Paul Wallbank – Communications Professional
Comms, journalism and writing
Why are the world’s startups flocking to San Francisco
Why are the world’s startups flocking to San Francisco? In a five part series for The Australian I look at the motivations for Australian entrepreneurs heading to the Bay Area.
The reasons for the moves are varied, as are the experiences, and it’s an interesting snapshot of a historical industrial shift as Silicon Valley evolves.
Is Australia facing a brain drain as the Ideas Boom dries up? That’s one of the topics we’ll be covering in this month’s Nightlife.
While Australia talks about innovation, some of our most exciting tech companies are moving to Silicon Valley. For the May 2016 ABC Nightlife we asked why are they moving and what can we do to encourage them to stay down under?
Along with discussing why Australian startups are moving to the United States we also looked at some of the announcements out of the recent Google I/O conference. If you missed the show it’s available for download from the ABC website.
If you’re in Sydney, we’re also debating whether innovation really exists in Australia in a Cloud Crowd debate on June 9. Tickets are free.
Some of the questions Tony and I looked at included;
On June 9 in Sydney we’ll be debating whether innovation is a myth in Australia, tickets are free and you can sign up through Eventbrite.
Tune in on your local ABC radio station from 10pm Australian Eastern Summer time or listen online at www.abc.net.au/nightlife.
We’d love to hear your views so join the conversation with your on-air questions, ideas or comments; phone in on 1300 800 222 within Australia or +61 2 8333 1000 from outside Australia.
You can SMS Nightlife’s talkback on 19922702, or through twitter to @paulwallbank using the #abcnightlife hashtag or visit the Nightlife Facebook page.
Changing the speaker industry requires collaboration and innovation but it doesn’t come without cost as Sonos finds
Today I had the opportunity to tour the Santa Barbara headquarters of smart speaker manufacturer Sonos. I’ll be writing up a some more detailed accounts of some of the interesting things this fascinating company does.
One thing particularly interesting thing about Sonos is how it was established by four veterans of the original dot com era who had no experience in audio hardware or technology but had a vision of how they would like the stereo system of the future to look like.
That vision hasn’t come without change for the company, the shift to streaming has meant Sonos itself has had to pivot away from its original business model which entailed layoffs for the fast growing company last year.
How Sonos is navigating that shift, along with fostering a culture of openness and innovation is an interesting story that I’ll be telling over the next few weeks. In the meantime, my head is spinning from information overload.
Can a council of wise men build a new Silicon Valley? TechSydney believes it can.
The success of Silicon Valley is partly based on the sharing of information. Can a closed group of business leaders replicate that success?
Currently I’m in the United States interviewing Australian startup founders who’ve moved to the Bay Area on why they’ve chosen to move their businesses in Silicon Valley.
Naturally there’s a whole range of reasons for relocating across the Pacific – for some most of their market was in the US, for others it was the accessibility of investors while for many the move was always part of their plan to go global.
The almost unanimous comment though from the founders was one of the attractions of the Bay Area are the support networks, “It’s a place you fall in love with straight away – it’s the people and the attitude,” says Holly Cardew. “People ask what can I help you with.”
Cardew, the founder of image management service PixC, sums up the consensus on the Bay Area business culture of ‘paying it forward’. Almost every entrepreneur who’d moved to San Francisco mentioned how the question “how can I help you?” was key to building a network and finding customers, staff and investors.
That openness to helping the ecosystem was greatly appreciated by Carl Hartmann, co-founder of logistics startup Temando. “I’m here today because people were kind enough to pay it forward,” he states.
Since then Harmann has become one of the ‘go-to guys’ for Australian entrepreneurs arriving in San Francisco and almost everyone we spoke to mentioned Carl as being a great help for them in obtaining initial introductions.
Those introductions and helpful acts are essential in a community where the most valuable asset is the people, not just investors but the entire complex ecosystem of coders, lawyers, publicists, designers and various other disciplines essential for an industrial hub to thrive.
Which raises the question about yesterday’s announcement of the TechSydney initiative, a project claiming “to address the Sydney innovation ecosystem’s greatest challenge: collaboration.”
This is a good idea, and one this writer was involved in seven years ago with the failed Digital Sydney program in 2010 which aimed to bring together the disparate groups that make up Australia’s disparate tech and digital media sectors.
Digital Sydney failed because the state government is poor executing at such initiatives so the fact TechSydney is being led by experienced startup founders, investors and advisors should give hope this attempt would be more successful.
However, TechSydney’s press release quickly dispels that hope with the opening line.
Australia’s most successful startups and global tech giants, including Atlassian, Airbnb and Airtree Ventures are backing a new not-for-profit aimed at turning Sydney into Australia’s Silicon Valley.
The “Australian Silicon Valley” line shows a focus on the current Bay Area tech startup model funded by venture capital and seed investors who are happy to forgoe profits in the hope of big capital gain when the business is acquired or goes public – the Silicon Valley Greater Fool model.
Silicon Valley itself is pivoting away from this model with businesses across the Bay Area now frantic to at least have the illusion of being profitable or on the path to making money. In narrowly promoting the tech startup model TechSydney seems to be trying to catch a wave that has already broken.
The main worry from the TechSydney announcement though is that it seems to go against the open door policy that makes Silicon Valley so successful. Rather than encouraging questions and new entrants, TechSydney is slamming the door shut with only the successful and well connected invited.
The group will launch at an exclusive invitation-only Dinner on May 30 at the Powerhouse. Sydney’s top 200 technology companies will be in attendance. The first 100 have already been invited, and the group is now taking applications for the next 100 attendees at TechSydney.com.au, and is urging companies to register their interest today.
In some respects this is to be expected of the Sydney business community – the city’s industry is based upon the Rum Corps model of the colony’s early days where success is based upon connections and influence rather than being open and collaborative. This attitude underpins the ‘mates culture’ that is critical to acquiring power and wealth in New South Wales and across Australia.
With an attitude of having an ‘invite only’ group leading the push the hopes of creating an ‘Australian Silicon Valley’ are doomed. By locking out new entrants or dissenting thinkers, it’s impossible to create a vibrant hub.
For Sydney, or any other Australian city, to succeed as a global hub in any industry that legacy of the Rum Corps, the mates network, needs to be suppressed and a more open, collaborative mindset put in place.
TechSydney can do that if its leaders choose to do so. Hopefully at their invite only meeting at the end of the month the wise men of Sydney’s tech elite will decide that an open initiative that welcomes newcomers and tolerates new ideas is the best opportunity to make the city a global leader.
Today’s startups indicate the future shape of the economy, but where will the jobs come from?
One of the challenges we face in looking at the economy’s future is going lies in identifying what tomorrow’s industries will be.
I’ve spent the day at the 500Startups pitch day at the Computer History Museum in the heart of Silicon Valley listening to the startups on the program making their investment spiels and in many ways those businesses are a glimpse of the future economy.
While not all of these businesses will survive, and many will pivot over time, they do indicate directions the economy is taking.
The question though is what sectors will drive jobs growth over the next quarter century and whether those industries will pay enough for workers and their families to survive, let alone keep a consumerist economy ticking along.
One investment company believes they have found four factors that predict the success of a startup business – being in Silicon Valley isn’t one of them.
There are four factors that seem to be key to the success of startup business and one that doesn’t reports the Harvard Business Review.
A survey of six hundred investments over the past decade by First Round Capital found the best predictors for success were that at least one of the founding team was a woman, one had been to an elite university, some had worked at a top tech firm and the average age of the team was under 42.
Interestingly First Round’s successful investments weren’t dependent upon the businesses being based in the Bay Area or New York.
Those factors may have something to do with the focus of First Capital’s investment managers but the results are food for thought.
AirBnB had almost no working technology when it launched in 2007. But they proved their idea.
The first ever guest of AirBnB tells his story. At the time the site had no contact details and Amol Surve was desperate to attend the San Francisco’s Industrial Design Conference in 2007.
He tracked down AirBnB co-founder Joe Gebbia to get the air mattress and the business was born.
Which shows a good business idea doesn’t need all their processes and technology in order to prove it works. Something that anyone with a new business idea should consider.
As VC money becomes scarce for startups, bootstrapped businesses could come into their own
“The sincerest form of flattery is that customers will pay,” says Alex Bard, the San Francisco based CEO of Campaign Monitor, an email marketing platform originally out of Australia.
Two years ago we spoke to Bard who at the time was Salesforce’s Vice President for Service Cloud and Desk.com. Since then he left the cloud CRM giant to run the global of expansion of Campaign Monitor. We caught up with him again today at the company’s San Francisco offices.
Campaign Monitor is an interesting company in that unlike most tech startups it has been cashflow positive from its early days and when it did take investor money, half the funds were raised from private equity rather than venture capital funds.
“Because the financing climate in Australia wasn’t as fertile here in the United States – and San Francisco specifically – until recently, you have a whole crop of tech companies that have been built differently. From day one they’ve been focused on economics and business fundamentals.”
Bard sees this focus on bootstrapping and cashflow as being an advantage in the current funding climate where suddenly unlimited amounts of VC money can no longer be assumed.
It could turn out more conservative companies are better fixed to weather the coming investment drought than today’s unicorns.
Dropbox’s warning about staff benefits is an indication of tougher times in the Bay Area
Despite having spent a hundred thousand dollars on a chrome panda for their office lobby, Dropbox are warning staff that benefits are about to tighten, Business Insider reports.
The warnings from Dropbox’s management are a clear indication that tougher times are approaching for tech companies. For those wanting to imitate the Silicon Valley greater fool model or get a slice of it, that opportunity may have passed.
There’s one common piece of advice entrepreneurs have for others.
I’ve spent much of today, interviewing Australian tech company founders on why they moved to San Francisco for a project I’m doing.
One question I’m asking is what advice they would give others planning a similar move.
Every response so far has been, “do it now. Don’t wait.”
So what are you waiting to do?
Startups may look sexy, but working for them is hard and stessful
Anna Weiner writes a great piece on the brutal realities of working for tech startups. The food might be good but they are an anxious and stressful place to work. This story is worth a read for anyone considering working for one.
Silicon Valley’s obsession with finding the next tech unicorns could be its weakness.
What happens in Silicon Valley when your startup doesn’t fit into the current hot ‘unicorn’ categories?
I recently spoke to one female founder about her business and why she chose to setup on the US East Coast rather than follow the popular path of establishing a San Francisco base. Her answer shows the obsessions Silicon Valley investors have and why the Bay Area model may not be right for all companies.
Originally we planned to set up in the Bay area. That’s what you do right? So our company’s registered office was in Palo Alto and then I started plans to have three of my staff and myself relocate to San Francisco. I took onboard some Silicon Valley Advisors and this was a pretty horrific experience that taught me a lot. Here is my experience of trying to set up in the Bay Area then not. This is my cautionary tale to other Aussie Start Ups.
The Valley comes with a certain formula that gets beaten into you. Here’s how it goes:
A Start Up must:
- Be in the Bay Area
- Have had an MVP in market
- Be an incorporated US company, preferably a Delaware company if you want US VC investment
- Have a Run Rate (annual revenue) of $3-5million dollars in order to attract investment
- Not be enterprise software
- Be a SaaS company like Atlassian with a similar business model
- Have a product that is inexpensive where clients can self-install and there is no professional services or servicing required
I found the Silicon Valley Advisors I dealt with to be arrogant, formulaic and could not see potential outside of the standard Unicorn-creating formula. So I realized the Bay Area was not going to be a good fit for My business. Additionally I figured that none of our clients were actually based in the Bay Area and I needed to be near them. As a FinTech company the logical thing was for us to go to where our clients were so that we could constantly listen to them. Listen to their problems, understand their business, build relationships, have them help us figure out what our product should be and pay us
So we moved to NYC and set up on office in Chelsea. From NYC it takes only a couple of hours to get to Boston, Baltimore, Philadelphia, Columbus, Chicago, even Texas to be with clients.
Also the investment discussions are much more ‘normal’ and investors are respectful of me as the CEO and Founder and my background and potential to build a significant, revenue led and profitable large software company. They are backing me and value that I am experienced. Not once has age or gender come up. In fact to be fair, probably the opposite. Being a woman over 40 seems to be appealing to East Coast clients and investors.
The founder’s experience also betrays a herd mentality among the Silicon Valley investors, something that may be a weakness for the industry and the region. It certainly indicates the dominant business model may be very fragile as markets turn against tech unicorns.
