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Making waves in mature Melbourne

Monday, 2 April 2012 | By Michelle Hammond

feature-melbourne-thumbMelbourne

 

Population: 4.07 million

 

Start-up survival rate: 74.3% (2007 to 2009)

 

The city of Melbourne is famous for its food, its fashion and its football, squeezing all manner of things into every calendar year, with no shortage of activities for tourists and locals alike.

 

Since the mid 1990s, Melbourne has experienced significant population and employment growth, and there has been substantial investment in the city’s industries and property market.

 

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So where does that leave start-ups?

 

There’s no shortage of notable Melbourne start-ups, including daily deals site Catch of the Day and its group buying subsidiary Scoopon, which last year landed an $80 million investment.

 

Founded by Melbourne brothers Gabby and Hezi Leibovich, Catch of the Day was launched in 2006, while Scoopon launched in 2010.

 

Other Melbourne start-up success stories include 99designs and BugHerd.

 

“The Melbourne start-up scene has improved immensely in the past 18 months, particularly for tech start-ups,” says Andrew Birt, co-founder of Melbourne-based start-up incubator AngelCube.

 

“A lot of this maturity in Melbourne’s eco-system wouldn’t be possible without people like Guy King and Bevan Clark [RetailMeNot], Lorenzo Grollo [Grollo Foundation], Mark Harbottle [99designs], Tony Glenning [Starfish Ventures], Simon Baker [Future Capital], Adrian Stone [AngelCube], as well as others.”

 

“The more successful entrepreneurs who decide to reinvest, mentor and teach the next generation, the stronger chances Melbourne start-ups have in making it on the world stage.”

 

Birt says Melbourne’s start-up scene also benefits from the work being done at accelerators such as AngelCube.

 

“Accelerators shine a spotlight on what’s happening in a local start-up community and bring together a diverse group of mentors… We could do with another in Melbourne,” Birt says.

 

Amir Nisssen, founder of Student Entrepreneurs at Melbourne University, agrees the start-up scene in Melbourne has been “coming of age” in the last 12 to 18 months.

 

“It doesn’t matter how experienced or successful someone may be, they are still keen and willing to listen to your pitch and help you out on your journey in any way they can,” he says.

 

“There are a bunch of really driven entrepreneurs looking to make Melbourne a leader in entrepreneurship and start-ups.”

 

“This can be evidenced with the seed accelerators, co-working spaces and general activity in the scene really coming to the fore in the last year.”

 

“One big weakness I hear about a lot from entrepreneurs is the lack of angel investment, particularly in the $100,000 to $200,000 available for early stage start-ups.”

 

“There are more options than ever for your zero to $20,000 funding, and few start-ups are at the VC stage asking for one million-plus, but the point in the middle appears lacking.”

 

The City of Melbourne offers grants through its Small Business Grants program, which includes a category specifically for start-ups.

 

The program provides financial assistance to small businesses located in or intending to locate to the City of Melbourne.

 

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According to City of Melbourne Lord Mayor Robert Doyle, small business makes up 83% of businesses in the Melbourne municipality.

 

“Quite often, the biggest hurdle for a small business is getting that great idea off the ground and that’s what our grants are designed to help with,” Doyle said in a statement.

 

Key target sectors include advanced manufacturing, biotechnology, finance and business services, environment services, higher education, information and communication technologies, creative industries, hospitality and retail.

 

For those who thrive off social interactions, there’s the Churchill Club, a community of technologists, entrepreneurs and innovators that meets in North Melbourne.

 

Club members get to network with seasoned entrepreneurs and technologists in Melbourne, connect directly with other members online, and discover emerging technology opportunities.

 

There’s also Lean Startup Melbourne, Melbourne Jelly, Melbourne Nightowls, Melbourne Silicon Beach and Melbourne Startup.

 

The various universities in Melbourne have a strong entrepreneurial focus, namely RMIT and Swinburne, the latter of which is home to the Australian Graduate School of Entrepreneurship.

 

While Melbourne is proving to be an ideal launchpad for entrepreneurs, they continue to look overseas to take their business ventures further.

 

For example, Melbourne entrepreneurs Rob Ward and Chris Peters have been making headlines with their iPhone-related products, the Opena Case and the Quad Lock.

 

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While Ward and Peters have no qualms with Melbourne’s start-up scene, they felt compelled to travel to the United States in order to do a deal with a distributor.

 

“The best move we made was traveling to the US for CES 2012 as we were able to meet face to face with distributors, and ascertain their size and reach in the market,” Ward told StartupSmart.

 

“Being an online business, many meetings and general business dealings have been conducted over Skype.”

 

“But our time in the US made it clear to us that meeting face to face is still a very important part of doing business internationally.”

 

Melbourne’s Silicon Valley

 

The CBD and neighbouring suburb Richmond are the respective homes of the York Butter Factory and Inspire9, which are “without a doubt” Melbourne’s start-up hubs, according to Birt.

 

“These two co-working spaces are the home of so many important events like AngelCube, Startup Weekend, the Sensis API competition [and] Ruby on Rails,” he says.

 

Strengths

  • Good co-working spaces, namely Inspire9 and the York Butter Factory.
  • Lots of meet-ups and events.
  • A legitimate start-up accelerator in the form of AngelCube.
  • Active early stage funds such as Adventure Capital, Future Capital and Starfish Ventures.
  • Angel investment community – Aurelius Digital is crucial to Melbourne’s start-up scene.
  • Successful entrepreneurs reinvesting in Melbourne’s start-up community.

Weaknesses

  • Needs more outspoken thought leaders – not many successful Melbourne entrepreneurs share their knowledge via blogs or writing books.
  • Not enough intellectual property unlocked at universities.
  • Hesitancy among telcos and media companies to make early stage acquisitions.

Notable start-ups

  • Catch of the Day
  • Scoopon
  • 99designs
  • BugHerd
  • Annex Products (Opena Case, Quad Lock)
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