long way with sensible, basic policy settings.

~~~
jbarham
> You can go a long way with sensible, basic policy settings.

A pity then that Australia's federal and state government policies (negative
gearing, first home buyers grants, interest only mortgages for investors etc.
etc.) have done so much to pump up the real estate market into such a huge
speculative bubble than will do untold damage when it finally pops.

It's insane what Australians are expected to pay for basic housing in one of
the world's most lightly populated countries/continents. Here's an example
picked at random: [http://www.realestate.com.au/property-house-vic-
north+melbou...](http://www.realestate.com.au/property-house-vic-
north+melbourne-112981899). 3 bedroom terrace house (i.e., no windows in side
walls) in North Melbourne, 1 bathroom, no parking, all yours for a mere $775k
at 6.5% mortgage rates.

~~~
sien
Many other countries have laws that allow negative gearing. The US has
substantially cheaper housing (even at the height of the bubble in much of the
country) and there you can deduct the interest on your own house against your
income and get a 30 year fixed loan, something you haven't been able to do in
Australia since the 1980s.

Australia has pretty tight land release laws.

If we had more cities with decent jobs you might see housing prices go down or
at least go flat.

It's also worth noting that Australian housing was fairly cheap until the
early 2000s (excluding Sydney)

~~~
jbarham
US mortgage rates are anomalous since the market has essentially been
nationalized as the vast majority of mortgages are underwritten by Freddie Mac
or Fannie Mae. It's insane that right now the average 30-year fixed rate
mortgage rate in the US is 3.63%. (Source:
<http://www.freddiemac.com/pmms/index.html?intcmp=CWS-HP>) That's almost half
what Australians pay for a 5-year mortgage!

Australia does have tight land release laws, but it means that property prices
are kept artificially high and too much capital is tied up unproductively in
mortgages instead of investing in innovative, high-growth industries.

~~~
jacques_chester
I'm not so sure. There's still institutional bias against venture investment
in Australia.

Superannuation savings are north of AU$1.5 _trillion_ dollars at this point.
Supposing that "only" a trillion of that is held by fund managers, then a mere
0.5% shift in portfolio allocations would pump $5 billion dollars into VC.

Given that the total Australian VC is a few hundred million on an outside
guesstimate, that'd be pretty noticeable.

Edit: maybe I should be knocking on doors at super funds? Though I guess the
local VCs are doing that already.

------
boyter
Not so sure if I agree with the comment about not being able to hire
developers. I think it could be better said "We are unable to hire developers
for the price we want to pay".

I am going to take up the offer to email and see how it goes... but I would be
surprised if I get an offer which pays enough to actually live in Sydney.

I recently went hunting for jobs and my experience was less then stellar. Many
companies didn't even bother sending feedback to coding tests, and one
expected me to pay for the Yahoo Boss API and violate Google's terms of
service for a test. I will say I had an excellent experience with Hotels
Combined though despite declining their offer for personal reasons.

EDIT - Emailed then, and got a response within 1 minute. I will say this for
Matt he's very responsive.

~~~
josephagoss
Interesting, I know a basic php dev in Perth working for 75k a year, and many
IT contractors are pulling in 200K. The thing is most of our grads end up in
tech support on 40k. And that's why we are getting in many overseas IT people
to actually code (The majority of my computer science class dislikes code)

~~~
boyter
75k isn't a great salary in Sydney (not sure about Perth) and I have seen more
basic PHP dev jobs offering 55k then 75k. Contractors always pull in large
amounts of cash, but that's usually not what these places are looking for.

Agree that most grads seem to want to avoid coding. Out of my class I think
only 1 or 2 actually ended up coding for a living. Not sure why that is in
Australia but it seems fairly common.

~~~
scorpioxy
I also have a problem understanding why people bother with a CS degree but
don't want to go into programming or don't even understand it. Why don't they
major in something else?

------
Smerity
To expand on one of the points in the article, let's expand venture capital
raised per capita[1]... Israel: $170 per capita, USA: $75 per capita,
Australia: $4.09 per capita.

Austrlaia literally spend more on a single day of gambling (Melbourne Cup:
$7.27 per capita) than we do in our entire venture capital industry.

The government have also decided we're betraying the country by "abusing" a
visa program to get more skilled programmers here. Of our 12,000 IT graduates,
8,000 of them are from overseas. 4,000 graduates doesn't go very far... Many
of the 457 visas would also likely be programmers from international companies
staying in Sydney: Atlassian and Google have numerous offices abroad and
commonly allow programmers to travel around. The Australian government have no
clue what's going on.

Mike Cannon-Brookes, founder of Atlassian, just tweeted "How can you say IT is
the future of the country, then complain when we import skilled labour to help
us?!"[2]

[1]: <http://en.wikipedia.org/wiki/Venture_capital>

[2]: <https://twitter.com/mcannonbrookes/status/312033343988449280>

~~~
wluu
I heard Mike on radio yesterday, here's his interview with Radio National
Drive - [http://www.abc.net.au/radionational/programs/drive/it-
indust...](http://www.abc.net.au/radionational/programs/drive/it-industry-
outrage-over-pm27s-visa-rort-claims/4573766)

------
hoodoof
Surely this guy doesn't think the answer is to vote in the liberals who will
shut down the fibre to the home goal of the NBN? Is that really a good way to
advance Australia's startups?

~~~
dr1337
That's besides the point. FTTH is overkill and is absolutely not a requirement
to build a technology industry.

How is fibre going to a small town like Burnie in the middle of Tasmania going
to encourage the creation of technology startups when its users are going to
be technologically uneducated in the first place? What will most likely happen
is all that bandwidth (paid by taxpayers) will most likely be used for
Torrenting music, warez, movies and porn.

As a pragmatist, the NBN rollout should have been targeted firstly for areas
of high concentration of startup activity. That way, users most likely to
benefit and create wealth from the increase of bandwidth will have first dibs
that will eventually trickle down to the rest of the system. Unfortunately,
for most short-sighted politicians, the main agenda of the NBN is to buy votes
from rural and marginal electorates.

~~~
Volpe
Tasmania is used for a testcase because it is a great 'micro-version' of
Australia. So potential issues that arise can be dealt with at a scale of
500,000 rather than 20,000,000.

> Burnie in the middle of Tasmania going to encourage the creation of
> technology startups when its users are going to be technologically
> uneducated in the first place? What will most likely happen is all that
> bandwidth (paid by taxpayers) will most likely be used for Torrenting music,
> warez, movies and porn.

I'll paraphrase your words: Poor/socio-economically disadvantaged people don't
deserve nice things, because they are too poor to understand them. Politicians
are short sighted for ignoring the rich middle class.

You're view point is exactly WHY the NBN should be rolled out.

------
D_Alex
So very true... Australia desperately needs a startup scene for stuff other
than the resources industry.

Having said that - the LinkedIn article does not actually say much about what
Startup Australia actually is. A google search brought me to this:
<http://www.startup-australia.org/> . The first thing that hit my eyes was a
large advert asking if I want to date mature women.... seriously, get some
class! Do you really need to fund this with cringeworthy advertising?

The rest of the site is underwhelming, maybe great startup some web design
company could take a shot at making it look good.

~~~
willix
Alex,

I think startup-australia.org is completely different entity from what Matt is
talking about

~~~
D_Alex
Oh. Thank goodness. But what is all this about then, is there anything
available now beyond the Linkedin post?

~~~
edhooper
<https://sites.google.com/site/siliconbeachproject/>

More is on the way

------
jcampbell1
The author is indirectly describing what is known as "Dutch disease".

When a country is rich in natural resources, smart and enterprising people
specialize in learning to extract natural resources. This damages the
technology sector because talent gravitates todward money in market economies.

Also, the first paragraph of wikipedia's article on dutch disease is flawed.
Dutch disease is used by economists to describe when a domestic comparative
advantage crowds out another industry. It has nothing to do with
manufacturing. The first paragraph incorrectly implies that it has something
to do with the manufacturing sector.

~~~
jacques_chester
> _The first paragraph incorrectly implies that it has something to do with
> the manufacturing sector._

Because historically it's been the manufacturing and trades sectors that get
crowded out; they are the industries most directly competing with mining for
skills and equipment inputs.

------
matthewsinclair
At least _part_ of the problem is AUS is that we really don't have VCs. We
have companies masquerading as VCs, but they're more like mezzanine financiers
than VCs. They want an established market, established customers, protected
IP, massive sweat and real-equity from founders, and they want a controlling
interest for their investment.

They generally have no capacity for risk whatsoever, and unless you're digging
stuff out of the ground and razing the environment, there's very little on
offer from the Government, either.

So I can see why a lot of tech startups kick-off here and then go offshore
because the economic environment is just not conducive to startups (at least
in general).

Given how many people small business employs in this country (from memory, its
the single largest employer, unlike mining, which only directly employes a
low, single digit % of workers despite the mindshare it has) we should be
doing everything we can to give people a leg up to start a business.

For example, something like Jon Stewart's proposal for a 'softer cushion for
failure' would be a great start. We could do a lot worse here in Australia
that institute something like this:
[http://boss.blogs.nytimes.com/2012/10/18/jon-stewart-
propose...](http://boss.blogs.nytimes.com/2012/10/18/jon-stewart-proposes-an-
entrepreneurial-policy-dont-laugh/)

~~~
mattbarrie
There are only a few that have managed to get funds off the ground. The core
problem is that VCs have trouble getting a second fund off the ground because
they can't show a good return on the first.

------
kerno
Coming back to Oz from London put into perspective how far behind we are. With
HN London now attracting so many people they've had to start charging a fee to
get in, and the community built around Silicon Roundabout, it is very sad to
come back home and see the fragmented efforts to build a startup group in
Australia.

With Silicon Beach on and off, Startup Grind, lots of small meetups, and
Fishburners in Sydney, there are certainly groups to build this community
around but I still think we are years behind the critical mass of something
like HN London. And that's just to talk about forums for people to gather in -
it says nothing about our skills shortage.

I agree with Matt's points regarding our reliance on the resources industry.
So many people head off to the mines on a fly-in-fly-out basis, and make
incredible coin - but it won't last long-term and then our skill base will be
incompatible with value-adding services industries.

However, I think we need successes before a great weight of people will shift
towards STEM disciplines, in the same way that the dot-com frenzy saw Web
Development course demand explode.

~~~
jacques_chester
Nitpick: labour isn't a homogenous, fungible good.

People who are good at trades are not 1-to-1 exchangeable with people who are
good at STEM subjects.

~~~
kerno
No, probably not 1-to-1.

However, before the industrial revolution we were all toiling in fields, so I
think perhaps labour is more fungible that you give it credit.

~~~
jacques_chester
Well now we sail off into matters of comparative advantage, division of labour
/ gains from trade and so on.

But the general point that labour and capital are highly heterogenous still
stands. You can't pluck a boiler fitter out of the Pilbara, drop him at a desk
in Perth, and expect to see anything useful for your web business any time
soon. And vice versa.

~~~
kerno
I think we agree with each other.

I wasn't trying to claim that we can immediately shift these resources, but
that this shift won't happen en masse until services has a bigger profile and
more to offer than mining.

~~~
jacques_chester
Hostile agreement is a common thing hereabouts.

~~~
kerno
When Startup Aus have a meetup we should both go, so I can agree with you
personally ;)

------
quadhome
The biggest "barrier," if you can call it that, to solving the IT skills gap
is the E-3 visa program:

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

It's a reciprocal visa program between Australia and the United States.
Australia offers Americans the friendly 457 visa and the US offers Australians
the friendly E-3 visa. It's an independent and _generous_ quota compared to
the H-1B visa.

It's surreal to me reading people weighing in so heavily about the difficulty
in hiring Australians and ignoring the elephant in the room.

If you are a decently skilled Australian in IT, you get up and move to Silicon
Valley. Why?

* More money.

* More respect.

* In the center of your industry.

* Paid travel!

This is the same complaint New Zealand has had about Australia for years too.
Kiwis move to Australia for the similar reasons.

Background: I've been on a 457 for two and a half years.

Everyone I know from the US or Europe on a 457 is in Australia for the
"lifestyle." The rest are people who came to Australia to study or work from
place like India/China/Philippines[1], converted to a 457, and are working
their way to permanent residence and finally citizenship.

And you'd be unsurprised how many move to work in the US or Europe after
earning their Australian citizenship.

[1] [http://www.immi.gov.au/media/statistics/pdf/457-state-
territ...](http://www.immi.gov.au/media/statistics/pdf/457-state-territory-
summay-report-jan13.pdf)

------
feint
This article is absolutely spot on.

I often get asked why I chose to incorporate in the U.S and take investor
money from U.S based investors and not from Australians. This is article
explains why.

There is a lot of talk in Australia but very little action - a lot of people
calling themselves Angels, VC's, incubators etc. without actually funding any
companies, or any decent companies.

~~~
toast76
You need money in the system to fund quality startups. But you need quality
startups to get money in the first place.

The problem is that we lack a lot in both areas. Chicken/Egg.

~~~
feint
Agreed - but I know of many quality startups that have moved to the U.S from
Australia (including mine). I think the bigger problem is lack of quality
Angel investors, VC's and incubators. The largest angel network in Australia
still has a ridiculous and immoral pay-to-pitch flow. They simply just don't
get it. And the VC situation is even worse.

------
joonix
Lack of enrollment in IT and entrepreneurship is a symptom of the culture,
really. You've got tall poppy syndrome combined with protectionism that makes
shooting for the easy low-risk stuff desirable... trades pay insanely well due
to strong unions and tight immigration policy, for example.

~~~
josephagoss
IT is not a admirable career here at all, Medicine, Law and Engineering are
the good careers that pay well and are generally respected, but IT is looked
down upon big time over here. Its a shame really, but to most IT is tech
support (I know many computer science grads who are on minimium wage tech
support)

~~~
chucknthem
There's a huge difference between IT and software engineering, and using IT as
the umbrella term is really doing us a disservice.

~~~
anip
I hate the use of the term IT, and won't work again for the company that
doesn't have an Engineering department, but only an IT department.

------
jedmeyers
I am originally from Eastern Europe. I have got an Australian permanent
residence visa but decided not to move there at least for now. I feel much
better in Silicon Valley on a work visa, where my salary is higher, my work is
more meaningful, prices are MUCH lower and my wife found a job in a reasonable
time, also in software engineering. I was shocked that you cannot find half-
sized shoes in Sydney's stores, and this is considering that their price was
2.5 times higher than the price on Zappos. Australia has to wake up and deal
with their protectionist policies regarding local businesses. By giving them
protection from external markets they might survive for a while, but this
definitely won't last long. No competition means no innovation and high prices
for consumers.

~~~
joonix
Protectionist is exactly right. But things are quickly changing, at least when
it comes to local retail. The incumbent bloated chains like Meyer are being
disrupted rapidly by overseas online retailers as well as shrewd foreign
retailers like Zara setting up in Australia. It's a good thing, too, because
the duopolies in Australian retail deserve to be disrupted. They have coasted
for far too long providing mediocre value to the customer.

------
vtjendra
AUS image = mining. USA image = tech innovation.

Many Australians talented developer and computer engineers have been flocking
to USA for mainly two reasons:

1\. They are rewarded more in USA, both socially and financially. Who doesn't
want to be in the middle of global innovation among other great people?

2\. It is much more prestigious and hard to resist. Many US-based companies
have been actively recruiting Australians, for example Amazon.com.

This leave Australia with limited local talents and therefore comes up with
need to employ overseas eng-IT professionals. Note that 457 are neither cheap
nor simple to lodge and employ. We are currently at a phase where it is
necessary to keep feeding our demand of technical professionals to keep the
growth of Australia tech industry.

------
jacques_chester
If you're in Perth: <http://www.morningstartup.com/>

I've only been able to get to one, but it's already given me useful feedback
and I met some great people.

------
nikcub
There are two distinct points here that are being a bit muddled. The first is
the 457 visa issue. For those that don't know, it is a skilled immigration
visa, similar to the H1B in the United States. Australia is coming up to an
election in September where the sitting center-left Prime Minister is very
likely to lose her Prime Ministership to the center-right party.

To sure up her base on the left yesterday she came out and attacked the 457
visa and said that they needed to be more tightly regulated, since they are
being exploited by some and are taking jobs away from Australians.

Prominent Australian entrepreneurs came out in support of the visa, and argued
that you can't grow a new information economy without the importation of
skilled labour to make up for the shortfall in local skills. This was the
biggest national news item yesterday.

As an analogy, imagine if Obama came out in support of lowering H1B visa's or
restricting their use, and the shit that would cause.

The _second_ issue here, which Matt also takes on by attaching it to the
first, is what a lot of people in the startup world feel is a disadvantage
that the Australian startup ecosystem has over its US, Israeli etc.
counterparts. This argument has been playing out for years now, to not a lot
of effect.

I think there is a contradiction in this argument, when you combine the two
together. On the one hand you are asking the government to leave you alone and
let you import labour, but on the other hand you are asking them to do
something about the lack of venture investment, the lack of skills, university
places, etc.

I think the later argument of asking the government to do something to assist
startups stems from a misunderstanding of how silicon valley works and why it
became successful. This misidentification leads to a feeling that with one or
two changes you could 'clone' what has made silicon valley a success, which is
not true.

The attitude in Silicon Valley has always been to be left alone by the
government. The tech industry in the USA is grossly underrepresented in
Washington lobby groups (only recently have Google, Apple and Microsoft
invested more in lobbying as their businesses broaden and intersect areas
where government has more control, such as spectrum).

Further to that, Australia ranks well in most global indicies for business
startup, running a business and open markets. We actually outrank the USA in
ability to start a company, and we rank about even in other business
friendliness metrics[0].

I think Australia's major problem is cultural. We have a fear of failure, a
lack of entrepreneurial spirit, and a severe tall poppy syndrome (all of which
I have experienced first hand - ironically from some of the very people who
are most vocal about wanting to make Australia more like Silicon Valley).

These should be a clear indication that the "problem" with the Australian
startup scene (if there is one, I don't think there is) is not the cause or
fault of the government.

I think Matt would have been better served here to focus his argument on the
457 issue, using the same arguments he has (such as Australia won't always
have things to dig out of the ground), but leaving the other issues alone for
now.

[0] [http://www.gfmag.com/tools/global-database/economic-
data/118...](http://www.gfmag.com/tools/global-database/economic-
data/11862-best-countries-for-doing-business.html#axzz2NZyqAC00)

~~~
ShardPhoenix
Having good ease of doing business in general doesn't mean that Australia
doesn't have a _specific_ problem with startup equity and tax.

~~~
nikcub
My only requests would be to ask the government to strip away barriers and to
step further away. The only real issue I can think of is tax on stock options,
and there are two ways to get around that, both of which I have used and both
of which are in active use today with startups in Australia.

Australia is too closely ranked to other countries with successful startup
ecosystems in the major market and freedom indicies. The USA is now going
through the long-term capital gains issue, and nobody has suggested that less
startups would be founded, or that there would be less innovation because of
it. As Warren Buffet says, he has never known an investor to turn down an
investment opportunity because taxes are too high.

------
StuieK
There is some hope: <http://blackbird.vc/>

------
sideproject
You tell 'em Barrie.

