Atlassian co-founder Mike Cannon-Brookes and Artesian Ventures managing partner Stuart Fox debated the impact of portfolio investments approaches, where an investor backs many start-ups with smaller amounts in the hope one or two works, at an event in Sydney last week. Cannon-Brookes, who also called for Australian start-ups to stop selling their companies so early, described portfolio theory as problematic for start-ups. “I want portfolio theory to be on my side, not on his side. Even at Blackbird (a start-up investment fund), the problem with a lot of investors is they want the portfolio theory on their side and I don’t think they should. Stay away from big corporates, they can get you into all sorts of trouble,” Cannon-Brookes said. Fox shared Artesian’s plans to invest in between 500 to 1000 start-ups in the next five years and how portfolio theory was key part of their approach. “If we’re going to invest in 1000 start-ups and they’re all billion dollar exits, we’re going to double the market cap of the ASX so that’s not probably going to work,” Fox says, adding the approach was likely to increase in popularity as new investors join the angel community. ‘If we want external investors, we need to make this look attractive to investors who, no offence, are going to have a portfolio approach. They’re going to price it against not just the people in the room, but also against other asset classes.” Cannon-Brookes added technology investors make most of their money on the one-in-a-hundred companies. “You need to believe you’re the one in a hundred or you’re starting a different kind of business,” Cannon-Brookes says. “The greater proportion of the returns flow to the winner and that’s it. In almost any kind of technology, the winner takes it all and everyone else is well who cares.” With this in mind, portfolio theory leaves underperforming start-ups more vulnerable. Fox explained they were quick to get rid of start-ups that have started to fail. “Our sh-tty ones we turn the oxygen off. I don’t want to be harsh, but we turn the oxygen off. We’ll hit an idiot bid first but that’s the same,” Fox says. “If anything comes out of my view, it’s that we’re not prescriptive. We want to get in really early on a lot of things,” Fox says, adding Artesian is backing got a couple of great companies who aren’t looking at maximum value of $20 million. Artesian Ventures has also recently launched VentureCrowd, a crowdsourced equity platform that will open in February. Fox said it should open up further funding opportunities as it will have a lower cost (minimum $1000) to access than an angel investment ($10,000 and up).
Designed to turn Australian technical founders into successful global entrepreneurs, one of Australia’s first start-up accelerators Startmate is now open for applications. The program will run next year from January to May. Companies will spend three months in Sydney and two in San Francisco. Startmate is seeking around eight companies, which will receive $50,000 in seed capital, in exchange for 7.5% equity. Startmate co-founder Niki Scevak told StartupSmart they’re seeking founders with big dreams and plans. “Beyond the very product centric technical team, we’re looking for people with large ambitions, the crazier the idea the better. We really want to work with teams who want to make a big difference in the world, so the scale of the ambition is what we’ll be selecting,” Scevak says. He says they’re committed to approaching each pitched idea with an open mind, adding that being the hundredth start-up to tackle an idea didn’t hurt Google, Facebook or Atlassian. “Anyone doing anything in an incredibly crowded area will be taken as seriously as brand new ideas. The ideas may sound incremental, but it really does matter why the founders have chosen to pursue this idea, and if they have a unique insight into it,” Scevak says. “It’s about why they care about their customers and if they have an authentic connection to the market. We look for what in their lives have driven them to this idea.” The program includes an impressive line-up of mentors including Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar; Tjoos co-founder Bart Jellema; and Spreets co-founder Dean McEvoy, as well as several partners from Square Peg Capital and Blackbird Ventures. This will be the fourth intake for the program. Previous participants include BugCrowd and NinjaBlocks. Start-ups can apply via Angel List.
It takes many things to get a business off the ground. It takes a flash of insight, plenty of drive, and good advice. It takes savvy staff and helpful networks. It also takes something few start-up founders have to begin with: money. Australia’s venture capital industry is growing and maturing. But the funds to finance start-ups don’t just come from high finance. Increasingly, a generation of Australian entrepreneurs who made or grew their fortunes over the past decade are investing their money back into start-ups, either directly or through niche venture-capital firms. Through this, they’re helping build a start-up ecosystem able to support new, growing start-ups, using the spoils of yesterday’s success stories. Here are just a few rich listers putting some of their money back where it came from. James Packer In many ways the trailblazer in this regard was James Packer, who made a fortune investing in companies like SEEK and Carsales.com.au a decade ago. While by no means a successful start-up leader (Packer inherited most of his money), he has nonetheless grown his fortune through savvy start-up investing, a passion that doesn’t appear to have ebbed with time. Packer bought a 25% stake in SEEK for $33 million in 2003. When the business listed, Packer’s stake was worth $150 million. By the time he sold out, he had made $440 million from his investment. He was also an early investor in Carsales.com.au, putting $100 million for a stake in the company that sold for $500 million a few years later. Those were some of the best dot.com investments ever made in Australia, and, perhaps spurred by his early success, Packer has continued to invest in start-ups with potential to disrupt their industries. One of his most recent investments was last month in taxi app goCatch, which could radically disrupt Australia’s cab companies and Australia’s Cabcharge monopoly by allowing passengers to book a taxi by directly liaising with the driver. Paul Bassat Packer is joined in his goCatch investment by Paul Bassat, a cofounder of SEEK who’s since left running the business to his brother while he focuses on investing. Bassat is the cofounder and joint chairman of Square Peg Capital, a newly minted venture capital firm that’s already put money into a heap of start-ups like beauty-box business Bella Box and design start-up Canva. “First and foremost, we want to back fantastic people who are smart, passionate and high integrity,” Bassat told StartupSmart when Square Peg was formed a few months ago. “For businesses that have been around for a few years and have a bit more traction, the question of if they’re solving a problem has been partially answered. If it’s an early stage business without a track record, we want to know exactly what the problem you’re trying to solve is if you’re actually solving it, in a unique and differentiated way.” Bassat is also a mentor at Startmate, which offers mentoring and seed financing to online and software start-ups. Mike Cannon-Brookes and Scott Farquhar Bassat isn’t the only rich lister to volunteer his time mentoring young companies. Scott Farquhar and Mike Cannon-Brookes, who cofounded Atlassian and for two years have topped the BRW Young Rich list, are also mentors at Startmate. Last year, Cannon-Brookes also invested in Shoes of Prey, which gives shoe lovers the chance to customise every part of their shoes online and have a unique pair created and shipped. Both Atlassian cofounders put money earlier this year into Ninja Blocks, a Sydney start-up that builds devices that let people link their devices to physical things in their homes (‘SMS me when the washing is done’, for example). This story first appeared on SmartCompany.
It often surprises casual observers that the annual BRW Young Rich edition counts the 100 youngest self-made entrepreneurs under 40. After all, in most industries, awards for ‘rising stars’ and the like cut out at 25 or 30. The reason BRW has to give people 40 years to shine is simple: hardly any businesspeople make a killing by 30. A list cutting off there would be dominated by sports stars and celebrities. And for a business publication, that wouldn’t interest its readers as much. Almost all of the Young Rich 2013, unveiled in the magazine’s flagship edition out this morning, are aged from 30 to 40. The youngest person on the list, MotoGP rider Casey Stoner, is aged 27. SmartCompany spent a fascinating morning dissecting the latest list. Here’s what Australia’s youngest millionaires have in common. Life’s work Most of the Young Rich are entrepreneurs, who started companies and over years helped grow them. Apart from the sports stars and celebrities, there are few employees on the Young Rich. Thanks to Nathan Tinkler dropping off the list this year, there are now two more. Todd Hannigan and Tom Todd made their $84 million joint fortune by leading Nathan Tinkler’s Aston Resources before it listed. In 2011 they lost their jobs, but were given six months’ pay and a whole lot of stock in the process. They sold their stock before things got rocky for the sector. This must be especially galling for Tinkler. BRW doesn’t think his assets exceed his debts. He didn’t make the $18 million cut-off, leaving him entirely off this year’s list. Around this time in 2011, Tinkler was valued at $1.13 billion. Most of the Young Rich have had a good year. Exactly half increased their wealth this year, while only 16 lost wealth. The rest were more or less steady. Tech tricks The full Rich 200 list, for which there is no age limit, is dominated by property developers. But the Young Rich has few of those. Over one in three (34) of the Young Rich made their money in technology, of which 22 were web entrepreneurs. In the top 10, eight started technology companies. These include Atlassian founders Mike Cannon-Brookes and Scott Farquhar, steady at number one with a joint fortune of $550 million. They were pegged at $480 million a year ago. The fastest-rising names in the top 10 are Ruslan Kogan, of Kogan.com, who more than doubled his fortune to $315 million, and Freelancer.com chief Matt Barrie, who’s risen into the top 10 with $185 million (he was pegged at $50 million last year). Both companies are looking at listing on the ASX in the near future, which could see their founders get a lot richer if all goes well. Reinvesting the profits If so, they’d be some of the few Young Rich-listers to turn their business success into serious disposable income. For most of the Young Rich, their wealth is ‘paper money’. They own large stakes in highly successful businesses. If those businesses list or are sold, they can cash in some of that ownership. Until then though, many of the Young Rich are fanatical enough to keep most of their wealth tied up in the one thing. For example, at Kogan.com, the online electronics retailer, shareholders Kogan and David Shafer reinvest the profits every year. Shafer told BRW their remuneration was on an “as needs” basis. “Building something is much more exciting,” he said. Perhaps this need to reinvest profits is driven by Australia’s low venture capital spend. According to a recent PwC report, there is less venture capital available in Australia, relative to our population, than in Israel, the US, Norway, Switzerland, Demark, Britain, or France. When capital to expand isn’t readily available, revenue can be the best source of funds. Slim pickings for women As always with Australian rich lists, there are few women wealthy enough to make the cut-off. Only seven women make the Young Rich, of which the wealthiest is Carolyn Creswell ($55 million), of Carman’s Fine Foods. The next wealthiest is Erica Baxter ($40 million), who is in the process of finalising her divorce from rich list-fixture James Packer, which could see her secure another $100 million according to recent reports. Other women on the list are Lilly Haikin ($40 million held jointly), who bought chocolate café chain Max Brenner to Australia, PageUp People founder Karen Cariss ($25 million held jointly), golfer Karrie Webb ($22 million), MyBudget founder Tammy May ($20 million), and model Miranda Kerr ($18 million). This story first appeared on SmartCompany.
Data released this week by US tech database CrunchBase has found the University of New South Wales produced more technology entrepreneurs in the past 15 years than any other Australian university. The data was based on the CrunchBase dataset of over 170,000 companies, including 169 Australian entrepreneurs. CrunchBase is a free database of technology companies, people, and investors where anyone can upload information on start-ups. Australians on the database included Dean McEvoy from Spreets, Tess Walton from Aruspex, Mike Cannon-Brookes and Scott Farquhar from Atlassian, Alicia Navarro from Skimlinks and Eddie Machalaani from Bigcommerce. The University of New South Wales was ranked number one in Australia and is credited with launching the careers of 16 entrepreneurs. UNSW had more than double the number of entrepreneurs produced by the University of Technology Sydney, which took second place and clocked in with seven entrepreneurs. Monash University, Queensland University of Technology, University of Queensland and University of Sydney shared third place with six entrepreneurs. Swinburne University, Melbourne University and the University of Newcastle were credited with four entrepreneurs each. Josh Flannery is the student enterprise manager at the University of New South Wales entrepreneur program and commercialisation arm NewSouth Innovations. Flannery told StartupSmart while the results were recognition of their commitment to encouraging entrepreneurship, he believes UNSW and NewSouth Innovations are about to reach a tipping point and start producing even more successful start-ups. “It’s been an experiment really, but we’re at a tipping point now. I’m speaking to 60 to 70 individual students who are working on start-ups at the moment,” Flannery says. UNSW runs entrepreneurial and innovation-themed subjects in every faculty and has a variety of internal programs. “What’s maybe different is our NewSouth Innovations commercialisation approach. We now give 100% of the equity to the students. That’s not the case in every university yet but it’s becoming the trend,” Flannery says. He adds that universities play an important role in encouraging young entrepreneurs and can do more to boost the start-up ecosystem. “Universities play a very important role in nurturing entrepreneurial students, but also something I’ve found that we’re doing, which is relatively new, is almost offering the entrepreneurship career route as an alternative to the safe route as a consultant in a big firm,” Flannery says. “The way we’re doing that is encouraging students to have a go at something entrepreneurial right now, when they have the least expectation on their shoulders than they will at any point of their life.”
Key players in the Australian tech start-up scene have lashed out at Prime Minister Julia Gillard’s suggestion the 457 visa program is being abused by the IT industry.
Blackbird Ventures is determined to offer Australian start-ups much-needed Series A funding rounds, after announcing the formation and first close of its $30 million venture capital fund.
The US-founded Startup Grind event series continues to grow in Australia, with the Sydney and Melbourne chapters set to host the founders of Atlassian and Zendesk respectively.
Independent eftpos provider Tyro Payments has vowed to step up its fight against the big banks, after revealing it surpassed $3.5 billion in credit and debit card transactions in 2012.
Local online retailer Shoes of Prey has taken a step towards the bricks-and-mortar world, teaming up with department store giant David Jones as the two companies explore new ways to boost sales.
The first class of Atlassian Hack House graduates have highlighted their achievements since participating in the program, after the second class began work yesterday.
It appears that the ‘lean’ spirit of modern entrepreneurship has finally inspired the Australian venture capital industry to invest in early stage start-ups – a trend is set to increase due to the accelerator boom.
This year’s BRW Young Rich List may be striking due to the dip in overall wealth of the top 100, including a $700 million plummet by mining mogul Nathan Tinker, but there are encouraging signs for start-ups.
The 2012 BRW Young Rich List has a strong start-up and tech flavor, with Atlassian founders Mike Cannon-Brookes and Scott Farquhar heading the rankings.
Mike Cannon-Brookes and Scott Farquhar, founders of tech success story Atlassian, have toppled miner Nathan Tinkler to head BRW’s Young Rich List.
Entrepreneurs can now register their interest in Web Directions South, a conference aimed at new tech companies, while Startup Weekend is to return to Adelaide for a second time.
A new venture capital fund is aiming to take the Australian start-up scene by storm, founded by a self-described “dream team” including Atlassian founders Mike Cannon-Brookes and Scott Farquhar.
Start-ups need to “recognise the tradeoffs” with regard to acqui-hires, according to tech start-up expert Mick Liubinskas, after Facebook snapped up the team behind mobile content-caching start-up Spool.
Startmate participant Ninja Blocks will return to Australia with very full pockets after securing $1 million from a group of high-profile investors, most of whom are US-based Australians.
Going by economic indicators such as unemployment, inflation and interest rates, Australians should feel pretty good about how we stack up with the US.