One of the irritations of being in Australia is the often insular and myopic view many of the nation’s business and community leaders have.
A consequence of that insularity is that business operates at a slower pace than in more competitive markets; there could be up to a five year lag between technologies being introduced in North America, Europe or East Asia and them being rolled out Down Under.
That lag creates an arbitrage opportunity for canny local investors, this post on the Investment Biker Analyst blog illustrates the thinking .
I’m not sure about the barriers to entry for potential competitors to Digivizer because part of my view as an investor since I got back to Australia is the way the markets geography has always insulated it from quick counter-punches. Think about the way the UK always seems to be the second place North American business rolls out it’s plans for sector domination. We’ve seen it over and over again. Australia on the other hand is well down the list as the market, while affluent is at 25million quite small. Also it’s a long way to come if you have to get on a plane . . . Oh, and besides that the “Aussies” can find us themselves without investing extra start-up capital.
Mike’s model is the standard for the Aussie start community; local entrepreneur looks at the hottest businesses in Silicon Valley, sets up a minimum viable copycat, pitches to investors who put money in on the hope of making a profitable exit to a dumb local player or to selling out to the market leader when they finally decide to set up an Australian operation.
Increasingly the second option isn’t working as the big player are either moving into the market quicker, which also screws the first exit option, or the locals are asking too much for their cheap knock offs.
As a consequence the local copycats are increasingly finding themselves stranded in the marketplace.
Quickflix is a good example of the local knock offs being stranded, having copied Netflix’s business model, the company has toddled along for a decade with its movie and entertainment delivery business and now faces Netflix starting an Aussie operation.
With a formidable competitor entering the marketplace, Quickflix is frantically trying to shore up its defenses, having made a $5.7 million capital raising and committing to cut costs.
One suspects though this will be nowhere near enough to build up defenses against Netflix, incumbent cable operator Foxtel, fellow steaming service Fetch TV or the bizarrely named and probably doomed Stan service setup by an uneasy coalition of fading old media companies.
In an increasingly connected world relying on the tyranny of distance to protect your business is a losing game, something that many Australian companies and investors are yet to learn.
Then again, as long as the coal trains keep running, maybe Australians don’t have to worry.
Great point although Quickflix doesn’t fit the model. The business is a decade old and should have flipped ages ago. But Foxtel’s pay TV monopoly, Telstra’s high pricing for backbone access and the slow development of high-speed bandwith all made it hard for Quickflix to build a defensible and dominant customer base worth acquiring. And Netflix de-prioritised entering the Australian market for those reasons too, so it’s arriving here later, with more years of slow Quickflix growth data to consider, making that acquisition less interesting.