The results from the latest Startup Muster survey indicate Australia still needs work when it comes to diversity in tech, as well the ambition of founders, according to a number of investors.
BlueChilli chief growth hacker Alan Jones says it’s “maddening” to see 27% of startup founders estimating their market size is less than $10 million. The figure is so startling that it makes Jones wonder whether or not respondents understood the question and thought they were estimating the current valuation of their startup.
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“Because if you aim to steal 5% of a $10 million market, even if your net margin is huge, that’s never going to be worth the risk of doing a startup – you’d be better off opening a café or a plumbing business,” Jones says.
“Startups should be shooting for the Moon, but it sounds like we’re still guilty of shooting for Moonee Ponds.”
That number also had Colin Kinner, the author of the Crossroads report and director of Spike Innovation, wondering whether the survey had picked up a lot of non-startups that are lifestyle businesses. Startup Muster organiser Murray Hurps says in addition to the validation steps, he manually reviewed the companies to ensure they were leveraging technology to create something scalable, the correct definition of a startup, and there didn’t seem to be any misunderstanding of the term.
It’s a concerning figure, given startup academic Steve Blank’s advice that startups are either born global or die local and certainly could be a factor contributing to another survey finding – 18% of startups had tried and failed to raise capital. As Jones points out, few investors are going to take on investments with such limited upside.
Blackbird Ventures managing director and founder of the Startmate accelerator program Niki Scevak agrees a lack of ambition was the most striking of the survey’s findings.
“What sadly stands out is the lack of ambitious founders creating global startups and chasing huge markets,” Scevak says of the survey results.
“We created Blackbird and Startmate to provide capital and a network of likeminded founders to help those who dare to make a big impact but there is a long journey ahead. It’s easier in my opinion to build a large ambitious company than a small unambitious one.
“It’s harder to get great employees, investors and partners when you are doing something uninspiring. So hopefully in five years’ time the numbers will be flipped. Come on Australia!”
AirTree Ventures partner Craig Blair says the figure leads him to believe that this survey is a sample of early stage startups.
“The opportunity for the Australian startup ecosystem is to convert these into Series A funded business. This will require addressable markets of more than $10 million, product market fit achieved and distribution starting to work,” he says.
Blair was surprised that just 6% of startup founders were under 25, and encouraged that the number of female founders had increased from 16% in 2011 to 19% in 2013. Jones was frustrated at the slow pace of progress.
“It’s frustrating to see we’ve made so little progress in changing the gender balance in the Australian startup industry but that might be because we need more girls studying STEM and entrepreneurialism to create more female startup founders, which would mean we won’t see the fruits of those efforts for another 5-10 years,” Jones says.
“I’d like to see if the percentage of women in senior exec roles in Australian startups has changed in the near term, and the proportion of women holding equity or options in Australian startups.”