The startup community has welcomed the Victorian government’s first budget but would like more details on the proposed innovation funds Labor says will drive economic growth. The 2015 Victorian budget includes a $60 million “startup initiative” in order to match local entrepreneurs with business mentors to help get their ideas off the ground. This is the first step towards the fulfilment of an election commitment made by Labor while in opposition last year to establish an independent authority to support startups. The government is also looking to transition the local economies in Geelong and Melbourne’s north away from manufacturing through multi-million dollar innovation funds. Victoria’s Minister for Industry, Lily D’Ambrosio, said in a statement the future industries funds will help support people transition out of car manufacturing. “We will support the transition of the Victorian economy through targeted sector strategies, helping businesses find ways to use their skills to create new products and reach new markets,” she said. “This will help secure today’s jobs and create the jobs of tomorrow.” Scott Handsaker, co-founder of Startup Victoria, told StartupSmart the mentorship initiative will be a significant boost for the local startup ecosystem. “Startup Victoria remains very supportive of the $60 million startup initiative proposed by the state government, although we are keen to see the finer details once they have been worked out,” he says. “We have met with Minister (for Small Business, Innovation and Trade) Adem Somyurek as part of his extensive consultation efforts, and we are optimistic that when the package is revealed that there will be something in there for high growth startups in Victoria.” Handsaker says the government should be focusing on helping entrepreneurs start a new business or grow an early one for the sake of the economy. “The Kauffman Foundation have shown that in the US, almost all new job growth comes from businesses that are less than five years old,” he says. “On average, businesses that were five years or older were net job destroyers. It is likely that the same dynamic applies to the Australian economy, which makes the support of new high growth startups a critical part of Victoria’s economic future.” Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Startup founders need to get out of Australia and see the standard set by entrepreneurs in successful tech hubs around the world, according to Startup Victoria’s Scott Handsaker, but that does not necessarily mean they should move there. “No matter what kind of business you have, Australia focused or globally focused, you need to spend time in successful ecosystems like New York, Silicon Valley, London, Berlin, those kinds of places,” he says. “The amount of time they put in, the amount of hustle, that shows you the amount of work you need to do when you get back to Melbourne, or Australia, and the level of intensity you need for your business, they just move so much quicker.” Handsaker says it’s successful startups that will grow the ecosystem, not where they are based, so a decision needs to be based on what will give them the best shot. Exto Partners managing director Peter Hammond says Australian startups need to consider a couple of things when trying to determine whether or not moving overseas will give them the best chance of being successful. “Some companies might focus on Australia and be able to get the model right, and be able to start generating revenues,” he says. “Alternatively their business model might need scale, and so it’s important to go into those bigger markets. It’s all a matter of focus. You’ve got to prove your model so your investors have confidence your business model makes sense, and you’ve got to be driving revenue.” Pollenizer co-founder, mentor/investor in StartMate and Muru-d entrepreneur in residence Mick Liubinskas says there are opportunities for Australian startups that focus on global sales. “Entrepreneurs should do whatever they can to grow their own businesses,” he says. “My view is they absolutely should be going overseas for sales. Safesite out of Brisbane, they came down to Muru-d and they had three trial sites in Australia. Through the Muru-d program they got to Los Angeles and made some connections and now they’re moving part of their team to LA. They’ve got local advisers and have raised a bit of money locally. “We have a lot going for us in that most of the world is happy to work with Australia. We have no enemies, so that provides a good opportunity to go global. “It makes a huge impact every time there’s an entrepreneur at that stage in Australia, whether or not it succeeds or doesn’t, it actually adds to the ecosystem significantly, their experience is as important as money.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
The Victorian Labor Party has promised to establish Start-Up Victoria, an independent statutory authority that will support startups, should they be elected to government. The commitment sees Labor promise $60 million over four years to fund the project, which will be administered by the Premier’s Jobs and Investment Panel. Opposition Leader Daniel Andrews made the announcement while speaking at the Australia-Israel Chamber of Commerce recently and says Start-Up Victoria will have an independent board that will bring together business leaders, vice chancellors, entrepreneurs and experts. “Start-Up Victoria will take our best ideas from conception to completion, from mind to market,” he says. “It will help nurture our most promising proposals into life. If you visit the Technion and the Weizmann Institute in Israel, you know for sure that this is where the world is headed.” Startup Victoria is not to be confused with Startup Victoria, the not-for-profit organisation dedicated to building and supporting Victoria’s startup ecosystem. Startup Victoria has over 4000 members and received $100,000 in seed funding from the state government when it launched in April. A spokesperson for the Victorian government says it has already been providing a wide range of assistance to the industry. “The Coalition government has a commitment within the Digital Economy Jobs for the 21st century statement to establish a Digital Economy Ministerial Advisory Committee (due Q1 2015), to advise on the development of the digital economy, including the development of digital startups and entrepreneurs,” the spokesperson says. “Disconnected Labor thinks throwing taxpayer dollars at public servants to write businesses cases will equate to a startup ecosystem. This is another Labor policy thought bubble and it shows they can’t be trusted with people’s money.” Startup Victoria co-founder and board member Scott Handsaker says the organisation “warmly welcomes” the Victorian opposition showing its support for the Victorian startup industry. “Melbourne has a fantastic opportunity to become an entrepreneurial cluster if both the community and the government of the day work together,” he says. “Startup Victoria looks forward to working with either side of the government after the election to help Melbourne become a world class startup ecosystem. “The choice of name is perhaps a little confusing, but we are confident that can be worked out. Ultimately we care more about the policy and what it can do for startup founders in Victoria. Anytime we can get politicians talking about startups and devising policy to help them, it’s a good thing.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Australia doesn't need a startup capital, and certainly not one that operates at the expense of other communities that are popping up around the nation. Even if we did, there is no evidence Sydney would be the best place for it. When Mike Cannon-Brookes opined at Sydstart this week that “Australia needs a single city where all its tech startups are concentrated, and that city should be Sydney”, he was essentially suggesting two things: 1. That a single city needs to be the dominant player in Australia in order for our startup industry to be successful. 2. That Sydney has already won the race to be crowned the startup capital of Australia, and that all future community building and government support should be focused on Sydney. Let’s look at whether these arguments stack up. Do we need a single city to be successful? The idea that Australia needs one city to dominate the scene in order to be successful is unlikely to be true. The creation of startup communities is a hard thing to get right, and success does not always go to the biggest and the loudest. Take Boulder, Colorado as an example. Boulder is a better place to do a startup than Sydney by almost any measure you can conceive of, and yet it has a population of just over 100,000 people. Clearly size is not nearly as important as quality. You can get great, stand-alone communities operating in various locales quite successfully without worrying about fragmentation of effort. What about Israel? Tel Aviv is ranked as the second best startup ecosystem in the world by the Startup Genome Project, with more startups per capita than anywhere else and 61 companies on the NASDAQ. And yet there are other startup communities in Israel that have popped up and been incredibly successful, including Haifa and Jerusalem. Israel is now widely seen as a “startup nation”, rather than focusing solely on Tel Aviv. With a population of just over 8 million, not even Israel has adopted the centrally planned startup model advocated by Cannon-Brookes. Cannon-Brookes asks us to adopt the Texas model, arguing that Austin is the leading startup city in Texas. While that is true, it is hardly an argument for focusing an entire country’s efforts on one city. It's not even an argument that the people of NSW should focus all their energies into the Sydney scene, given that there are still other places in Texas with supportive and successful startup ecosystems. Perhaps then, that is not how successful communities get built? If we were going to pick one city, would we pick Sydney? Even if it were true that one city is eventually going to be the best place to do a startup in Australia, it doesn't necessarily follow that we know who that is going to be. I cannot think of a single global example where a community has picked an ecosystem winner in advance and set about focusing all their energies in that direction. It’s the equivalent of trying to “pick a winner” before the race has even been run. Think back to our example of Boulder. Go back 25 years and ask whether the inhabitants of Colorado would have picked Denver (pop. 634,000) to be their startup capital over Boulder (pop. 100,000)? They would have been wrong, because no one can predict where and how a startup community will emerge. It's harder than that. That is where we are in Australia. We are Colorado 25 years ago, with all our startup communities in their very early stages of growth. Strong startup ecosystems are built by founders over very long periods of time. Over the next 25 years, amazing communities will be built in Perth, Adelaide, Hobart, Melbourne, Brisbane, Sydney and others. Some will become bigger and more successful than others, but it will come about through natural, healthy competition. In 25 years, Sydney may indeed be the best place in Australia to do a startup. Then again, maybe it will be Hobart, Melbourne, Geelong or Newcastle. It really doesn't matter, and we will be far better off as a nation if we encourage all founders to be successful no matter where they live. Scott Handsaker is the cofounder of Startup Victoria.
There have been several attempts at creating a snapshot of the Australian startup scene, but when startups launch and fail on almost daily basis it’s a hard thing to capture in a useful format. There’s also no up-to-date info on what the industry means to the overall economy. The most detailed report on the industry, the Startup Economy Report, was completed in April 2013 when Google Australia stated that “The Australian tech startup sector has the potential to contribute $109 billion or 4% of GDP to the Australian economy and 540,000 jobs by 2033”. In order to help facilitate growth and understand how the industry impacts the economy it’s important to have accurate information. Enter the Startup Wiki, a new initiative launched by Philippines-based entrepreneur Bowei Gai to try and build a comprehensive global guide to the startup world, with emphasis on regional stats and data. Originally, Gai set out to create a number of regional reports on his own, but found the task arduous along with the fact they became quickly outdated. To give an example of how the wiki can be populated, the Philippines entry has been created with up-to-date info. Australia’s entry remains sparse on information and it will be up to someone in the community to embrace the idea and start populating and editing it as things change. There’s some disagreement among Australia’s startup leaders as to whether the Wiki could amount to any value for the local community. Pollenizer CEO Phil Morle says surfacing what is normal for investors and entrepreneurs is an important part of helping us plan and grow. “There are lots of initiatives like this and they are quite an investment of effort,” Morle says. “The Wiki format will help share that load, but who’s going to start in Australia?” Adventure Capital managing partner Stuart Richardson says an independent, crowd-sourced, and verified record of fact, such as that Bowei is attempting to create and sustain, will be valuable to the rapidly growing Australian entrepreneurial ecosystem. But Startup Victoria cofounder and director Scott Handsaker is slightly sceptical of how useful the wiki could be. “The underlying motivation behind this is laudable, but it remains to be seen whether a single global repository like this will be useful,” Handsaker says. “The problem with anything like this is that unless it is institutionalised at multiple levels, effort will fade away and people will move onto other things. I would want to see evidence that the founders of the wiki were in it for the long term.” Handsaker believes when it comes to anything to do with a startup ecosystem, the answer is always local. “The best resource for this kind of information is going to be generated and held locally, and it is not clear that attempting to put it into a global repository as well will have any extra benefit,” he says. “Ecosystems are grown by local people, doing local things, for local returns.”
Finding a technical cofounder is one of the biggest issues in the startup community, where the number of developers can’t match those with the next big idea. But the constant deluge of pitches is fatiguing developers who are more often than not either working on their own thing, or stretched with current projects. Web Directions founder John Allsop told StartupSmart any technical cofounder worth engaging should be sceptical of an entrepreneur at first. “Anyone who is technically proficient enough to be a cofounder will have learned a lot of lessons,” he says. “Tech cofounders are not just your own coder, they’re going to need to be involved in hiring and growing teams.” According to Allsop, the quickest way to make a potential tech cofounder bolt is to approach them claiming to have the next Facebook, which just needs a developer and with no mention of funding. “It just shows no respect,” Allsop says. “There is a concern expressed generally by technical folk that non-technical folk are looking to get cheap labour. It’s not always true, but it does set off alarm bells. I do think it’s getting worse in the tech start-up bubble environment.” The recent explosion of tech start-ups has created a developer’s market. Pat Allen, coordinator of Melbourne’s Ruby on Rails meet-up, told StartupSmart no talented developer is without well-paying options so non-tech cofounders need to compete. “We want to know what makes you so good we should go with you. It’s hard to communicate credentials across skill sets but you both need to know what you bring to the table.” Wanting to address the issue, Startup Victoria is coordinating Co-founder Connect, a monthly event to bring aspiring tech and non-tech entrepreneurs together that will launch on Wednesday, April 2 at Melbourne coworking space Inspire9. Event coordinator Scott Handsaker told StartupSmart the Melbourne startup community had almost doubled the number of non-tech founders to tech founders. “It’s incredibly hard to find a tech cofounder. I reckon it is a billion dollar problem as it’s almost the biggest pain point in any ecosystem all over the world.” Handsaker says aspiring startup founders should expect a 12 month timeframe for their hunt to find the perfect partner. “Make sure you spend a few months on a side project. If you haven’t killed each by the end of that, maybe you’ll make good cofounders.”
Apple’s attempt to trademark the term “startup” in Australia has outraged members of the local start-up community. Scott Handsaker, founder and chief executive of Attendly and community group Startup Victoria, told StartupSmart Apple’s move risked putting developers offside and driving business to its increasingly formidable competitors. "It's such a disappointing move from Apple to attempt to trademark a word that is in common usage amongst the entrepreneurial community,” Handsaker says. “At a time when Apple is being attacked on all fronts by rapidly moving competitors, retaining the good faith of the developer community is an important competitive advantage. This cannot help with that surely." Handsaker added the community was keen to understand why Apple wanted the trademark anyway. “It is hard to imagine how it could be of benefit to them, as no-one thinks Apple is a `startup’ anymore. It feels like someone from the Apple marketing department is playing a bad game of word association,” he says. Peta Ellis, general manager of Brisbane-based start-up hub River City Labs, says the trademark application was probably filed to enable Apple to take action against knock-off Apple stores in preparation for the launch of the next iPhone. “From what I can understand, it’s been applied for to beat knock off stores in preparation for the launch of the new iPhone, which makes sense,” Ellis says. “If it does become a blanket trademark, it would be very detrimental to the start-up ecosystem, and a real hindrance if we couldn’t use our word.” According to Ellis, as the term is so widely used, a blanket trademark and consequent ban would be difficult to pull off. “As long as we can keep using the word, I think we’ll be fine. Startup the word is such a widely used term for different areas of business,” Ellis says. She adds River City Labs hasn’t reached a decision on whether they’ll oppose the trademark application if it passes examination. “We’re going to wait and see how it goes, and how it plays out. If it’s not a trademark on the blanket use, I don’t think we’d oppose it,” Ellis says. Baker & McKenzie, the law firm which filed the trademark application for Apple, told StartupSmart it had no comment at this time.
Australian start-up successes need to be celebrated to attract more funding to the sector, a discussion panel at the recent Startup Victoria conference has heard. The challenges and opportunities facing start-ups seeking funding were addressed in a panel discussion made up of Scale angel investment network founder Laura McKenize, App.io (previously Kickfolio) founder Ed Dowling and LIFX founder Andrew Birt. Australian investment scene limited but improving Event coordinator and entrepreneur Scott Handsaker kicked off the discussion by sharing his theory that Australian investors were “a little bit sh*t”, and asked the panel for their thoughts. Birt, who coordinated the $1.3 million Kickstarter campaign that launched the LIFX light bulb product and capital raising process, says the Australian investment space is evolving as successful entrepreneurs begin to invest in the next wave of start-ups. “More and more we’re getting a wave of successful entrepreneurs who are coming through,” Birt says, adding that some of his own and his peers’ experiences with institutional investors would lead him to agree with Handsaker. McKenzie agrees the Australian investment scene is growing and improving, and would continue to as Australian start-ups performed well. “There have been relatively few success stories that have been celebrated publicly,” McKenzie says. “We need to celebrate success more to attract more money to the sector.” Dowling, who recently raised just over $1 million in seed capital in Silicon Valley, says Australian investors can “appear to suck” as there were fewer deals because of fewer available investors. He added raising funds is never easy. “You have to work really hard to raise money everywhere,” Dowling says. “There are so few Australian investors so they see every deal and have a really tough job choosing what to develop.” Dowling added that companies looking to raise seed funding in Australia need a valuation of around $1 million, compared to companies seeking the same amount in the US which need a valuation of $3 million to $7 million. McKenzie disagreed. “We hang onto the numbers that are double or triple the average,” McKenzie says, adding the most recent research into American seed capital found the average company valuation was $2.3 million. Getting the investment relationship right is key The panel agreed start-ups need to recognise that investment is the beginning of a relationship, and it’s important to get that right. “Work with someone who has the experience, not just the money. If you take money from someone who hasn’t been there and done that, your expectations will be unaligned,” Birt says. “The last thing you want is dumb money.” Birt added that investments are negotiations and if the relationship is strong you don’t need to get hung up on reaching a $1 million valuation. Dowling shared that App.io’s funding process saw them pitch to 100 investors, follow up with 54 and eventually work with 19. He explains the process here: Dowling agreed the relationships and advice that come with investment funds need to be worth the equity given up receiving it. “Equity is so valuable. You can’t get it back once you’ve given it away,” Dowling says. “It’s about having investors you can have a beer with when things are going really, really badly.” Dowling said App.io’s biggest capital raising mistake was to only chase big deals, but the most valuable investment they received was a $5,000 cheque. “Don’t hang out for the big numbers. Hang out for the right numbers, and hang onto the smart money,” Dowling says. “The fact this guy was interested led instantly to $200,000 in other investments. It was the right person, with the right networks.” Keep the conversations focused on vision and raise enough capital for 12 months Dowling says he continually steered their funding negotiations away from discussing their existing revenue directly. “If you’re making money, it’s less vision focused. The conversations need to be kept as close to the vision as possible,” he says. “Investors will jump on revenue, so we never people a firm figure.” Birt, who co-founded Melbourne’s first accelerator AngelCube, agrees vision is the make-or-break factor for fundraising, but also pitching to an accelerator or incubator. “Swing to the fences and you’ll excite the people behind the incubators who’ll think you might just be crazy enough it pull it off,” Birt says, adding you needed to get your ducks in a row too. “You need some kind of product, not just a good idea. You need a team around you as well. If it’s just you it’s hard to justify choosing you.” McKenzie added that investors assess a start-up’s direct competitors when scoping out a business, and that founders should raise funds for at least 12 months. “I’d encourage you to raise for a minimum of 12 months because it takes time. Don’t close around and need to head back into the market with no tangible change in your business,” McKenzie says. “It’s really hard to execute on your objectives when you’re raising money.”
This week’s Secret Soloist is answered by Event Arc founder Scott Handsaker.
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