This time last year, Salesforce Ventures launched its Australia Trailblazer Fund with a mandate to invest in some of the most innovative businesses emerging Down Under.
One year on, it’s backed five startups, and counting, in New Zealand and Australia. And, as a newcomer to the Aussie ecosystem, principal of the fund Robert Keith has made a few observations too.
Keith doesn’t disclose the dollar amount of the investments. But, he does say the $50 million fund would typically be deployed over three to four years.
So far for the Australian fund, “the investments are consistent with what we’ve seen in other geographies … in terms of cheque size”, he adds.
So far, it’s backed the likes of Athena Home Loans, Basic and Valiant Finance.
But, Keith says the fund wasn’t necessarily intended to focus on fintech.
Rather, Salesforce is targeting several different verticals — one of which is financial services — but found fintech is a particular strength Down Under.
It’s about “really understanding what does Australia specialise in and focus on”, he explains.
“When you first come here, you really understand the expertise in the financial services sector.”
However, the fund is also actively exploring core industry verticals such as healthcare, retail and commerce, and manufacturing.
It’s also increasingly interested in the construction space in Australia — another area where the team has seen particular expertise here.
Aconex, for example, listed on the ASX in a $140 million float in 2014, and was later acquired by Oracle for a massive $1.6 billion.
“There have been some great exits over the past few years,” Keith says.
“You get that flywheel that has really made Silicon Valley so successful — with founders giving back to the ecosystem.”
Startups breed startups
While Australia is still a relatively young startup ecosystem, this flywheel effect is starting to come into play here. For overseas investors, that’s part of what makes this an attractive ecosystem, Keith explains.
“When you look to see which markets from an investment perspective are attractive, that’s definitely one of the key pillars and cornerstones of what makes for a successful tech ecosystem.”
We’re starting to see examples of people leaving successful startups to launch their own.
For example, Software-as-a-Service startup Dovetail, founded by former Atlassian employees, raised $4 million in funding just last month, while Tability, also founded by Atlassian alumni, has signed up more than 500 companies for its workflow accountability platform.
Keith is also seeing what he calls “the boomerang effect”.
“Aussies are going to the US, going to Silicon Valley, earning their stripes at a high-growth company or tech startup, and then coming back to the ecosystem here, because there are jobs and opportunities available for them.”
In fact, startups here are actively seeking out Australians living overseas, trying to recruit them back, he says.
All of this shows Australian startups are moving in the right direction, Keith says.
“You don’t have to be in Silicon Valley”
At the same time, our proximity to Asia presents an opportunity. Regimes such as the R&D tax incentive provide a helping hand to businesses, and even just over the past 10 years or so, investment here has skyrocketed.
“I feel like Australia has a lot of things going its way to make it a successful tech ecosystem,” Keith says.
And, Keith suggests Silicon Valley is losing just a little of its shine, with those who work there considering other markets such as Canada, the UK or Europe.
“Innovation is becoming more and more global,” he adds.
“Increasingly, you don’t have to be in Silicon Valley to find success.”
“As we see more exits, more founders, and Australians coming back — I definitely feel like Australia has its best days ahead of it.”
However, there are still challenges for Aussie startups to overcome.
For a start, the time differences aren’t going anywhere, and servicing international clients will always be a challenge.
Startups have to carefully consider when to focus on their home market, and when it’s time to put their efforts into going global, Keith says.
At the same time, Australia has a perception problem. There is work to be done to convince the world that Australia is an up-and-coming market.
“Doing more to attract more talent to the ecosystem here is something that you’re always going to be competing with,” Keith says.
“Once people come and realise the ecosystem that’s available here, people really get excited and want to stay.
“But I still think, when … you talk about international opportunities, the UK and the US still tend to come up as the first option.”
Aussies need to shout the market opportunities here, spreading education and awareness, Keith adds.
“Once people get educated, they realise how big the potential is here.”