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.
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. :)
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.
Remember, tech startups nearly never pay dividends. Making a ton of profit but no exit = good for founders and employees, big problem for investors.
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?
Because in Australia (and NZ, Canada, etc) founders and employees tend to be waiting for privately owned residential real estate to move up in value, a "lifestyle business" in these places doesn't need to get to profitability, it only just needs to keep the founders and employees in a job. Any outside investor that evaluates such a business is already being screwed over by the founders as soon as they start talking.
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.
- Scott Farquar, CEO of Atlassian
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.
Both Spain and France are European countries.
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.
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 :)
"You may not be interested in war but war is interested in you." - Leo Tolstoy
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.
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.
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.
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!
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.
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.
disclaimer: I used to work for Blackmagic
* PayDirt - http://paydirtapp.com/
* Cycling Analytics - https://www.cyclinganalytics.com/
Other products developed in Melbourne (I am unsure of the levels of VC):
* Aconex construction workflow - http://www.aconex.com/
* Redbubble - http://www.redbubble.com/
* Realestate.com.au - http://www.realestate.com.au/
I don't always understand the hype about investment. If someone is giving you their money, you are giving up sovereignty. If you can build something that earns enough to continue growth, then you can afford to make some mistakes.
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.
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 .
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.
On the positive side I don’t both going to listen to any of the so-called experts.
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.
Yep. In the US technology is a competitive advantage. In Australia it's a scam designed to separate idiots from their wallets.
Also experience outside Australia doesn't count. A multibillion dollar company uses your stuff on all their servers? Yeah but who in Australia?
I live in London right now. It's somewhere between the US and Australia in terms of views, with the advantage of tech, media finance and politics being in a single city.
These things are hurdles, but there are hurdles everywhere you go. You trade lack of VCs here for more competition for VCs there. You trade lack of startup community here with higher dev payrates there. It's all trade offs.
Things like timezone, distance etc are only an issue if you're selling in the US only. Smart Aussie companies sell into the Europe and Asia as well.
The Aussie dollar is shit at the moment, so I don't agree with that. It's a great time to be selling in USD.
No, some places are just vastly better than others for certain things. Everything doesn't always just balance out as if nature forces there to be a balance.
"Everything balances out so here is equal to there" is one of the biggest lies that small towns tell their ambitious people.
Of course it can be done (both of us are proof of this), it is just much harder than it should be. Australia could be such a great place to build a startup with just some relatively small cultural changes. I should get more involved to make this happen :)
Since then, I've noticed you've got a research institute that does a lot of wireless stuff, it or another has done some major L4 microkernels, and I happily pay Fastmail for my email service.
You gotta play with the cards you're handed.
1 - Company bureaucracy is one of the most lightweight in Europe (make that the world) http://www.doingbusiness.org/rankings
2 - European time zone. Not bad for doing business in the US or China/Japan
3 - It is part of EU and the potential consumer market is the whole of it. Localisation may be an issue though, still, the UK is a huge market as well.
The biggest thing people lack is ambition.
I have been running a small business here since 2006 or so. Do not get me started, yes getting a business setup is easy but the fun begins when you realize you are in for a lot of "fun" with taxes and Revenue and other bureaucracy and red tape.
The tax system actively penalizes you for starting a business by for example reducing your tax credits, removing welfare support for when things fail, and whats worse is how you get treated by state beuracrats with cushy public service jobs they view all private businesses with disdain and treat you like shit. For example Revenue ALWAYS treat every case as if you are guilty of whatever you are accused and then you have to spend time and money to prove your innocence, instead of you know running a business.
I am not negative after all this time running a business here, I am simply bitter and disillusioned. Anyone wanting to start a business here does not realize how much of their time and money will be wasted for no good reason.
This is endemic in New Zealand as well. "Hey, let's ignore this perfectly good solution in favour of asking an American!"
Venture Capital, shock horror, is not the only way to raise capital. And we have extraordinarily low interest rates.
2. Lack of non-predatory Angels
What are you basing this on!
3. Lack of a startup culture
Absolute garbage. We have hundreds of startups. Hell, all of them are looking to get purchased and ruined by some huge U.S. tech giant (hi, EMC!). In Sydney alone you can go into North Sydney, Crows Nest, St Leonards or North Ryde to find them.
As the author said, they are not founded by people working or partying themselves to death (well, some are), but that doesn't mean they aren't startups.
4. Risk aversion
Startups here take risks all the time. But your view of being "risk averse" opus probably coloured by the fact that you think a business can only be a success if it's made it in 3-5 years. Australians tend to want their businesses to survive long-term, so they adjust their position on risk accordingly.
5. Geographical distance
Big deal. Plenty of Aussie startups have overseas offices. Software development startups utilise the Internet extensively.
6. Cultural cringe
7. Time zone differences
This is only a problem for people employed outside our Timezone. You realise that a good majority of emerging South East Asian markets are close to our TZ? And if you know what you are doing you can make time zone differences work for you?
8. Over valued currency
Yeah, we're one of the few countries in the world to escape the GFC largely unscathed. Our high dollar can be an issue... Except when you realise that the U.S. Dollar and the UK dollar are far higher than our currency.
9. Real estate speculation
I hear yourain. This is a real problem in Australua, but it has little bearing on startups.
Let's look at our positives:
1. Highly educated workforce
2. Stable government
3. More relaxed culture as we have less disparity between the rich and poor than somewhere like the U.S. - often mistaken for laziness, when in fact we work just as hard and often harder than other cultures. And we have universal health care, a decent industrial relations system, reasonable welfare systems for those who are disadvantaged, a properly regulated banking sector, strong consumer laws, and lots of other things that make for living here actually pretty awesome. Heck, we're stable because we got so many things right over the past few decades.
4. Technology obsessed populace with cash to spare
5. Highly connected populace no longer concerned about technology (risk averse my arse)
We do things differently here. That makes us different, not impossible to do business with.
It's harder to build a company anywhere than it could be. I know, I've tried. Hats off to every startup and business person with reasonable morals everywhere.
The environment isn't very conducive to success.
Despite that there are success stories.
I obviously cannot give precise numbers but average basket for the e-commerce companies I worked for roughly did scale according to GDP per capita.
At the peak of the boom, RRP was 50% higher in Australia than anywhere else in the world (causing massive cross-border e-commerce, of course) and margins were and are still very good, in part due to lack of competition.
The other points brought up on the thread (such as lack of funding) are valid but globally true.
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.
"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!
P.S. You need to fix the patent page on your website. It seems to have been lopped into two columns, and is impossible to read. Just a heads up.
I had forgotten that the ASIN patent was even on the Nucleics website. It was being used for an old SEO experiment. I have fixed it up so at least you can read it now :)
I'm seriously hoping that it bursts soon, rent is just getting ridiculous.
Edit: source https://www.unisa.edu.au/Global/business/centres/cags/docs/a...