
Tight investors force young entrepreneurs offshore - apapli
http://www.abc.net.au/news/2013-04-26/tight-aussie-investors-force-young-entrepreneurs-offshore/4653828
======
7Figures2Commas
What if the title of this article is wrong? Isn't it possible that American
investors are loose?

If you believe the hype, foreign investors are scared of failure, less willing
to take chances, etc. Yes, investors have different risk tolerances, but most
professional investors are not entirely risk averse.

Looking at the performance of most venture capital funds, and the venture
capital "asset class" as a whole, over the past decade-plus, I think more
intelligent investigation of foreign investors' preferences would reveal that
there are very good reasons they aren't chomping at the bit to throw money at
every tech entrepreneur in need of a few million dollars.

------
schappim
I partially agree with this.

I run a startup in Sydney and raised $1M from angels and VCs in both Australia
& the US.

When I first presented to angels in Sydney I found them initially "tight", and
they laughed at the $2M valuation I was pitching.

After this I pitched at 500 and at a whim doubled the amount I was raising
(and our valuation).

The response from valley investors was that it was refreshing I was only
asking for a $4M pre and I was able to secure some investment (in the context
of several YC companies wanting a 10-15M valuation post YC).

I found that with this strike price established by the Americans, the
previously "tight" Australian investors then followed suit.

Just my 2c.

~~~
michaelochurch
_When I first presented to angels in Sydney I found them initially "tight",
and they laughed at the $2M valuation I was pitching._

I feel like the one-time cash-drop is a terrible model for early-stage
businesses. A good (1.5+) programmer is worth _at least_ $300k/year working on
his own stuff, because (a) he actually gives a shit, and (b) his competence
will grow faster than it would in a typical paid job.

So for 4 years of a good engineer's work, $1.2M is a fair sight-unseen
valuation. Scale this up for team size and include existing validations from
the market, and $5-10M isn't unreasonable (with a 4-year vesting period on
founder equity; unvested stuff going to investors).

The indefinite duration to profitability is a problem, because it's such a
huge unknown that renders valuation calculation a joke. When you're valuating
_a person_ , any number that comes without an amount of work (e.g. a duration)
is meaningless.

I feel like an Autonomy Fund model is better. Broad-strokes overview, minus
the regulatory stuff and incentive problems and adverse-selction protections:
there isn't a specified time line, but you get 75% of your market salary, and
investors get a _passive_ 30% equity in whatever you build (including side
projects, that being the one downside for employee). The going assumption is
that you're worth 2.5x more to the economy when you work on your own stuff
than when you work for a typical company.

Of course, there are various protections that need to be in play to prevent
people from scamming it (i.e. quitting the Fund, then launching something
next-day with 100% equity) and there would be a need for some kind of audit
cycle (to push out people who are coasting) but I think the overall model is
superior to anything that exists now.

One thought I had is that local governments would have an interest in setting
these kinds of things up, because even if the concept fails and they "lose"
money, it goes back into the city and the network effects also build up the
technology ecosystem there.

------
gridmaths
The PWC report they mention can be found here :
<http://www.startupaus.org/research---startup-economy>

[ PDF here : [http://www.digitalpulse.pwc.com.au/wp-
content/uploads/2013/0...](http://www.digitalpulse.pwc.com.au/wp-
content/uploads/2013/04/PwC-Google-The-startup-economy-2013.pdf) ]

------
michaelochurch
What gets me, in the US, is that investors only want to fund companies in red-
ocean star cities where studio apartments cost more per month than the average
American fucking _makes_ after taxes.

I enjoy many things about living in New York-- you fucking hate it when you
sign a rent check or change jobs; other than that, it's quite nice-- but it
pisses me the fuck off to pay these ridiculous rents (and the real estate
costs reflected in restaurant pricing; I wouldn't mind paying $20 for sushi if
the money went to the chef and wait staff and not real-estate fuckers). The
reason the city's expensive is because top-talent _people like me_ come here
and work their asses off, providing a healthy substrate for economic activity
that generates lots of value. _I'm bringing the real fucking ingredient_
(talent) and not these unproductive and fucking _uncultured_ absentee landlord
fucksticks (half of whom don't even live in the city, and what the fuck are we
doing allowing foreign speculators, i.e. third-world despots and their
henchmen, to own property here when we can't even provide for our own fucking
people?) who've stolen most of my savings. Who the fucking fuck thought
"Talent Pays" is a fair or good fucking system? It wasn't fucking me, I'll
tell you that much.

The talent argument for startups only being in star cities is specious. All it
would take is for a few hundred top engineers to move to any city X in unison
and that would start something. Fuck, you might be able to build a kernel with
20. You could use a #4-10 tech hub (Austin, Seattle) or somewhere that's not
even on the map (e.g. Iowa City).

Now, if you're selling to a specific clientele, living in a star city makes
sense. If 80% of your clients are going to be financial firms, you want to be
in New York. I get that. But there's so much that can be done from anywhere;
so why is all the investor money limited to a couple of cities?

I am a genetic contrarian so I tend to be one of the first to see when going
assumptions are wrong. I think that if you want to build a stable company, you
want to be _outside of_ the fuxpensive star cities right now. When the culture
is one where you have to become some parasitic VP who doesn't do anything, and
then "exit", just to own a house, you're not nurturing the lifelong software
engineers who will _actually_ be motivated to build awesome shit. Whereas
outside of the star cities, your burn rate is lower, and the "job hopping"
climate isn't as fluid (which is good and bad) so you can really invest in
people and build for the long-term, instead of being _fucking toast_ if
Facebook doesn't buy you before trick-or-treat night.

~~~
wtvanhest
The reason all the money is in 3 cities is actually really simple...

NY, SF, Boston > Every other city in America

I'll admit that those cities are not for everyone, but they are irreplaceable
for most people that live in them. If you make enough money to live in one of
those cities, the lifestyle cannot be replicated outside of those cities.

VCs can choose where they want to live, most of them choose tier 1 cities.
Talent also chooses tier 1 cities so the collocation benefits everyone.

~~~
michaelochurch
_I'll admit that those cities are not for everyone, but they are irreplaceable
for most people that live in them. If you make enough money to live in one of
those cities, the lifestyle cannot be replicated outside of those cities._

What about Chicago? Great city, not as expensive; problem is, not much VC
money. I would rather the worst thing about where I live be called "January"
than have it be called "rent".

 _VCs can choose where they want to live, most of them choose tier 1 cities.
Talent also chooses tier 1 cities so the collocation benefits everyone._

Talent doesn't get as much "choice" as HN likes to believe. Sure, good
programmers get solicitations for jobs all the time, but often that's just an
invitation to waste time on a phone screen, spend six hours on a code test
(because you actually care about doing things right) and then get rejected
because your choice of language (for the test) fell on the wrong side of that
company's ever-shifting internal language wars. Or it's an invitation to work
at some startup with shitty cargo-cult culture that'll fire you at 4 months
with no severance if you don't go to the strip club with the other
brogrammers. _Good_ jobs are goddamn rare and hard to find no matter who you
are.

Talent should have the kind of leverage that HN believes it does, but right
now, 90+ percent of talented people are poors who still need to adapt to
bosses and market trends and landlords.

~~~
wtvanhest
Yeah, Chicago is good too. The winters there are worse than Boston, and as
someone living in Boston, I'm not sure I can deal with much worse.

Also, DC is pretty good too.

Arguably, NY and SF are far better than Boston, and you could probably safely
lump Boston in with Chicago and DC as far as desirability.

I agree with you that talent doesn't have as much leverage as they think they
do. Good jobs are nearly impossible to find. That is why living in a great
city is so important. Talent will never have the type of leverage HN believes
it does except for in rare individuals who have built social credit along with
their skills.

~~~
michaelochurch
_Good jobs are nearly impossible to find. That is why living in a great city
is so important. Talent will never have the type of leverage HN believes it
does except for in rare individuals who have built social credit along with
their skills._

Now that I'm almost 30 and aware of my mortality (my mother passed away
recently, which had more to do with my "mid-life crisis" than chronological
age, since I'm still quite young by the standard outside of Wall Street and
VC-istan) I'm starting to wonder about the best way to change this. How do we
take this garbage-pile of an industry and fix it? How do we clear away the
crap and build something we can be proud of?

Social trends are such that we're on track for a violent worldwide revolution
(widespread, permanent un(der)+employment will be the norm by 2030) unless we
fix our society in a major way (basic income, necessitated by said
underemployment) but we also have the tools available to be smart and not
burn/kill our way to a better world. We don't _need_ to overthrow the
corporate bastards with force (at least, I hope we don't; the problem with
real-world holy wars is that the unholy have guns and better aim) because with
technology we can outperform them. We should take this opportunity to rewrite
all the assumptions, if we can.

~~~
wtvanhest
I wouldn't count on the violent worldwide revolution. History has not been
kind to the massive number of people who consistently predict it while saying
"this time its different!"

As far as your first question... who knows? One thing I know for certain, it
doesn't matter what you do, or how you do it, there will be trade-offs,
always. As a much older than you... 30 year old, I've come to sort of just
enjoy what I can and brush off the unpleasant stuff while I keep up with a
rigorous search for knowledge and improved skills.

I'm certain that opportunities will present themselves, and I'm positioning to
always be ready to take advantage of them. Fulfillment for me partially comes
from the knowledge and skills gained. I know that I will have a high level of
achievement over my career and because I am confident it will all work out, I
am relaxed while I push myself.

In 2 years, maybe I'll have a totally different outlook? I guess that is the
fun of the whole thing.

