startups | Paul Wallbank - Communications Professional

Australia’s changing startup landscape

The 2016 Startup Muster report tells us a lot about the state of Australian business.

Last week, the annual Startup Muster report on the Australian startup sector was released, giving investors, founders and policy makers a valuable snapshot of a vibrant sector of the economy.

The 2016 report had 2711 responses to the online survey which the researchers whittled down to 685 startup founders, 239 potential founders and 474 startup supporters.

Compared to the previous years, the replies are an increase from the 602 in the 2015 survey and 385 the year before. It shows how the Australian scene is growing and evolving.

Still a boys club

A key finding from the 2016 Startup Muster report is the changing gender composition of a group that, quite rightly, has been criticised for being too much of a ‘boys club’. This year’s survey found 24.6% of founder respondents were female, up from 17.4 and 16.1 in the previous two years.

One area where Australia’s startup community does boast diversity is in its industry composition with 17% of the country’s startups in 2016 being focused on the most popular category of Fintech. Notably that sector came in at seventh in 2015.

2015	2016
Marketing	Fintech
Content/Media	Retail
Retail	Content/Media
Big Data	Internet of Things
Health	Education
Education	Marketing
Fintech	Social media

Also notable in that list was the disconnect between startups and investors. While 17% of Australian startup founders were focused on Fintech, 42% of investors were. The area most of interest to investors was medical technology (47%) with the Internet of Things second (43%).

Over the next few years it will be interesting to see how investment fashions change, in the UK the bottom seems to have fallen out of the fintech boom while global investments seem to have increased. It’s likely Australia will follow a similar pattern to the wider global trends.

Sydney’s decline

Another interesting shift is the balance between cities and states with New South Wales and Sydney remaining dominant but its position slowly falling,

	2015	2016
outside capital cities	n/a	23.1
NSW	44	40.9
Vic	17	18.8
Qld	16.5	19.3
WA	8.9	7.3
SA	2.9	6.3
Tas	0.6	2.3
ACT	6.4	6.2

The fall in Western Australia is probably due to the state’s economic collapse in the face of the dying mining boom – many of WA’s skilled and affluent workers are moving out rather than struggling with a declining economy.

Efforts by the Victorian and Queensland governments to promote their startup sectors seem to have had some success although the real winner is South Australia, something underscored by US incubator TechStars’ recent launch in Adelaide.

The big question though is how attractive Australia is as a location for startups and investment capital.

Funding woes

In the 2016 Compass Global Startup Ecosystem Ranking report, Sydney fell four points from the 2012 survey to 16th while Melbourne fell out of the top twenty city rankings.

Due to its position as the second lowest on the Growth Index within the top 20, and its comparably weak statistics around Performance, Funding, and Market, Sydney now ranks #16 (down from #12 in 2012).

Compass’ findings show a critical problem for the Australian sector, regardless of its location, industry or founders’ gender – the lack of later stage investment funds.

That lack of funding means Australian startup founders are particularly sensitive to money issues with Startup Muster finding the most common hindrance to people launching startups is life circumstances requiring a stable income. In a high cost society, the need for a regular salary isn’t surprising.

Startup Muster’s 2016 report is a very useful snapshot of the state of Australia’s tech startup community. It serves as a good guide to what business founders, investors and policy makers should be considering.

Scamming the Jobs Act

JOBS Act equity crowdfunding replaces the ‘fools, family and friends’ that startups relied for seed capital. Hopefully there won’t be too many fools

When the Obama administration approved the US JOBS Act in 2012 it was almost certain the crowdfunding aspects would attract charatans looking to separate gullible investors from their money.

And so it has turned out, with the New York Times reporting how some crowdfunding sites are worried by the poor quality of startups touting for funds on some platforms.

The Times piece follows the story of Ryan Feit, the founder of New York’s Seedinvest who tells how he has rejected substandard proposals only to have seen them embraced by other crowdfunding platforms with often terrible results for investors.

One of the early companies he rejected was shut down by regulators — who labeled it a fraud — after it raised $5 million from investors. And Mr. Feit expects it won’t be the last.

That fraudsters would be attracted to crowdfunding sites is unsurprising and with regulators still working out how to manage investor protection the field is still very much ‘buyer beware.’

High valuations are also an investor warning sign.

Mr. Feit has been particularly worried about companies that have assigned themselves sky-high valuations that will make it hard for investors to ever make their money back. In several cases, companies that he rejected because of their high valuations have shown up on other sites with the same valuations

The unicorn mania of recent years is the cause of this focus on high valuations and is strange for investors as those richly priced stakes are not in their interests or those of employees taking equity in the business. If anything, a ridiculous market valuation should be the biggest warning of all to potential stakeholders.

Ultimately though it may be that crowdfunding equity isn’t about taking a stake in a business but more showing one’s support for a venture suggests, Nick Tommarello, the co-founder of Wefunder.

Mr. Tommarello also noted that many small-time investors so far were viewing their investments more as donations to businesses they like, rather than as investments that will make money.

As JOBS Act equity crowdfunding campaigns are limited to a million dollars each, being the modern equivalent of the ‘friends, families and fools’ may be the future of these capital channels. Hopefully there won’t be too many fools.

GorillaStack – the weekend hacking exercise that grew into a business

As a business born out of a weekend hack Sydney based GorillaStack is almost a classic tech tale.

“I was involved in a startup previously,” says GorillaStack’s CTO, Elliott Spira, recalling how the company was his co-founder Oliver Berger at the AWS Re:Invent conference in Las Vegas last week.

“We noticed we had spikes in our AWS spend, there was a big attribution issue and one day we said ‘how about we do a weekend project and try to spin something up that listens to our Cloudwatch metrics and tells us how much we’re spending at any time of the month.”

As the challenge was accepted, the team went to work. “We hacked away all weekend as we like to do, being nerds, and by the time the weekend was over we had the basic cost dashboard that told us how much we were spending each month.”

Adding more features

“The next weekend we decided to add another feature and we decided to add cost alerting where we’d get an email when we passed a certain threshold. That was really cool as we could budget and know when we were spending too much.”

“On the following weekend we started working on periodic alerts on how much we were spending over a set set time and from there the idea started to prosper, we thought ‘oh wow, we have a bit of a product going here. Let’s show some friends who also use AWS.’ From that feedback we found people wanted to keep the dashboards up and keep track of what was being spent.”

Today GorillaStack offers a service that allows companies to manage their AWS usage, something that can easily get expensive for organisations not closely watching what they are using. “What we try to do is make a cultural change where people become conscious of what is actually theirs in the cloud.” Elliott says. “We’re actually seeing that change.”

Living the culture

“In terms of that culture, we try to live that culture as well. We have private Slack channels with each of our customers so there’s a constant line of communication,” says Oliver. “Those Slack channels have proved to be an effective customer support and product development tool. “we’ve fostered quite a good community.”

With the initial hack being successful the company was formally founded in June 2015 and to date is bootstrapped, having not taken any investor’s money. “We want to get to a stage where we’re comfortable with the product,”says Oliver.

Currently the user base includes paid customers like Citrix, Bauer Media, Health Direct and the Australian Football League. “We have quite a good spread in terms of geography and mix of customers,” observer Oliver. “Right now the breadth suits us.”

Applying the freemium business model

Following the freemium model, the company also offers a free tier offering a single switch. “If you want anything more you move onto our paid tiers,” says Elliott.

To the question whether the company is looking at catering to other services such as Microsoft Azure or the Google Cloud, the dominance of AWS comes into play. “Right now we’re definitely sticking with the giant, we’re really looking at growing our capability so we do more and offer more to our existing customers,” says Elliott. “I think it’s really important to focus on delivering value to them and our business’ future,” Elliot says.

Looking to the immediate future, their focus is on extending their current customer offering. “We’ve a fair bit on our roadmap, we have a bit focus on chatops with a more in depth integration with Slack and Hipchat integration with our existing product,” says Elliott.

In talking to the Gorilla Stack founders, it’s striking just how the startup follows the classic tech model of a bootstrapped company that started by a bunch of hackers solving their own problem. How the business evolves will be fascinating to watch.

Paul travelled to AWS Re:Invent in Las Vegas as a guest of Amazon Web Services

Saving pets with tech

Pet Rescue has a mission to make sure every rescued pet finds a home. By using the web they hope to save thousands of animals each year.

“Like all great ideas it was conceived over a beer and executed over coffee,” says John Bishop, the joint founder and co-CEO of Pet Rescue. “A couple of friends and I were sitting in a bar back in 2003 and we came up with the idea, had a look around and there was no-one doing it in Australia at the time.”

John was talking to Decoding the New Economy at last week’s AWS Re:Invent conference in Las Vegas where he some time to explain how Pet Rescue uses the web to connect prospective pet owners with rescue shelters.

“Basically we help people find rescue pets in need of adoption,” John explains. “We work with the vast number of rescue groups in Australia. By rescue groups I mean pounds, shelters, vet clinics and foster care networks. There’s about 950 of those in Pet Rescue at the moment.”

Rabbits, guinea pigs and rats

The system allows accredited animal rescue services to list the pets they have available for adoption, “primarily cats and dogs but also rabbits, guinea pigs, pigs, chickens, there’s even one rat we’ve rehomed,” John laughs.

John was working as an IT manager with a consulting business on the side in 2004 when the site launched. “We didn’t know if it would work but I had the idea in my head the whole time I was building it that if one pet found a home rather than being killed then it would be worthwhile.”

“From day one I designed Pet Rescue to be as hands off as possible, once the members had access to it they could upload their own photos and things like that. It wasn’t groundbreaking in 2003 but it wasn’t that common”

“One of the biggest problems we faced in those early days was many of the rescue groups didn’t have digital cameras. So we did a promotion with a bunch of Kodak digital cameras that had been donated to us and gave them to the groups.”

A problem of scale

The site was quickly a success but that came with issues, particularly when the site was mentioned in the press or had a lot of social media attention. “Eventually we hit problems as I had gave no thought of architecting a site that would scale.”

While that scaling process didn’t go without problems, the service now sits in the public cloud with AWS so the Pet Rescue team can get on with connecting pets with owners, and John expects to help rehouse four thousand pets by the end of the year.

“Our challenge at the moment is we have a weird supply and demand problem happening, we have half a million unique visitors a month and helping rehome about five to six thousand. Another challenge is we’re still working on an old model of handling enquiries about the pets.”

“Our goal is to get to the point where we rehome 200,000 pets a year. Right now we’re looking at 90,000. It’s a bit of a magic number because that’s the number of pets that are unnecessirly killed each year so if we can get to that two hundred thousand we can zero that out.”

Finding funding

The bigger task for Pet Rescue is to find funding with the organisation as John doesn’t believe paid registration for the rescue groups or users is the best thing for the site, “we want to have as few barriers as possible,” he says.

Currently the service earns some money from advertising with some corporate partnerships in the pipeline. “We need money, it costs a lot to keep the site up and costs a lot for development.”

While many startups and corporations talk about using tech for good, Pet Rescue’s and John Bishop’s mission of ending unnecessary deaths of unplaced pets is a genuine worthy cause. By making it easier for companion animals to be adopted by the right households shows what technology can do.

Paul travelled to Las Vegas and the Re:Invent conference as a guest of Amazon Web Services.

The shine goes off the wearable tech market

FitBit and GoPro lose their lustre as smartphones take many of their features

Friday was a bad day for former startup darlings FitBit and GoPro with both companies disappointing investors.

GoPro, whose cameras for a while defined a new wave of adventure videos, announced a loss of $104 million dollars on the back of production issues and further disillusioned stockholders with a forecast of further poor sales in the upcoming holiday season.

Those shareholders have many reasons to be disillusioned with the camera maker’s shares reaching $98 two years ago after floating at $24. Today they are sitting at $11.

FitBit shareholders have suffered similarly, with the fitness band’s shares falling to eight dollars after listing at $20 almost two years ago. Their announcement of further problems on Friday saw the stock price dropping thirty percent on the day.

It may be easy to scorn investors in hindsight, but both companies were emblematic of a new generation of wearable technology and much of their problems today owes as much to them trying to stay ahead of the curve as it does from smartphones developing most of their products’ functionality.

The travails of FitBit and GoPro are typical of a time when new technology is changing business. Some companies shine brightly then fade while others have a rocky road to success. We’ll have to wait and see if FitBit and GoPro survive.

Building a billion dollar business

Therese Tucker, founder and CEO of accounting automation service Blackline, has some useful lessons on building a new business

Last week accounting automation service Blackline listed on the NASDAQ stock exchange with a valuation of over a billion dollars.

The listing was a triumph for the company’s founder and CEO Therese Tucker who started the company in 2005 after a client asked her to find a way to manage the ten thousand spreadsheet their firm used for accounts reconciliation.

We spoke to Therese last year during a visit to Australia where she described some of the challenges of building a business.

Therese’s journey is an interesting, and inspiring, tale of how you don’t have to be a twenty something white guy to build a billion dollar tech business. Her story is worth listening to.

An entrepreneur’s journey – a conversation with Muru-D’s Ben Sand

From a scrappy and underfunded inner Sydney startup to Silicon Valley and back, Muru-D’s Ben Sand has a fascinating entrepreneurial journey

As part of Telstra’s Muru-D business accelerator opening its latest startup intake this week, Annie Parker and Ben Sand, the organisation’s co-founder and Entrepreneur in Chief respectively, spoke to a small group of journalists on Tuesday about what they were looking for in the next batch of applicants and how the tech startup sector is changing.

Ben’s entrepreneurial journey from a scrappy, underfunded Aussie startup to a hot Silicon Valley property and back to a corporate incubator is an interesting tale in itself.

His first venture, an edu-tech startup called Brainworth founded in 2010, operated out of a dilapidated inner city Sydney terrace. The business acheived traction and Ben’s team won a ScreenNSW interactive media grant two years later.

Failing the Kickstarter test

Ultimately Brainworth petered out after missing a Kickstarter round. As Ben says, “I focused on getting out the maximum viable model rather than the Minimum Viable Model and the money ran out.”

As Brainworth withered away, Ben joined former university friend, Meron Gribetz at his Augmented Reality startup Meta which went onto join the Y Combinator program. The company went on to attract $23 million dollars in investment, primarily from Hong Kong and Chinese investors, and now has 150 employees.

Earlier this year, Ben returned to Australia after seeing Mick Liubinskas’ blog post about moving to the United States. In that article, his predecessor put out a call out for those interested in replacing him at the Sydney office which Ben answered.

Australian advantages

Now firmly settled into his Sydney role, Ben sees computer vision as one of the biggest opportunities in the tech sector. Bringing together disparate technologies like virtual and augmented reality, artificial intelligence and smart sensors, computer vision allows machines such as autonomous vehicles, drones and medical diagnostic equipment to pull together sources of data that lets machines see what is going on in the world around them.

Computer vision is a field where Australia has an advantage, Ben believes. “Adelaide is the second most funded city in the world in computer vision,” he points out with investments like Cisco’s into South Australia’s Kohda Wireless driving the local industry.

Ben and Annie don’t see the next group of Muru-D applicants being restricted to any one field despite Ben’s background in AR and interest in machine vision. “It’s more the psychology of the founders,” he says.

Mentoring the next wave

Three years of experience is also delivering dividends, observes Annie. “I’m starting to see the early cohorts starting to mentor and support the newer ones. That’s part of what Muru-D is part of, creating the ecosystem.”

Over the three years, there’s also been quite a few adjustments to the Muru-D process, Annie observes. “We change the model each year by about thirty percent.” she says.

Another thing that has changed is that later stage startups can apply for the program which will be open until November 4.

“I’m excited and I’m very confident we’re going to get great outcomes for these people,” says Ben of the next Muru-D cohort. “We’ll be working on getting the most confident founders on board and hopefully helping them to aim high.”

ABC Nightlife – building the businesses of the future

What can we do to build the next generation of businesses?

This Thursday night join Dom Knight and myself on ABC Nightlife to discuss what tools you can use to start or improve your business and how can we encourage more people to have a go.

Last week the last Australian car making jobs finished and a survey of the Geelong Ford workers found only one percent were interested in starting a new business.

If you missed the spot, you can listen to the podcast through the Nightlife website.

Despite the reluctance to start new businesses it’s never been easier to do so with a range of tools making it simpler to run one. Tonight on the Nightlife we look at some of those tools and what we can do to encourage more people to have a go at running their own companies.

For the program, I’ve a compiled a list of tools businesses should be using. It certainly isn’t exhaustive or definitive and if you have any suggestions on better or newer tools, I’ll be happy to add them.

Some of the questions we cover on the program include;

who ran the survey of motor industry workers?
what were most of them going to do?
so what sort of businesses can these workers go into?
what programs are being offered to these workers?
how has starting a business changed over the past twenty years?
is the focus on tech startups intimidating people who might want to start a business?
what are the basic tools every business should have?
a few years ago social media was all the rage, does it matter any more?
what’s the number one advice for anyone thinking of starting a business?

Join us

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.

Speaking American – learning the language of Silicon Valley

While the business cultures of the US and Silicon Valley may look familiar, they are very different to other communities warn Australian startup founders

This is the last of four stories I did for The Australian on why entrepreneurs are making their way to the United States’ Bay Area.

“It is a very good time to be Australian in America,” says Dr Catriona Wallace , the Sydney based founder of Flamingo Customer Experience. Despite that goodwill she and those who’ve made the move to the US have found the ways of doing business in the two countries can be quite different.

US decision making processes are one trap, Wallace observes. “Americans will say ‘yes, yes, yes then no’, whereas Australians will say ‘no, no, no then yes,’“ she told The Australian. “I had to learn that an enthusiastic “Yes” from an American is an expression of their interest and intention, not necessarily an action that can be followed through.”

Swinging for the fences

Casey Ellis, who relocated his Sydney security startup Bugcrowd to San Francisco in 2013, finds the scale of ambitions are a key difference between the two countries. “Americans are comfortable with those who swing for the fences whereas Australians aren’t.

“I had a million dollars committed already but people weren’t buying my execution because the way I was selling it was that I had it all figured out, which is what I’d been taught what to do in Australia – we’ve figured how to make sausage machine then the key to making more money is to build a bigger handle and crank out more sausages.”

The reality though is different in the United States warns Ellis. “If I’m pitching like that to VCs over here they’re like ‘we like what you’re doing but your vision is too small.’ I always had a big vision for Bugcrowd but I’d been taught not to put that at the front. In the US you put the vision first and the execution follows.”

Figuring out the differences

“I spent some time trying to figure out why it is different,” Ellis reflects. “If you think about it Australia is a country was formed by a bunch of people who were thrown out for stealing stuff, dropped on a rock and told to figure it out, so we’ve got this incredible culture of troubleshooting and innovation but we’ve also got this tall poppy syndrome of ‘don’t stick your head out too far.’ That’s a very strong cultural feature of Australians and how they interact.”

“If you bring that over to America you will fail because this country was formed by entrepreneurs who set out to find a new land,” Casey concludes. “It’s not about saying Aussies are meek, they’re not, but Americans are completely comfortable with swinging for the fences and Australia’s aren’t.”

Peter Grant of Safesite warns not to overplay the Paul Hogan persona. “Coming from Australia is a novelty but you can’t play the dinky di Aussie card, you have display professionalism and represent you are serious about being a US company and serving the US environment,” he told The Australian. “Americans are a lot more accepting of risk and have a fear of missing out on the next big thing.”

“The country is founded upon going out and doing your own thing and being a maverick, so they are a lot more accepting of risk and have a bit more of a fear about missing out on the next big thing, “ Grant explains. “We’ve developed a strategy of saying ‘we’re working on this, this is going to happen and we’re talking to your competitors.’ That seems to work.”

Watching the clock

One respect where Australians’ laid back attitudes come unstuck is in time keeping warns Flamingo’s Wallace, “Americans are super punctual. Conference calls typically start 5 mins before the hour rather than 10 minutes after as it would in Australia. Meetings finish at quarter before the hour so people can get to the next meeting 5 minutes early.”

“If people are delayed and get to a meeting a few minutes late they will apologise profusely for several minutes and then apologise again at the end of the meeting. American’s will warn of the need to finish a meeting at a certain time by saying, “I have a hard stop at quarter before”

Humour lapses

Another difference is the sense of humour, Dr Wallace warns. “Americans typically are not funny in business as we Australians are. There is not much joking in meetings. I once used the enormously funny expression of, ‘That customer experience would have been like having a hot chicken blood enema!’.”

“Instead of this being outrageously funny I was surrounded by a group of 10 executives whose mouths hung open in shock that I had just said something like that. The meeting tanked from there on….”

“All this being said, the American business community love Australians,” Wallace concludes. “They find us hard working, great at relationships, good at navigating politics, honest, authentic and transparent. In some ways they aspire to be more like us. We cut through the bollocks – although they don’t understand that word – or bullshit and get things done. Americans like that. We are generous. They like that too.”

Maintaining the home base – why many startups don’t fully move to Silicon Valley

For all the benefits of moving to the Bay Area, many startups are happy to keep much of their operations in their home states.

This is the third of four stories I did for The Australian on why local entrepreneurs are making their way to the United States’ Bay Area.

For all the benefits of moving to the US, many startup founders want to remain down under. According to last year’s Startup Muster survey of Australia’s tech community, only 18% of local entrepreneurs intend to move overseas, and even those going offshore keep the bulk of their operations Down Under.

The reasoning for keeping operations in Australia vary, but for those focusing on Silicon Valley costs are a key concern. Didier Elzinga of Melbourne’s Cultureamp decided to keep management and the bulk of operations in the company’s home town due to several aspects. “For us there are many great benefits, including lifestyle, but commercial decisions play into it too,” he says.

“Our engineering team is based in Melbourne, and we are happy not to be competing for talent in the bloodbath that is Silicon Valley. In the longer term we also believe the world is moving to the East – and Australia has the opportunity to be the eastern most tip of the West, or the western most tip of the East.”

Needing a US presence

Having a North American presence proved essential for the sentiment measurement company, “for us a US office was an easy decision as most of our clients were tech companies based in the Bay Area” says Elzinger.

“We had someone working in customer success there from fairly early on, and then we officially beefed up our presence when one of our co-founders Jon Williams moved to San Francisco in 2014.” Since establishing a San Francisco base, Cultureamp has raised six million dollars in capital raisings and opened offices in New York and London.

Running a global business from Melbourne can be demanding but Elzinger believes it is worthwhile, “other than timezones we’ve yet to run into any major obstacles,” he says. “For me as CEO, it can mean a lot of travel, I try and get to the States at least once a quarter, most times more. But overall, we feel we’ve made the right decision, and are proud to grow a global company from Melbourne.”

The travel can be demanding for an Australian based business and Temando’s CEO Karl Hartman found the demands of regularly flying across the Pacific left the company at a disadvantage. “Previously when I was flying here once a quarter, things moved gradually,” he recalls. “Being here means we can move much more quickly, some things need to be face-to-face.”

The expense of Silicon Valley

A San Francisco base comes at a cost though, “it’s very expensive here.” Hartman warns, “we have a focused team here in the US that is largely focused around partnerships, project management and go-to-market. But we keep our developers largely in Australia.”

“I’d caution any Australian company looking at coming here to fill engineering jobs that coming here is very expensive, I’d argue you can find very good talent in Australia,” he says. “I’d also argue it’s easier for Aussie companies to raise seed investments in Australia.”

Holding costs down is particularly critical for earlier stage companies points out Affinity Live’s Geoff McQueen. “It’s about a third less to employ a developer in the Illawarra than the Bay Area,” says McQueen who has kept his development team in the company’s home town of Wollongong. “Saving those costs gives a startup with limited funding a lot more time.”

Keeping the skills base

Data analytics startup Instaclustr is another keeping most of its operations in Australia while opening offices in the United States, Europe and Japan. “We established a leadership team and sales office in the US, but all of our engineering and support services are located in Australia, at the University of Canberra,” CEO Peter Nichol explained to The Australian.

Instaclustr, which recently raised $2 million in seed funding for its data analytics service running on the open source Apache Cassandra system, chose to maintain operations in Australia to avoid having to compete with the salaries and expectations for high-tech staff in the US.

A favourable Australian dollar and a relationship with local education institutions were also key factors says Nichol, “the skill sets that we are chasing are rare, so we have decided to built a knowledge base and big data experts through a partnership with the University of Canberra.”

Keeping close to customers

Like most tech companies having a US presence, if only for management and sales, has proved essential for Instaclustr. “The main reason,” Nichol says, “was to be to near our customers and partners from a physical and time zone perspective. Over 60% of our customer base is located in North America and 100% of ecosystem partners.”

Despite the benefits of remaining in Australia, the movement of Australian entrepreneurs overseas is increasing. While only eighteen percent of the 602 startups surveyed for the 2015 Startup Muster report intended to move overseas, it was an increase of fifty percent over the previous year.

That many heading overseas want to keep operations and employment local should be encouraging for those trying to Australia into a global startup centre and has to be a factor in developing a local ecosystem and government policies that support it.

California dreaming – following the startup trail

The flow of startups to Silicon Valley is a modern gold rush. Why are entrepreneurs making their way to the Bay Area?

Earlier this year I did a series of four stories for The Australian on why startups see Silicon Valley’s Bay Area as the best base for their businesses.

From the interviews there were a number of reasons for that migration and it was a fascinating exploration of what drives the development of today’s tech industry along with how a global industrial hub maintains its position.

The stories feature a diverse bunch of founders and businesses which in themselves are interesting tales.

Just doing it – the road to Silicon Valley

For business founders thinking about moving to Silicon Valley the advice is ‘just do it’ from those who’ve done it.

This is the second of four stories I did for The Australian on why entrepreneurs are making their way to the United States’ Bay Area.

“Get over here as quickly as you can. Don’t worry about being ready, feeling fully baked or whatever,” says Bugcrowd founder Casey Ellis. “Do whatever you can to get a ticket over here, stay in a hostel and do whatever you need to be here and experience the place.”

Casey Ellis was speaking in the company’s converted warehouse offices just off San Francisco’s Embarcadero waterfront. “Half the price of SoMA,” he smiles while explaining what intending expats should prepare for when moving over to the United States.

Ellis has plenty of reasons to smile as a few weeks earlier the crowdsourced security testing service had announced a successful $15 million fund raising with Australian investor Blackbird Ventures leading the round.

Getting a US base

While he was delighted an Australian investor had lead the funding round, Ellis believed the company had to have a US base from its early days. “One of the reasons for that is if we’re not here, we’re going to be competing with someone who is,” he says.

“When I started going full throttle into BugCrowd, the logic I applied to it was this is either going to fail as an idea or it’s going to move very quickly,” he told The Australian. “If it moves quickly we need to be in a position where we are resourced as well as possible. The place to do it is here.”

“What blew my mind when I got here. I had blinkers on and the move took them off and I’m like ‘there are opportunities here that I hadn’t dreamed of. The reason I didn’t know that was because I hadn’t seen it first hand.’”

Being social

Peter Grant of construction safety service Safesite found social media was a good tool to prepare for the shift to the United States. “If you’re looking at moving at over, but generally speaking you need to make sure there’s a good product and market fit. You need to establish your networks over here, even when I was back in Australia at Muru-D, Twitter was a good way to establish communications.”

“Don’t wait until you get to America, engage with your community and your market as soon as you possibly can. Go onto the webinars, know the language, know the language, know the players – it’s a big country so there’s lots of players. Just start to get involved as soon as you possibly can.”

Founded in Brisbane after Grant found most construction businesses monitored site safety with pen and paper systems, Safesite first moved to Sydney to be part of the first round of Telstra’s Muru-D program. In 2015 he moved to the US as most of the platform’s users were American based and has since set up a network of distribution agents across the nation.

Staying local

“If you’re an organisation like us that needs to be in the US to survive then get over here as soon as possible,” Grant points out. “We have a year on our competitors. If it’s going to be too complex or you already have a profitable business in Australia you may not need to come to the US, you have to be realistic about it. It might make sense to find a local partner.”

Should it make sense to move to the US then it’s important to capitalise on those initial contacts and market research, Grant believes. “When you get over here establish your product market fit and your face-to-face relationships, the dynamic factors that will influence your growth over here.”

The move though doesn’t come without costs he warns, “it can be expensive to set up a business over here so make sure your investors and your legal representation have a full understanding of the implications of what you’re doing and the processes.”

Just do it

Jindou Lee of HappyCo also warns startup founders have to be prepared for some changes when moving to San Francisco. “If you really want to change the world and see your company succeed, get closer to your customers, you need to make sacrifices.“

The founder of real estate inspection app Happy Inspector, Jindou moved from Adelaide to the United States in 2012. After raising three million dollars in funding and being accepted onto the 500 Startups program, the company expanded into general business documentation and renamed itself to HappyCo. “My advice specific to moving to the US is… do it,” he says.

Connecting with the existing networks is also important, “the other piece of advice is to hook up with the different groups that are around,” says Bugcrowd’s Ellis. “The Startmates, the Blackbird folk – figure out who you can get in touch with. People like me who can sherpa you a little bit.” He says “Don’t rely too much on them as you won’t succeed as an entrepreneur if you do, but get a good solid start.”