Startups from Australia January 1, 2007Posted by jeremyliew in australia, startups, Venture Capital.
I recently got back from a fascinating conference in Sydney which brought back about a hundred of us expat Australians to talk about the Australian diaspora and how we could continue to help Australia from overseas. Peter Costello, the Australian Treasurer, said in his address that there are about 750,000 Australians working overseas. For a country that only has a population of around 20,000,000 that is pretty remarkable. Unlike most other diasporas, this hasn’t been driven by turmoil or disaster at home, but rather by opportunity abroad, and as a result the Aussie expats have tended to do pretty well.
Aside from the self congratulation, mutual admiration and networking (which is always fun!), I also really enjoyed the discussion on how to drive more innovation from Australian companies. A number of Australian tech companies and tech companies with Australian founders have seen some degree of success, including Hitwise, Looksmart and Massive among the better known ones. Other Aussie tech companies that have come to the US more recently and are getting some press or conference coverage include Bluepulse, Minti, Veetro and In The Chair.. And Eurekster has its roots in nearby New Zealand. So I took the opportunity during my trip back home to meet with a number of the local Venture Capital firms to get a flavor of the market.
The VC Industry in Australia is still young, with most firms currently raising their second, or at most third fund. The early part of this decade was as tough for the Aussie market as it was for firms of the ’99 ands ’00 vintage in the US, and since this was the first or second fund for many of the Aussie firms, they are just now getting their portfolios into shape to be ready to raise new funds. The consensus of opinion seemed to be that the Israeli model of Venture was the way to go.
If you look at most Sand Hill Venture firms that have an office outside the US, they will be in one of four geographies; China, Europe, India and Israel. One of these does not look like the others… Israel, like Australia, has too small a domestic market to be able to nurture a venture backable company. From the beginning, Israeli startups have to look to a global market. That often means eventually moving customer facing components (sales/marketing/business development, and often the executive team) of the company closer to the markets, usually the US. Development can often stay at home, where often costs are lower.
There is a long history of Israeli companies making this progression, and the partners at Lightspeed have been investing in Israeli companies making just this transition for many years. Many Israeli Venture firms end up leading the first round of investment in Israeli companies, then look to a US based Venture firm to lead a later round and help those companies move their market facing operations to the US and fill out their management teams. One of the reasons that this is common may be that the Jewish diaspora has led to many partners at US VC firms with ties to Israel. When faced with a very long flight to look at a potential investment, and VC’s general preference to invest within the same area code, having some personal connection to the geography can help bridge the gap.
Which brings me back to the Aussie diaspora. As an Aussie, I would LOVE to be able to fund promising Australian startups and help them make the jump to the US. As far as I’m aware there are only two other Aussie partners at VC firms in the US (although I haven’t done an exhaustive search and stand to be corrected in comments), and hopefully as the Aussies diaspora matures and more Aussies expats find them in positions where they can help Aussie startups make the jump, we will see more Australian founded companies make it big on the world stage. This would be good for Australia, good for the founders, good for Aussie VCs and good for US VCs with ties to Australia.