
Why being an Aussie startup sucks - aqrashik
http://blog.angrymonkeys.com.au/why-being-an-aussie-startup-sucks
======
cletus
I'm an Australian but I currently work in New York. From my perspective, a
startup in Australia has many hurdles:

1\. The cost of living. Seriously, Australia is an incredibly expensive place
to live now. I'm from Perth and I'd say that overall it's cheaper for me to
live in _Manhattan_ than Perth now. MANHATTAN. Actually, same for same rent-
wise, Perth is still cheaper but Manhattan has options Perth doesn't (like
saving money by living in a walk-up);

2\. Virtually no VC and startup community; and

3\. Depending on your industry, you will find very consumer-friendly
legislation that is actually a problem for small companies to comply with,
particularly in the finance space (and within that space, particularly
dispensing anything that could be construed as "financial advice"). The US has
gotten worse about this in the last decade with SOX and other reactionary
legislation but it's still better.

Put it this way: I don't think something like Mint could ever be done in
Australia.

Now Australia's fortunes rise and fall with China's so the boom industries are
mining and construction. If you can think of something to sell to these
industries, you could make a lot of money. But why do it in Australia? The
strong Australian dollar makes it more attractive to do it elsewhere.

Sure health insurance is an issue but you can buy that in the US and even if
it's hundreds of dollars a month (IMHO) you're better off overall.

~~~
lancewiggs
Perth is not Australia - it's not the East Coast. Perth and WA is
comparatively moribund for start-ups, and years behind when it comes to
adoption. They still have thick sections of classified advertisements there in
the newspapers, and the dominant marketplace is a weekly classifieds newspaper
- Quokka. Meanwhile, as you say, the economy market is overheated with the
mining boom. But there is some great stuff happening in Sydney and Melbourne,
and some awesome things happening across in New Zealand. Auckland and
Wellington are closer to Sydney than Perth - and a lot more advanced.

~~~
rdouble
I was in Melbourne for 3 months this year and enjoyed it, but it was
shockingly expensive. Groceries are 2x the cost of NYC, clothing is 3x. If you
drive, fuel is 6x. Housing is about the same. From what I know, Sydney is even
more expensive.

If this list is to be believed, all major cities in Australia are more
expensive than NYC, which is about the most expensive place in the USA.

<http://www.citymayors.com/features/cost_survey.html>

As to your first point, I traveled extensively in Australia. To an outsider,
Perth is more culturally similar to the rest of the country than Sydney is. :P

------
josephcooney
Why being an aussie start-up doesn't suck - two words - health insurance. The
public health system provides for much, and as a private citizen for a few
hundred dollars a month I can get coverage for elective things. I'm not faced
with a decision like 'shit, if I quit my job at bigco and go and do this
startup thing and then get sick will I be putting my life at risk?'

~~~
Shivetya
Yet many young people in no way require the amount of health coverage older
people do. Why should they be forced to buy into something they don't need?
Each year we go through our health care presentations we have numerous people
asking to opt out but they aren't allowed.

Yes it weighs on the minds of many, but not all. I am all the more willing to
pay as you go on my health care but I would prefer to see reasonable coverage
for catastrophic care which is what really becomes expensive.

~~~
run4yourlives
The whole point of health insurance - nay, insurance in general - is the idea
that the well fund the sick in part, because being sick costs so much money.

If all the young healthy people opted out, you'd have pools full of old sick
people, and rates would be so bad, there wound't be much of a point.

With insurance, you need a large element of people that are essentially paying
into the service for no benefit in order to insure the risk. That's the whole
idea.

~~~
anamax
> The whole point of health insurance - nay, insurance in general - is the
> idea that the well fund the sick in part, because being sick costs so much
> money.

Actually, no. The idea of insurance is that you pay a slight premium over your
expected costs in order to avoid getting hit by variance. (The slight premium
is to pay transaction costs.)

Healthy people paying for sick people is subsidy, even if you hide the subsidy
behind the label "insurance".

Being "older", I'm all for today's young people subsidizing older people. I
wonder if the next group of young people will feel like subsidizing the
current group when the current group gets old, but that's not my problem.

~~~
run4yourlives
That might be the RNC's talking points of how insurance works, but given that
I'm in the industry, I can tell you that insurance exists to offset risk by
spreading costs over a pool of people.

The concept of "risk" by default means that certain people will never utilize
the service. Premium is a factor of the risk analysis, not a transaction fee.

This works very well for concepts like auto or home insurance: most people
will - in a given year - never actually crash their cars or destroy their
homes. The premium they pay is based on the risk profile of one of these
things happening to them, and overall to the pool.

Health insurance is a little different, but the concepts remain the same. The
only real difference between a nationally run program and several private
programs - assuming a level of administrative competency - is the size of the
pool. The larger the pool, the less the risk, the cheaper the average premium.

You can call it dirty words and all, but if you are against the concept of
national insurance programs as a principle, you should really evaluate your
view of insurance in general, since you're "subsidizing" people who crash
their cars, have house fires, pick the wrong banks etc, etc.

As an aside: I'm in Canada. As such you might find it interesting that while I
believe the US system isn't using the full potential of the available pool, I
believe our system has forgotten a lot of the concepts that sustain the
insurance industry by just declaring medical care a "right" despite the costs.
Both of our countries would be better served by abandoning ideologies here.

~~~
anamax
> That might be the RNC's talking points of how insurance works, but given
> that I'm in the industry, I can tell you that insurance exists to offset
> risk by spreading costs over a pool of people.

Both insurance and subsidies (as I described them) spread risks over a pool.
The difference is in how we charge folks in the pool.

If we charge them by their expected cost, it's insurance. If we charge some
people significantly more than their expected cost so we can charge others
less, the first group is subsidizing the second.

And no, the fact that I don't have a claim doesn't imply that I'm subsidizing
anyone any more than the fact that someone hits the lottery implies that
lotteries are a good bet. The relevant question is how my cost of "insurance"
compares to my expected claims.

There is value in reducing variance - I'd rather pay $600/year for 10 years
instead of paying $5800 one year and nothing for 9 years. And, I'm willing to
take the chance that I'd never pay anything to avoid the hit of paying $5800
twice and nothing 8 times. (In this example, I'm paying $200 so I'm not
subject to variance.)

However, I'm a lot less willing to pay $600/year if I think that my expected
costs are $1k once every 10 years. That's the problem with subsidies disguised
as "insurance". The rational response is to try to get out of the pool.

> Premium is a factor of the risk analysis, not a transaction fee.

I didn't refer to insurance premiums, I referred to the fact that maintaining
a pool has costs which the payments must cover in addition to the losses.

> The larger the pool, the less the risk, the cheaper the average premium.

That's simply not true. My risk of having a car accident does not depend on
how many people are in "the pool". There can be economies of scale in the
costs of maintaining the pool, but they have nothing to do with risk.

> if you are against the concept of national insurance programs as a
> principle, you should really evaluate your view of insurance in general,
> since you're "subsidizing" people who crash their cars, have house fires,
> pick the wrong banks etc, etc.

I'm not against insurance. However, subsidies have issues and it is dishonest
to claim otherwise and confuse the two.

~~~
run4yourlives
I don't think you have any idea how insurance works.

>If we charge them by their expected cost, it's insurance.

Um, no. Insurance premiums are determined by total cost of claims plus
expected inflation plus administration costs. There is no "expected cost". You
are making this term up. There is only risk and the premium mathematically
calculated to cover said risk. Making these calculations is the entire purpose
of a whole profession: <http://www.soa.org/about/about-what-is-an-
actuary.aspx>

>I referred to the fact that maintaining a pool has costs which the payments
must cover in addition to the losses.

...which is always significantly less than the losses, since administration
fees are usually a percentage of claims.

> My risk of having a car accident does not depend on how many people are in
> "the pool".

You're failing again to understand the math. The risk of you having a car
accident is only part of the equation, the other part is the number of people
that are able to absorb said costs. Any artificial group will vary from the
mean overall risk, either being better or worse. The larger the pool, the less
this variance. This is why you can't get insurance if you get sick: The pool's
overall risk is artificially lowered to maintain competitive premiums.

>However, subsidies have issues and it is dishonest to claim otherwise and
confuse the two.

There is no real distinction here except for the doublespeak you're
introducing in an attempt to somehow differentiate health insurance from any
number of insurance services. Actuaries do not define the term subsidy. It's a
political creation to confuse and obscure.

~~~
anamax
> Insurance premiums are determined by total cost of claims plus expected
> inflation plus administration costs. There is no "expected cost". You are
> making this term up.

I'm not using jargon, but the meaning is both clear and correct.

>There is only risk

and the cost of that risk is the meaning of "expected cost".

However, you did make an error. Premiums don't depend on the total cost of
claims, but on the EXPECTED total cost of claims. That's where actuaries come
in - they predict claims costs (and try to reduce them) - you don't need
actuaries to compute the total cost of claims. See if you can figure out why
it is the expected and not actual costs.

However, that's just how you get the total payments required to create and
maintain a shared-risk pool - you have choices wrt the price paid by different
members of the pool. (Actually, it's a shared-cost pool because it's not the
incidence odds but the product of the incidence odds and their cost, but I
digress.)

Subsidy refers to a class of pricing decisions, namely those that ignore (to
some extent) relative costs, so it's neither surprising nor relevant to say
that actuaries don't define subsidy. Moreover, actuaries don't determine
pricing systems - they merely provide cost-predictions when and where
necessary.

For example, you could charge each member their individual predicted claims
plus a share of the other costs. This would be risk-based, or rather,
expected-cost-based, pricing and is what is traditionally known as
"insurance". In this case, actuaries are involved in determining pool-member
pricing.

Or, you could charge every member the same amount, namely the total divided by
the number of members, even though your actuaries tell you that some members
of the pool have higher predicted claims than others. If you do this, the
high-expected-cost members of the pool are being subsidized by the low-
expected-cost members. This is a subsidy, even though there's still a shared-
cost pool. In this case, actuaries have no role in determining a given
member's price - they're just needed to determine the expected cost of the
whole pool.

Note that high-expected-cost members can save money by leaving a pool that has
cost-based pricing for a pool where they'll receive subsidies. However, low-
expected-cost members can save money by leaving a pool that requires them to
pay subsidies for pool that has cost-based pricing.

In the (artificial) case where all high cost members are identical as are low-
cost members, the end result is that everyone ends up paying cost-based prices
but they end up in different pools (assuming each pool pays its costs).

>> My risk of having a car accident does not depend on how many people >> are
in "the pool".

>You're failing again to understand the math.

Not at all. You claimed that my risks depended on pool size - they don't. The
fact that the variance in total pool claims does depend on pool size doesn't
change that fact.

> This is why you can't get insurance if you get sick

Actually, you can. A pool with expected-cost-based pricing makes money on all
possible pool members, regardless of expected cost.

However, a pool with subsidies does benefit from avoiding high-expected-cost
members.

>There is no real distinction here except for the doublespeak you're
introducing in an attempt to somehow differentiate health insurance from any
number of insurance services.

I've never tried to differentiate health insurance from other insurance. I'm
differentiating different pricing policies for shared-risk pools. Some are
insurance while others have internal subsidies.

------
joelhaasnoot
Seeing as this article is from 2010, looks like Chargify now has "eWay" listed
as a payment gateway. <http://chargify.com/payment-gateways/>

Being a European company, just looked at Chargify, and Quickpay is the gateway
that looks like it supports all of EU. Going there, it looks like I need an
acquirer for my gateway. So you're telling me that I need an acquirer to get
the payments, a payment gateway for the credit cards, and Chargify to manage
recurring billing?

Kill me now, please. If anyone has an article on EU credit cards basics,
please let me know.

~~~
thibaut_barrere
In case it helps, although it's not on Chargify: I'm going to launch a SAAS
product (<https://www.wisecashhq.com>) and will use Recurly. They advised to
join WireCard, which we did.

Basically, WireCard does the acquisition, payment gateway and provide a
merchant account as well, as part of a single pack; which means I "only"
subscribe to Recurly + WireCard.

I can acquire money in $ (we will only use $ first) despite being a french
company, and my merchant account there will be in €.

Be sure to check out the way Recurly handles VAT too:
blog.recurly.com/2010/09/recurly-now-features-vat-support/

Hope this helps!

------
jacoblyles
Recently I discovered that there is a US work visa specifically for
Australians (the E-3). Unlike the H1-B, the E-3 cap of 10,000 per year has
never run out. Also, E-3 applications go under less scrutiny and are more
likely to be approved and are generally approved quicker. It's worth thinking
about if you are an Australian programmer interested in working for a US
startup.

~~~
benkant
Thanks for pointing that out. I figured there was some sort of visa concession
as a result of the FTA but didn't know what it was. You made my day.

------
katiepatrick
Australia has low self esteem and a 'you'll never make it' attitude which is
pervasive. There is little consciousness within employees of the concept of
'equity' which can often be replied with 'I don't work for 'free'' - or even
for for 'less'.

It took us 3 months to set our our facility using chargify which was fuct -
whatever. But now it works and it is awesome.

I moved to the bay area from Australia for the knowledge hub and to find
hackers who are also environmentalists (who seem to be as rare as hens teeth).
The amount I have learned technically in a short period of time has been
profound.

I can never go back to Australia. It feels like a ball chain has been removed
now I am in an environment that cultivates, even reveres nerdy freaks and
dreamers.

------
kim-pushstart
\- The lack of payment gateway options in Australia sucks - CORRECT

\- There is no startup community in Australia - INCORRECT

\------

There is a massive amount of community activity for those who care to look for
it.

Here are just a few examples

\- PushStart - <http://www.pushstart.com.au>

\- StartMate - <http://www.startmate.com.au> (NB: Alan, the OP, is cofounder
of <http://www.bugherd.com> which went through StartMate's first Sydney
program and is doing incredibly well)

\- Fishburners - <http://www.fishburners.org/>

\- AngelCube - <http://www.angelcube.com>

\- Startup Weekends (here's the next Melbourne one) -
<http://melbourne.startupweekend.org/>

\- Silicon Beach Google Group - <http://groups.google.com/group/silicon-beach-
australia/>

\- Sydney Tech Startup Meetup (Open Coffee) - <http://www.meetup.com/open-
coffee-sydney/>

...or just sign up to The Fetch (<http://thefetch.org/>) or Sydney Startup
Digest (<http://startupdigest.com/2011/05/24/sydney-startup-events-2/>)

From a funding point of view you have more and more angel / super-angel sized
investment $$$ coming online all the time. There's also an ever increasing
amount of large scale investment into top Aussie startups from leading Valley
firms.

This has led to a good number of successful startups and more that continue to
be started everyday.

I could keep going on but I won't... :)

The point is, let's not get confused. The post is about a specific issue with
being a non-US based startup not about the Aussie startup community as a
whole.

~~~
justinj
Kim - he's clearly a jaded west-coaster.

~~~
toast76
I'm from Melbourne :P

------
podperson
I'm also an Aussie living in the US and agree wholeheartedly with the title.
The article focuses on "tyranny of distance" issues which I agree are a
serious pain.

Another problem in Australia is that the entire investment community is
focused on sucking on the government teat* and tax minimization __. I was
involved in meetings with Australian "VCs" that were far more concerned with
how they'd write off the loss from their investment than actually delivering a
successful product.

* The Australian government has a terrible habit of trying to "pick winners" and invest in projects directly. A classic example of this was a huge fund created in the early 90s to fund "multimedia" development. This probably did more to kill the Australian "multimedia" industry than any other single act.

 __Also in the mid-80s the government at the time came up with a well-
intentioned but retarded idea of encouraging research by offering >100% tax
write-offs for R&D expenditure. This is a classic example of paying peanuts
and getting monkeys -- most companies simply figured out tricks to reclassify
stuff they already did, like photocopying, as R&D.

------
kuhn
Suggest all Aussie startups check out <http://www.startmate.com.au/> they're
doing heaps to build the startup community back in Oz as well as forming
strong ties to the US. They've just opened their 2011 intake.

Startmate was a massive help to us at Chorus (<http://www.getchorus.com>).
With their help we launched our product and successfully flipped our company
up to the US. Today we're operating out of Mountain View, CA.

------
mgkimsal
This may seem a bit naive, but given how many people complain about banking
services in non-US countries, specifically as it related to merchant accounts
and SaaS offerings, isn't there a business to be made solving that problem for
those people?

Couple issues I can see:

1\. Maybe it's that the market is too small, but if you made it easier, I'd
bet you'd have more customers.

2\. Working within the legal/financial systems in those countries may be _too_
difficult???

~~~
dasil003
It could be an interesting venture, but I think very capital intensive, and
extremely risky. Not only do you have widely varying government bureaucracies
to navigate in each country, but you also have the credit card companies and
banks trying to kill you at every turn. You could build a very promising
business and then by killed by legislation at the stroke of a pen because you
were out-lobbied by the powers that be.

That's not to say it couldn't be done, but I think you'd want to start with
deep connections in at least one country and build a viable business there
first before attempting to move to multiple countries.

~~~
mgkimsal
I was, perhaps, a bit unclear. I was meaning specifically different ventures
to operate specifically in _one_ country and offer deep expertise and service
in that one country only. The OP was about Australia. I suspect there's some
legislation which makes is hard for viable competition to get established, but
I can't imagine it's totally impossible. Once a more customer-oriented cc
gateway/merchant vendor was operable, it would provide some competition to the
established players.

------
inkaudio
Perhaps Envato my can help, that's the company behind themeforest, audiojungle
and the whole tuts network of sites. They may be able to provide suggestions,
there are an Aussie based startup who are profitable, have experience (been in
business for 5 years) and they only sell digital based products and
subscriptions.

------
cubicle67
ha! this is exactly where we are now

we're in the process of getting a merchant account going but it's a long drawn
out pain. We're using eWay for the gateway as I've used them in the past and
they've been fantastic. The bank, however, is having a hell of a job getting
it's head around the idea that we want to sell a service over the internet
(we're building a saas product).

last call from the bank was yesterday when they decided they wanted full login
and usage rights to our app (so they could verify it?) - kind of hard when
it's not built yet. We seem to be in a bit of a chicken/egg situation where we
have to actually launch before they'll let us receive payments... Prior to
that they wanted revenue history for the last few years! agh!

Luckily we anticipated this taking so long which is why we started the ball
rolling months ago.

tl;dr: use eWay

------
damncabbage
<Redacted> is Westpac[1], I'm guessing.

[1] [http://www.westpac.com.au/business-banking/international-
tra...](http://www.westpac.com.au/business-banking/international-
trade/cashflow/foreign-currency-account/)

~~~
daemin
I was going to say NAB, since they offer a multi-currency account that is
quite expensive and onerous to acquire.

------
Trindaz
In Australia we build companies so that we don't have to work for someone
else, and we scoff at big ideas.

In the US we build companies to change the world, and we scoff at small ideas.

(from an Aussie who recently made the move to Silicon Valley)

------
wisty
Have you tried a non-local bank with Aussie branches, or just the Big Four?
HSBC is pretty big, and has a fair few Aussie branches. Though maybe it's a
subsidiary, not a branch. There's also Barclays Capital - I've heard of them
so they must be big. If you go to
<http://en.wikipedia.org/wiki/List_of_banks_in_Australia>, there's quite a few
subsidiaries and branches of foreign banks.

~~~
kokey
Banks like HSBC may seem and claim to help you between countries, but this is
rarely the case. The problem is regulations, they really do operate in
regional silos except perhaps on advice (and where the profits go). For
example my HSBC account in the UK doesn't help me in opening an account in the
US, even if I just moved to the US. It also doesn't speed things up when I
want to transfer money to an HSBC account in Hong Kong.

~~~
goatforce5
Citibank branches around the world really go out of their way to help you when
you appear on their doorstep with a Citibank account from another country.

My Citibank UK account absolutely helped in opening a Citibank US account. I
also seem to recall it was quicker and/or cheaper to transfer money
internationally between Citibank accounts.

------
acangiano
Generally you can replace "Aussie" with "Non-US based".

------
alfiejohn_
Hey Alan :)

What's the minimum requirements of setting up a shell Delaware LLC? Surely
citizenship wouldn't be one of them.

~~~
ebaysucks
I looked into setting up a Delaware parent holding for my Startup Chile
startup as I wanted to use Stripe.

What stopped me was the need for an American social security number.

To be clear: This is what the Stripe signup required, I can only assume they
need it for all the merchant account magic they do.

~~~
mahyarm
How about an ITIN? Same length as an SSN, let's stripe find a blank credit
history. I would ask the stripe guys about it.

[http://www.irs.gov/businesses/small/international/article/0,...](http://www.irs.gov/businesses/small/international/article/0,,id=96696,00.html)

~~~
obvio171
Yep, you don't need to be a citizen or resident to do that. I have a Brazilian
friend (Diego Gomes, founder at EverWrite) who went through the whole
foreigner-incorporating-in-the-US-without-living-here thing and is posting
details about it on their blog (the next post is exactly about ITIN and
merchant accounts): <http://myeverwrite.com/blog/>.

------
justinj
they may be ahead with startups, but jesus, the banking system. they're still
using checks [sic] over here. Can you believe that? it's 2011.

~~~
kuhn
My co-founder and I were just bitching about that this morning. It's
unreasonably difficult to send money to people in the land of capitalism...

Even worse is most of the 'innovation' in the banking sector seems to be
pointed at making old systems less painful (e.g. cashing checks via MMS etc.).
Why not just eliminate them altogether? Major opportunity for disruption if
you can overcome some pretty deep and wide moats.

~~~
daemin
Isn't that what PayPal set out to do, where you could send anyone money just
over email?

Conversely I was thinking that Australia needs some sort of integrated
Merchant Account/Payment Gateway system company, much like Stripe.

------
lukejduncan
How is it possible that a bank can request you remove a blog post?

~~~
morgo
There are very few banks. The poster is clearly upset with his, but if they
refuse to do business, he will have even fewer options.

------
pitdesi
Quick thoughts -

Here's an ebook that might help folks understand the gateway/processor
dynamic: [http://feefighters.com/ebooks/what-is-credit-card-
processing...](http://feefighters.com/ebooks/what-is-credit-card-
processing?force_download=true) (written with US audience in mind, but most of
it holds true worldwide)

To get a US merchant account, you need a US Tax ID/Bank account (acquirable
with Delaware company) AND a US Social Security number for someone who has
ownership in the company. Unfortunately that is the minimum that underwriters
will accept... AFAIK you need the same stuff with Stripe, Samurai, and
Braintree.

One thing to realize is that for us startups serving startups, we would love
to do the rest of the world but there are a bunch of complications that come
with doing so (timezones, currencies, partners, taxes).

We (<http://samurai.feefighters.com>) hope to be in Australia in the near
future. If interested in Samurai for Europe or Australia, give us your email
address here:
[https://docs.google.com/a/transfs.com/spreadsheet/embeddedfo...](https://docs.google.com/a/transfs.com/spreadsheet/embeddedform?formkey=dDZrMVI1YVVGT0NhSmpQbl80Q0o5Z2c6MQ&ndplr=1)

If interested in Canada, use this form:
[https://docs.google.com/a/transfs.com/spreadsheet/embeddedfo...](https://docs.google.com/a/transfs.com/spreadsheet/embeddedform?formkey=dGh0bHdEMlZ1cVZsbE50djhVbjlHN2c6MQ)

As for the beaches, I hope to find out soon :)

~~~
nirvana
How is a foreign corporation, setting up a US corporation, going to have a
social security number for an owner of the corporation, if none of the owners
are US citizens?

Is this really a requirement of the underwriters, or the IRS? I remember
looking at an EIN form once and seeing that it required a SSN in order to get
an EIN. But of course, someone whose never lived in the USA would not have an
SSN.

This would seem to imply that the USA is only open for business to US
Citizens. You need an EIN to do anything that might be taxable in america, but
you can't get one unless you have an SSN.

~~~
rprasad
You would get a TIN (taxpayer identification number), which is essentially an
SSN or EIN for foreign taxpayers.

------
saturn
Nice article, I guess, but overly complex; it really is a very simple set of
reasons. Here goes:

    
    
      1. There is a large startup community in the US
      2. Many people interested in startups already went to 
         the US because of (1)
      3. The barrier to moving to the US because of (1) is far
         lower than trying to recreate the environment locally
      4. This is a strongly self-reinforcing phenomenon
    

Wash, rinse, repeat. You can say the exact same thing for films and music.

Spoken as an Australian who is likely moving to NYC in the coming months. The
startup environment just does not exist in AU. I have the petri dish, I have
the bacteria, what I need now is agar, and there is precious little to be
found down under.

------
teflonhook
Being an Australian startup early on is great because there's a number of
programs to get easy cash, including AusIndustry CommercialReady which can get
you a CPI-indexed loan for $1-2m.

------
teflonhook
1) You can do subscriptions with Paypal 2) Moneybookers is an alternative
which is easier to set up and cheaper

When you get big you can use someone like GlobalCollect or Cybersource.

