Top start-up advice from Silicon Valley expats

Australian expats embedded in Silicon Valley’s tech ecosystem have potentially game-changing advice for players back home.

Craig Blair and Daniel Petre of Airtree Ventures. Picture: James Croucher/ News Corp.

Australian entrepreneurs should focus on creating businesses that play to Australia’s strengths and avoid starting businesses that duplicate the offering of global players, according to expats working on both the founder and venture capital sides of the Silicon Valley tech ecosystem.

“Don’t just try to do in Australia what is done elsewhere,” Zetta Venture Partners managing director Ash Fontana told The Australian. “Try to do in Australia what can especially be done in Australia.”

“Which industries are particularly strong in Australia? What needs do they have for technology? Ask yourself those two questions and then work on those problems.”

Professional services and mining, for example, are two key industries for Australia that could offer opportunities for tech start-ups, says the San Francisco-based former Macquarie banker, who now focuses on investing in companies that make intelligent enterprise software.

But making another large e-commerce company in Australia is “pretty difficult” to do, given it is not the largest market for this kind of business.

“Don’t try and copy Silicon Valley,” he says. “Try to work from the question: what are the needs of Australian industry and what can I especially do there?”

Australians should also make sure to do global research, given the risks involved in duplicating the offer of other overseas companies, according to the founder of upscale freelance marketplace CloudPeeps, Kate Kendall.

“There’s a lot of what we call clone companies in Australia,” she told The Australian in San Francisco.

“People go and say, ‘I’ve got this brand new idea, it’s never been done before.’ And actually it’s been done 10 times in the US and they’ve all failed.”

Prospective early stage investors in Australia should be particularly alert to this risk, she says, given some founders don’t realise their idea has already been tried. Meanwhile, other founders are specifically trying to replicate a product from the US for the smaller Australian market.

The comments follow a recent warning from Sydney-based venture capitalists Daniel Petre and Craig Blair of AirTree Ventures that Australian start-up accelerators need to focus on building quality companies and not just fostering enthusiasm.

To gain a better understanding of the global tech industry, many expats in Silicon Valley encourage Australians in the sector to think about visiting or even moving for a time.

They are quick to dismiss concerns over “brain drain”, saying the skills and experience gained in the US offer a boost to the local industry when Australians return.

Many Australians come to the US on the E3 visa, a two-year renewable permit that does not provide a path to long-term residency.

After spending nearly six years in the Bay Area, Aconex head of engineering Tim Olshansky has seen a number of fellow Australians come over for a few years and then return.

“I think it’s actually a great thing because from a business culture perspective we’re in a lot of ways very different, Australians and Americans,” says the former derivatives trader, who founded cloud software company Worksite before it was acquired by Aconex.

“And I think Australians benefit a lot from the American way of doing business in the sense that people are proactive, they’re relationship-driven.”

But he warns start-up CEOs who already have a team of employees in Australia against making a permanent move for the sake of it, suggesting such a move only makes sense if a company has a customer in the US or has outgrown the Australian market and needs to expand.

Another consideration before moving is the cooling off of the Valley’s tech boom this year, with some companies raising new money at lower valuations and the total amount of venture capital raised slipping from last year’s heights.

This cool-off brings into focus the difference between a young company that is profitable or has a clear path to profitability and one planning to pursue scale first, points out Aaron Beashel, director of demand generation at Campaign Monitor, after making the move from the email marketing firm’s Sydney headquarters to its San Francisco office.

“If you were moving over here for a job at a start-up that has huge cash burn and is basically looking to continue to raise and raise and raise… it’s something to consider that maybe you didn’t ultimately have to think about 12 months ago,” he says.

But given Australia’s comparatively less developed venture capital scene, Australian companies are often bootstrapped and more profit-focused from an early stage than their US counterparts, with Sydney-founded and now Nasdaq-listed software company Atlassian the classic example.

Despite the learning opportunities available to Australians from the US, the flow of ideas is two-way, as this focus on profitability shows.

“The conversation [around profit] is definitely shifting,” Mr Beashel says. “I think it’s a great thing for the industry as a whole.”