|By||http://e27.cohttp://e27.sg/2012/07/03/is-australia-the-next-upcoming-tech-startup-hotspot-to-watch/||| Jul 3, 2012 | Asia|
Is Australia becoming a hot place to do startups? While some think so, there are others who are less optimistic.
The question was asked on Quora. Venture capitalists, successful entrepreneurs as well as those who were based in Silicon Valley filled in with their two cents. Some agreed that yes, Australia will be the next big thing. Yet, some still feel that Australia still has a lot of catching up to do.
[Yes] Successful exits and hot startups spurs the ecosystem
Among those that replied to the thread was legendary venture capitalist Bill Tai, who runs on an impressive track record of nineteen IPOs, and invested in companies like Twitter, Tweekdeck, Ark, as well as Tango. Bill replied to the Quora thread, saying there has been an ascendancy of anchor tenant technology companies such as Atlassian.com as well as a few other notable and successful startups such as Freelancer.com and 99Designs.com. Hot new startups such as ShoesofPrey.com, Posse.com, BubbleGumInteractive.com, Pygg.co, Canva.com and others serves as motivational examples to budding entrepreneurs. As a result, we are definitely seeing more and more startups coming from Australia.
Chris Bayley, Executive Director of Software.com chipped in too and shared that successful exits such as OzForex as well as PC Tools, which was acquired by Symantec, also give rise to a successful first generation tech entrepreneurs, injecting a fresh flow of capital back into the ecosystem.
[Yes] More Venture capitalist and Accelerator programs
Another reason why Australia might be the next Silicon Valley can be attributed to the recent growth in early stage venture industry in Australia. Some of the reasons behind this growth cited by Jeremy Colless, Director of Bubble Gum Interactive, which recently raised a $2.5million round, includes a potentially long period of low single digit returns from tradtional asset classes such as equities, bonds and real estate as well as the successful execution and liquidity events by the current crop of invested ventures. Following that, there are increasing number of well funded foreign VC firms setting up offices in Australia. This trend is expected to continue.
The partnering of Optus and SingTel Innov8 to set up a local seed program in Australia also see telcos playing an active role in pushing the local startup ecosystem. Other local incubator and accelerator programs which has been actively molding and coaching local startups includes AngelCube, Pollenizer, Copper Sydney, StartMate and a handful of others.
[Yes] Influx of talents into the local ecosystem
In addition to that, Jeremy notes that there is an influx of quality talent into the Australia ecosystem. These talents comes from the successful Australian engineers and designers who have left or will soon leave their careers at huge tech companies such as Facebook or Google to join or start new ventures back at home. These talents bring experience, networks and know-hows, spinning off into various startups which then stimulates the whole ecosystem. Bill Tai described this in a fashion similar to how the deconstruction of Fairchild Semiconductor produced more than sixty spin outs including Intel, National Semi, LSI Logic and many other companies.
[No] Australians are much more risk adverse
While many seemed to be optimistic about the whole startup ecosystem in Australia, some remains skeptical. “People in the USA are more open to new ideas, and are more optimistic and willing to take risks. In Australia, I was above average in terms of optimism/risk-taking. When I came to the USA, I was below average for Silicon Valley, so much so that work colleagues from startups commented that I was taking a “negative” attitude. Optimism/risk is at the heart of the startup culture, and much as I wish it weren’t so, there’s a big cultural difference in that regards between Sydney and Silicon Valley. Australians are much more risk adverse (and less supportive) than their US counter parts – it’s a cultural thing.”, writes Waleed Kadous, a software engineer at Google who spent five years in Silicon Valley.
[No] Small market size and a lack of exit opportunity
Waleed illustrated this perfectly: “The USA has 15 times the population of Australia. That means a startup only has to find a niche 1/15 the size to get the same economies of scale if the target market is the USA. Sure an Australian startup can target the US market. But if there are two startups, one in Australia and one in the USA, both targeting the USA market, which do you think is going to win?”
Another legitimate point brought up by Waleed pertains to an exit strategy. Assuming that an Australian startup is a raging success, the startup is far more easily overlooked in Australia than if it is based in the states where there are a lot of experienced and cash rich companies.
Of course, while some of the points are valid, startup founders should be able to overcome the small market size and have a viable exit strategy, and in fact, these should not be any excuse for any startups to not try. Australia is definitely buzzing with entrepreneurial activities, with an exciting future to look forward to.
We also spoke to Carmen Benitez, founder of FetchPlus as well as Gistly, who seems to be optimistic about the startup ecosystem in Australia. She says that “the Australian start-up ecosystem is definitely progressing to go beyond its current borders and move into other major geographic markets that extend into Asia and the US. With strong early / growth stage VCs like RightClick Ventures and partner programs through Optus/SingTel, start-ups can leverage a solid foundation mix of investor and partner channels. In addition, for those interested in launching a start-up in the social media space, Neilsen reports that most activity from the major 10 markets was Australia. We are pleased to have a Sydney office working with AU media companies to help leverage our own social enterprise products into these markets and beyond.”