Australia will never have a Silicon Valley

I recently interviewed 99designs co-founder Mark Harbottle and he revealed something genuinely shocking: just when the company received a $35 million investment from Accel Partners, the business had not received one call from an Australian venture capitalist.

That’s crazy.

Now, it’s not unusual for businesses to receive calls from VC firms. The bigger teams have analysts and junior staffers gathering information on all the hot new companies and start-ups. It only makes sense, and putting in a call to a potential investment happens all the time. Harbottle said he received several calls like this.

But not one from an Australian.

Isn’t that crazy? When the investment occurred, some industry figures were concerned too many Australian tech firms were too quick to hand over the keys to the Americans. And 99designs wasn’t the only one – Accel snapped up big investments in Atlassian and OzForex. Plenty of other firms opted for US investments and that trend has continued.

And yet Australia still likes to think of itself as potentially curating some sort of Silicon Valley-lite atmosphere. There is no shortage of attempts to turn Sydney or Wollongong into a tech haven.

Two things: firstly, it will never happen. An area like Silicon Valley doesn’t get built because the Californian government threw some money into the area. It happens because it generates talent and interest organically. Throw all the money you want at start-ups, but it won’t change the underlying trends that train and develop tech entrepreneurs into developing a product people want. Like 99designs or Catch of the Day.

Secondly, I’ve spoken with a number of people in the tech industry who lament the fact so many Australian companies are being snapped up or invested in by Americans. It’s still happening – last year Shoes of Prey received a big investment from a group of investors, including TechCrunch founder Mike Arrington.

On the one hand, I understand this fear – we want to keep talent in Australia and the “brain drain” to Silicon Valley is a problem. But if what Harbottle says is true, that he received absolutely zero calls from venture capitalists for an idea that earned the company $35 million from one of the premier VC firms in the world, then why shouldn’t they?

That’s not to say there isn’t activity happening here. Of all people, James Packer seems to have identified the opportunity in online retail, leading a syndicate to invest in Catch of the Day. And there are companies like Aura Capital looking for opportunities in the online space.

We all talk about how Australian tech firms are lagging. But in many ways this is because there simply isn’t enough investment. Throw some money around and you might start to see some results.

It isn’t that easy, of course. VC firms are difficult to convince at the best of times, and investing in a tech business – and not just an online retailer – is volatile. The founders of these companies are looking for long-term growth, not a five-year turnaround plan.

But that’s the difference between Silicon Valley and Australia, and that’s why we’ll never actually get to a point where the money flows like milk and honey. Australian venture capitalists are far too conservative – it’s the same mentality that caused David Jones to shut down its online store a decade ago, and it’s the same one that stopped VCs from picking up the phone to call Harbottle.

That mentality is also why no matter how much money state governments throw at incubators or special tax breaks for tech firms, the tech industry will never have an Australian Silicon Valley. We don’t have the decades of history or passion for entrepreneurship.

But there are plenty of opportunities nonetheless – Accel wouldn’t be investing here if there weren’t. Australians just need to develop a keener set of eyes, or risk losing out.

You can follow Patrick Stafford on Twitter @pdstafford.


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