Where Australia sucks for startups and what needs to be done to make the ecosystem shine
Tuesday, September 20, 2016/
Four years ago I moved from Melbourne to San Francisco in the hopes of taking my startup to the next level. I’d made that decision after passing through SF and meeting some fellow Australian founders.
“Should I move to SF?” I asked. The answer I got was a resounding yes. “Absolutely. It’s the random meetings that are possible here that can be game changing for your business.”
So based on that advice I decided to spend a few months in SF. Four years later, I’m still here. I may have moved on from that startup I was working on but without a doubt my life and my perspective has evolved tremendously as a result of living here.
Now when I meet Australian founders who have recently made the move to the Bay Area and raised money here, their feelings about their decision to move their base here mirror mine. They are blown away by the opportunities here and the willingness for Americans to connect them with potential partners, customers and investors, with no hesitation.
What’s interesting is that when I delve deeper, I notice certain similarities between these startups. They still have a solid team back in Australia. And they raised money in Australia before coming here.
As Australians we’re really good at beating ourselves up and talking about how we don’t compare to the rest of the world for various things. From Australia, we look to the world for inspiration to apply to our society; yet when we travel we realise just how lucky we have it.
The fact that the investment in startups has grown immensely is fantastic. It still has a long way to go and I could write a whole separate post about my opinions on that topic, but let’s just stop to acknowledge that we have made progress there.
But where do we need to be to really compete and how can we do that better than we are now?
They say acknowledging the problem is half the battle, so let’s just put it all out there.
In my opinion, this is where Australia sucks for startups:
Australia is far away from the rest of the world. Our timezone is a challenge for people wanting to do business in the US and also to an extent in Europe. It also takes a really long time to get anywhere (and a lot of money). These are things that we really can’t change, but nevertheless they factor into challenges for startups and are worth mentioning.
When I moved to the US, I made an incorrect assumption that Aussies are just like Americans culturally. Yes, we speak the same language, but there are fundamental differences in our cultures that get us some marks in the “cons” column for startups.
In short, here is where we fall short compared to Americans:
- We tend to underplay our achievements and our businesses
- We hold our connections tight to our chest, rather than openly offer them up to help others
- We are secretive about our business ideas, thinking that others will steal them, rather than believing that ideas are cheap and execution is everything
- We typically only have meetings that have a specific agenda, rather than meeting to explore and see how we might help or collaborate
- We lack the “pay it forward” attitude that is pervasive in Silicon Valley
- We are more transaction-focused than relationship-focused in our business dealings
- We operate with distrust as our default position, rather than trust. This results in a high cost of transaction which is counter-intuitive to the way startups need to operate
- Australian business often has a lack of a sense of urgency. This is in part because we have a much less competitive market than the US. Aussie startups often under-estimate the lost opportunity by moving too slowly
- We are much more focused on having a great lifestyle than we are on being successful
Cultural change is not a fast process; but with a concerted approach towards changing it, it is possible. Without this change, Australian startups will always start on the back foot.
We don’t provide enough support to our startups who are going abroad. We all know this. It’s been talked about forever. Us Aussie startup founders in the Bay Area have long been envious of the support other countries have provided them to come here, in the form of landing pads, access to networks, free space for exhibiting at top conferences.
So when the announcement about the landing pads came out, we were pretty excited that there was finally going to be some help for companies coming to the US. My vision was that it would be a central hub for us Aussie founders to congregate and collaborate with each other, get together for Friday night drinks and run events from so we could highlight and support Aussie companies to the rest of the startup community in SF.
It would be a place that us local Aussies would want to work from, and that would provide a nice cushion for newcomers to come and connect with other Aussies as their first entry point here.
For those of you that know about startups, you will be familiar with the phrase, “ideas are cheap; execution is everything”. Now, to say that the execution of the local Aussie landing pad has left us Aussie founders underwhelmed is an understatement.
The reality of it is that, while the intention was there, the focus up until the federal election was to get it announced and up and running to be used as a political win. So now that we’re past that, can we please build something that is actually useful?
A few desks in a co-working space, on a floor that looks like a depressing government office and a limit of one desk per company is very far from the vision that I and others had.
As a model, the New Zealand landing pad is a good starting point. Canada’s C100 is also a source of envy for us. Note that both of these have had a significant amount of investment and direction from non-government entities.
Access to experience
Silicon Valley runs on an informal framework of experienced entrepreneurs providing advice to other startups.
These experienced entrepreneurs have seen successes and failures and act as role models to other startups of what is possible, but also provide insights on what pitfalls to avoid.
Australia has little of this. The result of this is multifaceted, but a few of the outcomes of this vacuum is founders not thinking big enough, founders making mistakes and wasting money where they might not have if they had access to the right advice.
This experience can’t be manufactured in a few short months, let alone a couple of years. It exists elsewhere and must be imported until we have a critical mass of successful entrepreneurs back home.
One program that I think is on the right track is the Visiting Entrepreneur Program that I participated in earlier this year, run by Startup QLD. The program brings out entrepreneurs for a week to visit various locations within Queensland and give talks as well as mentor startups.
Israel is often held up as a model of a startup ecosystem and lately Australia has been looking to Israel to learn from it. One of the factors Israel has going for it is it’s small size. Most of the main startup hubs in Israel can be traveled between in under two hours.
By contrast, Australia is 373 times the size of Israel. Successful ecosystems require density, and Australia is anything but dense. And each state (mostly Victoria, NSW and Queensland) is competing to become the startup state of Australia.
This reminds me about when I learned about Australia’s foundation where Melbourne and Sydney were competing to become the capital city of Australia. In the end they decided to establish an entirely new city to become the capital.
Perhaps that isn’t the solution, but we do need to start thinking more creatively about how we support density in the Australian startup ecosystem.
Whilst this is not an issue unique to Australia, it’s important to call it out and recognise it so our expectations are aligned.
Any program that is setup to improve the situation for startups in Australia is going to take a long time to bear fruit for the larger Australian economy. Startups typically take on average 10 years to come to fruition, whether that be through IPO or a significant exit.
Political terms are three years long. This builds a natural tension, because any politician is going to struggle to recognise real results within their elected term.
As a country we need to acknowledge this and develop patience for the longer term benefit to arrive, and reward the brave politicians who take this on as part of their platform.
So what’s next?
What’s required for Australian startups to truly compete and to elevate Australia in the eyes of the startup world? Here are my ideas for what would move the needle.
Start with the students
One of the core pieces of a great startup ecosystem is a way to feed it with great talent. Australia needs to build this engine.
Universities will play a part in providing the right skills. Non-traditional education institutions should be encouraged to provide shorter term vocational skills. Whilst I’m not a huge fan of coding schools, they do play an important part in a tech-deficient workforce.
Australia also needs to build core skill sets in non-technical startup roles like sales, Product management, growth and user experience. We need more schools that focus on that too.
These students must also gain valuable experience and learn about startup culture. An internship placement program would be a great opportunity to place Australian students into six-month internships in Silicon Valley.
Every day I meet Silicon Valley startups interested in participating in this kind of program. It does, however, require support from a visa perspective and buy-in from Australian universities.
The beauty of a program like this, is that after six months these students return to Australia with relevant skills, connections and cultural understanding of the startup world that they can then seed into the Australian startup scene.
It’s an extremely fast realisation of ROI for a startup ecosystem initiative.
A nationwide visiting entrepreneur program
As I mentioned earlier, the dearth of experienced startup entrepreneurs is a major issue for Australian startups. Let’s establish a well funded program for bringing these people out, not just to give advice, but also to get a feel for what’s going on in Australia and it’s benefits.
Let’s bring Australia closer to the rest of the world.
As part of this program, we should be bringing back Aussie founders who have relocated elsewhere to visit and impart their knowledge.
It’s a blessing and a curse. I believe governments should establish incentives and frameworks to enable desirable outcomes. I believe that government is not so successful (and it’s not it’s role) in executing on desirable outcomes.
This concept, ironically, is the policy of a traditional right wing Liberal government: smaller government.
Even though I was quite excited about the concept of these landing pads, the poor execution of them has reminded me that this function should not be executed by a government department.
I think the Liberal government has also lost sight of this. Perhaps we need to establish a non-profit organisation that is funded in part by the government, corporates and high net worths and staffed with people from the startup sector — people who have been there and done that and have the right connections in Australia and abroad.
Another challenge when it comes to government is the speed of execution. Startups by their very nature are conditioned to move fast; they have little tolerance for slow movers, as waiting around for them could mean the end of their business.
Many startups hesitate in applying for government grants for this very reason — they can’t wait for a grant to be processed to get the money. Governments, by contrast are notorious slow movers. Often for good reason; they have many stakeholders to factor in and a wrong move could be disastrous for their leaders. Having worked on both sides of this fence I have an appreciation for each of their perspectives.
Now try to get startups and government to collaborate. The slow speed and perceived lack of progress is enough for most startups to throw their hands up in exasperation.
So what’s to be done about that? I don’t have a clear answer on this, but I feel it really has to be a matter of where to draw the line.
I’m inspired by the US Agency called 18F that has drawn top tech execs from Silicon Valley to help reform the way technology and government work together.
Australian startup ecosystem advocate
I see an opportunity for a new role for someone to hold. This person is tasked with elevating Australia’s position as a startup hub to the world. The other day I spoke at an event for foreign founders.
One of the first questions I was asked was to name some Australian startup successes. Naturally I mentioned Atlassian.
That same evening I went to another startup event hosted by a leading Israeli VC. One of their investors who invests in countries all over the world asked me the same question. I mentioned Atlassian, 99 Designs and BugCrowd. He had heard of all these companies, and was actually actively following one but didn’t even realize it was originally out of Australia.
We are really bad at touting our accomplishments and there is a lot of opportunity for us to get much better at that.
In doing so, we make the path that much easier for the startups that come out to Silicon Valley in the future to get noticed and attention. Australian startups should be sought out for whatever it is we decide to position ourselves as the best in the world.
This role needs to be held by someone who has been an entrepreneur and can talk intelligently with and about startups (ie. it’s not a role for a politician).
One way to rapidly effect cultural change, is to compose a manifesto that defines how we operate, how we engage with each other and commits subscribers to certain practices that help to move our startup community and culture forward in meaningful ways.
Some example commitments might be: “I commit to taking two meetings per week that have no set agenda.”
So those are my thoughts on the challenges Aussie startups face and some potential strategies to alleviate them. It’s not an exhaustive list, merely a few ideas and thoughts that could have a real and timely impact.
Feel free to share your thoughts in the comments.
This article was first published on Audrey Melnik’s blog.
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