Why the Australian tech industry is finally starting to take off
Australian tech entrepreneurs have been asking themselves a single question for a while now: Where’s the money?
Unlike Silicon Valley, where even the promise of an idea can net you millions, the riverbed of home-grown Australian tech funding is seemingly running dry.
Even Mark Harbottle, the head of one of the most successful tech companies in Australia, 99designs, delivered a sobering truth recently: He received not one call from an Australian tech investor before snapping up $35 million from Accel in Silicon Valley.
But is the market really dead? Far from it.
As we’ve pointed out before, there have been dozens of deals with companies such as Shoes of Prey, Catch of the Day and BrandsExclusive are receiving investments, with Peter Thiel even getting in on the action.
The one difference? All of this money has come from offshore. There are very few deals being done within Australia with Australian money.
Local experts are convinced this will change soon. Mick Liubinskas of Pollenizer says he’s convinced 2013 “will be a hallmark year for a massive increase in investment in tech businesses in Australia”.
“I think we’ve had the first generation of wins, with Seek, RealEstate and CarSales, and then we’ve had another round with start-ups like 99designs.”
“It’ll be a combination of the mining industry falling off, and tech’s big successes. I think we’re set to see even a tenfold increase in the amount of investment.”
Evernote chief operating officer Ken Gullicksen told SmartCompany he believes the market is fit for both entrepreneurs and investors to make a huge splash in the global tech scene.
“I’ve looked into the Australian market a bit and I think now there is a critical mass here of tech companies.”
The apple of the world’s eye
Everyone loves Australians.
That goes for tech investors, too. We’ve had a number of investments from overseas angels such as the BrandsExclusive deal, the Accel investments in Atlassian, OzForex and 99designs, along with the Shoes of Prey deal – which caught the eye of TechCrunch founder Mike Arrington. Summit Partners recently pumped $25 million into fashion group The Iconic.
Peter Thiel even invested in an Australian start-up, ScriptRock, and local tech entrepreneurs say more equity firms are sending people to visit Australian firms.
The investment follows rumours Napster co-founder Sean Parker has been hunting for Australian deals.
But local experts say it’s not necessarily enough. The industry is still dependent on offshore income. As Harbottle says, angels are a little wary on Australian shores.
Michael Fox, the co-founder of Shoes of Prey, says while the market is “definitely on the up”, it’s still hard to get money on Australian shores.
“There is more investor interest in start-ups than there was a couple of years ago, but I think it’s still hard,” he says.
“It’s difficult to raise money being based here than in the United States.”
It’s a problem the local industry is used to. Investors are too risk averse in Australia, whereas the United States may have the opposite problem, where angels are a little eager to sink money into an idea before it’s ready.
This isn’t just a problem with angels, but the entire tech industry in general. Even David Jones and Myer are just now getting up to speed with a real eCommerce program which should have been on its first legs a decade ago.
But Fox says he’s optimistic.
“There are small angel rounds happening now, more investors are travelling to Australia and they’re seeing the big successes like The Iconic and Catch of the Day.”
“These are decent sized companies that have done raises in the past couple of years.”
Evernote’s Gullicksen is one of these investors. While he hasn’t invested personally in Australia yet, he says the market is ripe for good businesses.
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