On the face of it, Australia looks like a rather challenging place to create a startup. There’s the tyranny of distance, the timezone, and probably worst of all, the small and thinly-spread population.
Unlike Facebook or Google, an Australian entrepreneur can’t rely on their home market being much more valuable than the rest of the world. The size and distribution of the population also lends itself to a handful of dominant players in various sectors. Incumbents are generally big, well resourced and can be hard to unseat.
But Australia has a great many natural advantages, like a good educational system, a multicultural society, and good relations with the rest of the world. And that small market problem? Yes, it can be a drawback for some business models, but can also act as a shield for young companies.
A clear starter market
Living in a small market means fewer consumers, but it also means fewer competitors for talent. There are some big Australian technology companies, but there isn’t anyone on the scale of Google and Facebook. And the other competitors for talented Australians engineers and developers, like the banks and telcos, can’t offer stock options in a fast growing company.
For entrepreneurs like James Barouch, who founded data company LocalMeasure, this means the vast trove of Australian talent is ready and affordable.
By comparison, when Barouch started recruiting for his office in the United States, he faced intense competition.
“Try being a no name Australian entrepreneur in San Francisco trying to hire an engineer competing against Google and Square and Box, Airbnb and everyone else, who can pay five times more than you. Good luck!” says Barouch.
For some businesses, Australia’s small market means they are protected as their competitors focus on bigger companies, or are scared off by the smaller scale. Australian peer-to-peer lenders and crowdfunders, for example, have been able to develop scale while their competitors targeted the larger American market. And as SWIFT pointed out last month, they have now reached the stage where they can hold their own with foreign players.
A great platform for going global
“The good news is it that in the sort of digital world that we live in, people don’t really care where the company is from anymore. What they care about is that the product works and works incredibly well,” says Bill Bartee, a parter at Blackbird Ventures.
For Bartee, it is a prerequisite for investment that a company be ready to go “global from day one”. This means it needs to be highly scalable, with a platform that can be rolled out quickly, with minimal infrastructure. But it also means that the entrepreneurs have to be globally ambitious. There are plenty of Australian success stories that can be drawn from – Canva, Freelancer, 99 Designs and Envato, but Bartee uses Atlassian.
“Atlassian, the products are used around the world, and I don’t think people really care that they are from Sydney,” says Bartee.
“Its amazing to me how many times I’ve been to California and talking to someone about Atlassian, and say ‘you know [Atlassian is] from Sydney’ and they are completely shocked”.
Atlassian recently filed for an IPO that will value the company at $4.2 billion, but it has done so without a sales team. Instead, the company built products that appealed to developers around the world.
Its this sort of niche, global-from-day-one philosophy that is also espoused by Mick Liubinskas, the entrepreneur in residence at Muru-D.
Liubinskas encourages the founders he mentors to find scale overseas, and his organisation has recently partnered with Chineseaccelerator in Shanghai and 500 Startups in Silicon Valley, to encourage this kind of thinking.
“We’ve got to combine our spirit of backpacking with our spirit of entrepreneurship,” says Liubinskas.
“You can’t stay in Australia and build a big based business.”
A well-liked country
“There’s not a lot of countries around the world where everybody likes you,” says Liubinskas, comparing Australia to the likes of Switzerland.
“The USA likes us, China likes us and Asia likes us. That’s not to say we don’t have issues, but [good relations] are important.”
But more than just fond feelings, Australia has trading relationships with many of these countries. Free trade agreements like the Trans Pacific Partnership and individual agreements with the likes of China, have opened up more than a billion consumers to our products and services. Big industries like resources and education have cleared a path for startups to follow.
“Everyone sort of needs us for our resources but no one is worried about Australia either taking over from a hostile or market perspective,” says Liubinskas.
The high regard for Australia can also aid entrepreneurs personally, as they can visit more than 130 countries without a visa and live and work in New Zealand.
Multiculturalism as an export
Almost half of Australians are either first or second generation, which results in a great connection with foreign customers. Many Australians have experienced problems overseas they want to solve, or can speak the language of their foreign customers.
This is especially fruitful for startups pitching services outside of the English-speaking world. With Asia right on our doorstep and on the rise, the ability to tap Australians who are native speakers opens up billions of customers.
James Barouch has experienced this first hand. LocalMeasure is working on an integration with Chinese social media giant Sina Weibo. While the company has an office in Singapore, they aren’t Chinese speakers. Its the ability to tap Mandarin-speaking Australian coders that have given LocalMeasure the possibility to enter the Chinese market.
“We’ve got a Chinese speaker in our Sydney office and they can code, build and hopefully shift by the end of the year” says Barouch.
Starting up anywhere is tough, and Australia certainly has its fair share of challenges. But it also has many natural advantages.
Australia’s small market is potentially as much as help as a hindrance. It forces Australian entrepreneurs to think and act a certain way. It primes them to scale up and take on the world.
Once Australian entrepreneurs have embraced the global mantra, Australia offers protection and opportunities. Startups can validate and gain momentum while sheltered in a small market, ramp up with a skilled and multicultural workforce, and use Australia’s connections to the rest of the world to go global, fast.
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