This is the second article in a week where I've read the complaint that banks don't loan money to Aussie startups. However I think you'll find banks don't lend money to startups pretty much anywhere in the world. Banks aren't the place to secure funding for high risk ventures - VCs, Angels and crowdsourcing are.
I think the bigger issue in Australia is that the VCs here have a terrible investment track record, so banks and other investors are less likely to given them funds to invest.
There are a couple of things that could change here to improve things. The first is that it's currently easier to bet $15K on Melbourne FC to win the AFL Grand Final than to invest the same amount of money in an Aussie startup. That's completely crazy - it makes becoming an Angel in Australia a burden.
The second potential is Australia's vast pool of super funds (401Ks in US terminology). They can't invest in either startups or VCs because it's "too risky". However they should be allowed to invest a portion of the fund - say 10%. That would make a huge difference to the funding available to startups here.
Given that Australians have the highest per capita gambling losses in the world (http://www.economist.com/blogs/graphicdetail/2014/02/daily-c...), I'm surprised that the regulations around funding startups are so risk averse. Also ironic that angel investing from super funds is deemed "too risky" but using your super to get an interest only mortgage to buy an "investment" property with negative cash flow is just fine. Clearly there are powerful established interests at work...
EDIT: Given that Melbourne are currently 15th on the AFL ladder anyone would be crazy to bet on them winning on the Grand Final. Port Adelaide, on the other hand... ;)
A huge benefit in Australia (at least, for now), is the healthcare and education system. You can come out of university with no overheads and free healthcare. All you need is rent, pizza and hosting costs and you can build a startup. I honestly think a lot of the barriers in the article are overstated. The biggest problem is the lack of economy of scale here, there is just not much of a market to test your ideas in locally and a lot of regulation and legal barriers (eg: asinine copyright laws, no fair use, etc.) that make it much harder.
You may incur a substantial liability or even worse be charged with fraud if you are actually working full time (on your startup) and at the same time claim unemployment benefits. I like Australia's social welfare safety net and I think it helps startups to have it, but I wouldn't recommend it be abused to start a company.
If Abbott isn't kicked out soon, Australia is going to become a much, much worse place. (for many reasons, not just the above) I had tears in my eyes when my parents told me of his plans to charge University and healthcare fees.
I used to be proud to be Australian, I hope I can be in the future.
Almost. There are in fact people in the world who do not have $7 and who once could walk into a clinic but will have to essentially beg their doctor to give them service for free. It's a tiny crack but if you want to apply the word "universal" a tiny crack is as good as a chasm.
This won't be a popular comment amongst my fellow Australians, but some of these points in the post don't ring true to me.
Being a startup in Australia is hard, but being a startup is hard anywhere. I think there is a certain mentality amongst Australian startups that the US is the land of milk and honey for startups and Australia sucks. There is a certain element of truth in that, but its not as bad as some of the posts to HN make it out to be.
First Tax Breaks:
The R&D tax incentive is amazing (http://www.ausindustry.gov.au/programs/innovation-rd/RD-TaxI...). We have recovered around 40% of our seed funding as a tax refund from the ATO. If you do something slightly innovative and can prove that you do some testing, you qualify. This tax incentive has directly allowed us to put on another developer.
GST:
Yup GST is a pain but at least its uniformly applied to the whole country. The US you have to apply it on a state by state basis (depending on where you are located etc and the nature of the good/service you provide). Other countries have a consumption tax. Seriously meeting your tax obligations is a requirement of doing business anywhere, its not that hard to do: if(countryCode == "AU") {//apply GST... }.
Venture Capital:
Nothing can compare to Silicon Valley in terms of money available for the tech space, but at the same time Australian VCs are often happy with a 10x exit as opposed to pushing you to be either a $1 billion company or go bust. The choice of where you raise will be a personal choice more likely influenced about who you know. Remember the higher the valuation you get, the bigger the exit you need to make.
Australia being expensive:
Sure you pay a little bit more for your mac book pro, but the guy using it will be seriously cheaper than someone in the valley. You think Australia is competitive for developers who could get a cushy contracting rate. Try competing with facebook, google etc for the top talent.
Internet:
Ok the current government hates in the NBN, it sucks, I love fast broadband as much as the next person, but unless your startup is about delivering high bandwidth content to Australians who cares? Your servers are going to be sitting on AWS in US_EAST anyway.
Mind you having said that I do agree with some points. Employee Share Schemes are a pain in the arse and getting a good payment provider is tough. Seriously spend the cash to get a Delaware C-Corp and open a US bank account... this will make your life so much easier. Even Braintree Australia is a shadow of using Braintree from the US.
I'm an Australian that left 8 years ago, and have been living and working in the US and Canada ever since.
I agree with you 100%.
Australia being expensive: Anyone that says that needs to wake up to how lucky they are to live in "the lucky country". After living a few years in America (and to a lesser extent Canada) I'm more than happy to pay extra for "stuff", given life is so, so much better. Heath Care, Education, decent infrastructure, paid vacation, sick and maternity leave, just to name a few. Also consider someone working minimum wage in the US ($7.25/hr) has to work ~206 hours to get that $1500USD MacBookPro. In Australia, someone on minimum wage ($16.37/hr) has to work ~113 hours for the same $1849AUD MacBookPro. Obviously minimum wage earners are not buying MacBookPros, but given that wages scale similarly, you see living/working Australia is actually better than living/working in the US.
Timezones: Wait, it's a complaint that the world has timezones now? Give me a break!
Foreign Investors want a global vision: The OP of the article is upset that foreign investors want to get a boat-load of money back on their money by reaching as many customers as possible? Does this person not understand how investors think?
In short, cry me a river. I challenge any Australian who disagrees with me to go and live in the US for a few years, then see what you have to complain about.
The timezone issue is significant if you need to offer realtime support as part of your product, and the majority of your clients aren't near where you are.
West and East coast in the US are 3 hours apart (timezone - ta-da!). Same issue with timezones applies even in the USA. Realtime support is hard to do anywhere in the world. What happens when the operator is overloaded with too many requests. There are many ways to make this scale and work even across timezones and languages.
Come on guys, give me some credit. We're having problems with internal processes right now because our offices are split between Melbourne and San Francisco, and there's only 2 hours in the regular working day of overlap. Being a couple of hours out is nothing compared to being almost the entire working day out.
The more your support has to do shift work, the harder it is to get and vet support, train them properly, and the more expensive they are to pay. The more they're awake during normal sleeping hours, the lower the quality of support - and I say this having spent two years doing support for in-timezone sleep medicine equipment. The article also states other problems with response lag and low efficiency, which is what happens if you can't adjust your work day (and if you do, then you're out of sync with local services).
The kind of condescending 'get over it' comment from grecy is utterly beside the point - regardless of whether you deal with it well or not, out-of-timezone sync support is more difficult to do, and that is something worth mentioning in a list of hurdles an Australian startup might face.
> The kind of condescending 'get over it' comment from grecy is utterly beside the point - regardless of whether you deal with it well or not, out-of-timezone sync support is more difficult to do, and that is something worth mentioning in a list of hurdles an Australian startup might face.
You know, Australians are very well known internationally being being complaining so-and-sos.
I can't believe a thinking person would actually complain that Australia is in vastly different time zone. Next you'll be complaining it's too hot, then that it's to sparsely populated (oh, you already are). It never ends with you, does it?
You're doing some pretty massive projection there. I said that the timezone increases support costs if you're not where your market is, and it's worth putting on a list of hurdles for startups. I didn't complain about the timezone, just mentioned that it's not the trivial issue you painted it as. It's also winter here in Melbourne, where it gets cold enough that I've heard both Scots and Canadians bitch about how stupidly cold it is here (because we don't insulate our buildings properly), and when summer rolls around, I love the heat and 40+ degree days. And when it comes to 'sparsely populated', I've argued several times here on HN that Australia is one of the most urbanised large countries in the world - despite the outback image we promote, far more of us live in the cities and we have a very centralised population.
So not only are your complaints wrong about me, they're the diametric opposite of who I am and what I say. It's fine if you don't like the country and want to live somewhere else, but don't just make shit up about your former fellow citizens in order to justify your movement to yourself.
Yes, but that's like complaining you have to spend time brushing your teeth in the morning, or take time out to feed yourself the calories you need to live.
There is nothing you can do to change it, so if you really, really don't like it, move someplace it's not an issue.
It's part of life, stop complaining about it, and get on with it.
- Australia is only competitive against the Valley, but that's like saying New York super premium real estate is cheap because those penthouses go for 30m vs London's 100m. We hire globally with half the team being remote, and Aussies are the most expensive per "unit talent" of our applicants, followed by Sweden (which is tax-expensive). Americans are really cheap once you get them out of the Valley - on par with Asia despite the extra tax - because cost of living in places like LA's suburbs or Pittsburgh is low.
Really? Our applicants came from Perth, Brissy and even Tasmania as well. In fact, the Sydney ones were cheaper. But we target people with around 5-10 years experience. I would say if x is the market value of a Singaporean developer, Australia is around 3x, the US 0.8x but this is hypothetical since we have yet to hire a Singaporean into the Haskell team (the language is pretty much unknown here).
I was looking at real estate in various Australian cities. There's a 3 bedroom house 1km from Bankstown station (not as bad as it used to be but still, no Kirribilli) that went for 750k AUD 2 months ago - imagine what that would buy in most US cities! Even moving to the suburbs isn't an option anymore.
> Even moving to the suburbs isn't an option anymore.
Sure it is. Just rent instead of buying. I pay less to rent a 3 bedroom house in Melbourne's inner suburbs than I did for a 3 bedroom unit in Irvine, CA. Granted buying a house in Australia is very expensive, but Aussies will learn soon enough the folly of not heeding the lessons of the property bubbles in the US, Ireland, Spain etc...
Oh, on that I agree, but it's hard to fight with an ingrained culture of ownership ("rent is dead money!") and cheap credit, and the income/price ratios have been consistent at least since the 80s according to people who bought back then (just like house prices in the US kept going up from WWII to 2007). Australian real estate, unlike much of the US, is also very desirable to a lot of foreigners, and all the government needs to do is lift restrictions on foreign ownership to keep the market afloat a few more years. Look at how central London prices have shot up with the influx of money from as far as Moscow or Qatar...
>>I think there is a certain mentality amongst Australian startups that the US is the land of milk and honey for startups and Australia sucks.
This is true for many other parts of the world too. In my country its a big craze among young people to move to the US ASAP(I'm from India).
Unrealistic expectations, overall frustration with the government, corruption, bureaucracy, and infrastructure problems padded with heavy watching of Hollywood movies on HBO- transports people into a scheme of thinking that nothing is or will be ever wrong with US.
Only recently I heard two people talking while traveling back in the office cab, as to how all their problems would magically disappear if they immigrate to the US.
People seem to think that no one is poor in America, and that all Americans live in posh homes and drive expensive cars. And once you enter the US, all your troubles shall come to an end.
But people here don't have a very high opinion about the overall social and cultural aspects of the American society.
>People seem to think that no one is poor in America, and that all Americans live in posh homes and drive expensive cars. And once you enter the US, all your troubles shall come to an end.
Well, to be fair if those countrymen are solid programmers that image of the US is pretty true. Solid coders are in huge demand and you certainly won't be poor if you apply yourself in that field. As to the social/cultural aspects, it's worth mentioning that the culture changes massively depending on where you're physically located in the country.
I don't mean to say everything is perfect here, but it's not the den of poverty and violence that a lot of media outlets try to make it out to be. Like everywhere else, there's good,bad, and everything in between.
Not dismissing the rest of the article at all, but with specific regard to accepting online payments, why no mention of Pin [0]? Stripe/Braintree aren't the only options for Australian businesses to accept credit cards online easily, in-fact we have our own, home-grown alternative kicking arse in that arena.
Pin has been out of beta for over a year, accepts payments in multiple currencies [1], is Australian owned and operated, and works very similarly to Stripe with regard to integration and client libraries [2].
I get frustrated that an Aussie company solving the very issue lots of people complain about (easily accepting card payments online) doesn't get a mention, and is always playing second fiddle to Stripe.
I'm an Australian working at a US software company. I've always planned to return home at some point. But the state of the industry in Australia makes this seem like a very poor move. I could move to Sydney, take a 50% pay cut for an uninspiring position, and still end up with a higher cost of living (yes, including house prices!) than here in the Bay Area.
You mention that you'd have to take a big paycut to work in Aus, yet the author of the article complains that it is expensive in Australia because of high wages.
Another Australian currently in North America here (though I still do business in Australia). Low-to-midrange talent is more expensive (developers start with a higher salary in Aus); though there's likely more "top end" stuff in the US/Canada (What's the average SF developer salary these days?)
Median salaries are higher, but the standard deviation is lower. Part of this is because the effective minimum wage in Australia is $17/hr. (Benefits are likely more expensive in Aus than the US/Canada as well, particularly if you want to differentiate on giving above average holiday leave etc).
I believe that the article misrepresents facts to make a point that may or may not be there - the type of talent that you'd ideally want to attract (especially as an early-mid stage startup) is likely pretty close in cost to the same talent outside Australia. I'd think that there are more pressing issues (such as the tolerance/approach to failure, or differences in interest rates, which lead incubators to asking for much more equity for less money)...
As a software engineer who moved to Australia from Southern California 3.5 years ago, my experience is that development jobs in Australia pay well, but there are very few of them around. http://www.seek.com.au/ will give you an idea of what programming jobs are around.
Apart from a handful of larger companies (Google, Atlassian, Campaign Monitor) there isn't much of a software industry in Australia, and even then it's essentially limited to Sydney and Melbourne. Most developers work in-house for banks, the government, web agencies etc. I've met some very capable developers, but many of them are working in roles below their potential.
Longer term I fear that without a significant software industry, Australia will find it difficult to develop new talent and keep experienced top-flight developers from seeking greener pastures overseas. Personally I believe the high-cost issue will largely solve itself as the mining boom slows and the property bubble pops...
It depends what league you are in. The top end of salaries in Australia is about $120-$140k no matter how great you are. My impression is that in the right market and with the right skills you can go way higher than that in the US. At lower levels of specialty / skill I think they are comparable. But the work in Australia is mostly incredibly tedious - back end systems for banks, insurance companies, etc. etc.
I am pretty sure you can hire most Aussies cheaper then you can compared to Silicon Valley or New York, but I consider both of those places the exception to the rule, and someone on a good wage there will tend to take a pay cut to go anywhere.
Look at www.seek.com.au which is pretty much the premiere jobs site for Australia for prices
Senior Dev Roles in Sydney and Melbourne will get ~ $120k AUD per year with Brisbane and other state capitals generally dropping from there. Mid Level in Brisbane (3rd largest city) is generally $65k AUD. Orgs tend to be smaller here, so there are less managers / director / CTO roles then I have seen in the US. As such you can find it more difficult to climb the ladder.
On top of salary though there are a few extra expenses. Employer super is ~ 9% (going up to 12% in the future) on top of salary. States may (or may not) have payroll tax, and you likely also have to pay for things like WorkCover (which is an insurance scheme for injuries sustained at work). On the other hand most companies don't offer health insurance, etc as perks.
> On the other hand most companies don't offer health insurance, etc as perks
IMHO as someone who's worked in the US and now lives in Australia, that's a good thing! I'd argue that one of the major causes of the current health insurance fiasco in the US is the history behind health insurance being offered as a perk for good jobs. My health insurance (medicare & private) in Australia is completely separate from my employer and my employment status, and I very much like it that way.
Exactly. That is one thing I hate in the US. You leave a company and they cut all your health benefits. Left on the street. And when you do find coverage you end up paying nearly 1K per month for mediocre coverage. In comparison in Australia I remember paying $100 per month (5 years ago) for private coverage on top of medicare (free).
In the US at my previous gig, I remember hearing older folks with health issues afraid to get made redundant because they would loose their health coverage. None of those fears exist in Australia.
The Australian Government has a petrifying fear of anything that operates online. They see no value in country wide internet and present short sighted ideas whenever the concept is brought up.
I'm sorry but just because the LNP isn't on board with the Monolithic NBN project while still committing billions to infrastructure doesn't equate to "They see no value in country wide internet".
Can we not just slander because they don't agree with you?
It's not that they are not on board - it's that they are spending just as much on a version that is objectively worse in almost every way...
They have said that there's no value in homes having faster than 25Mbps, but are still putting in the same amount ($29bn Government equity investment vs $30bn before) of money to deliver that as what the fibre network that would have been able to provide 1Gbps to 93% of the population would have cost (pricing permitting, of course. But that would have dropped fast as demand went up and 1Gb/s would have been as affordable as the 100Mb/s plans available today on the NBN are).
And decent options for small business are nowhere to be found. Have you tried getting decent internet outside a CBD? We would kill for the NBN - other providers wanted between $2000 and $4000 a month for 20/20Mbps fibre, and this is in the inner suburbs of a capital city!
I don't want to get too political here but the previous government massively understated the cost of FTTP broadband. The money saved is much more substantial than $1bn. Whether it's a more effective long term investment is another question altogether.
Also, prices were not scheduled to drop for the broadband service. The Labor governments $30bn costing was predicated on NBN users paying more than they currently pay for ADSL services, and for those charges to increase annually.
Furthermore, you're calling it a saving of money in one sentence and then imply that it's in investment right in the next. So what is it, a pure expenditure or an investment?
And in fact, with the NBN plan I'd likely switch to were it available in my area I would pay $10 less than my current connection, have 4 times the download speed, 40 times the upload speed and unlimited data. Or I'd stay with the same provider and pay $5 more and the same as above but not unlimited data. Either of the two are with a phone line included.
So I guess if that's what you meant by paying more than with ADSL, then that's one way of looking at it. Another way is this (mind you, with 40 Mbps upload vs. a maximum 2 with ADSL): http://i.imgur.com/VKovuSO.png
Which blows this:
> The Labor governments $30bn costing was predicated on NBN users paying more than they currently pay for ADSL services, and for those charges to increase annually.
Pretty much right of the water, doesn't it? In fact, I'm curious. Where did you hear it and believe it to such an extent you were willing to parrot it without any further fact checking?
That's debatable - all the actual figures from the real construction that was actually happening were within the estimates provided, and they had factored in efficiency savings that were being made along the way (as has been shown to happen in other rollouts internationally).
It wasn't 'massively understated' until Malcolm Turnbull's theoretical 'Strategic Review' that estimated that the cost was going to suddenly double because of [redacted] (the alleged reasons that the previous downward trend suddenly stops and then jumps up is blacked out in the report), as well as things like inflating the peak funding because they counted the full cost but stopped counting future revenue after something like 2022 (adding about $12bn to the peak funding), and ignore like $6bn of savings from design changes that had already been signed off.
It was all pretty dodgy, but still with all the fudging only came to $56bn (instead of the old $44bn - the $14bn additional to the Government spend was to be private equity).
The second paragraph of your post is a misconception. They required a $90 per month ARPU - when you factor in business use (many who would be paying in the region of $400 - $2000 because of higher traffic classes, lower contended CVC, business SLAs, etc), home users would only need to average about $60-70 a month (that's more than I pay for ADSL that doesn't hit 4Mb/s), and that's an average which is skewed by the power users (as per the Pareto principle).
So the average household would only be paying $30 to $60 a month, which is more than competitive with ADSL when you factor in Telstra line rental. And this is across all services, not necessarily just internet, so add in phone and pay TV, which people already pay $100pm for, and it's easily conceivable that prices would have dropped.
Even now, if I were in an NBN area I could have 100Mb/s internet and VoIP for just $10 more than I pay for my slow ADSL2+ with phone (I'm on the $79p/m iiNet bundle)
Its pretty much as if the political parties and their supports dont even read each others policies, they just take the opposite position because thats the easy route.
My personal opinion is that Australia needs to let the private market run the country, rather than the government who regardless of who is in power seems only to focus on job creation (in the form of mineral extraction). If the government wants to do something it should be limited to tax reductions / removal for particular industries while they get going. Unfortunatly this would probably only work if Australia could also be shifted around 10+ hours closer to America (the continent), until then it'll be driven by the needs of Asia, which is simply energy.
Edit: I wonder how unpopular this comment will turn out to be...
I agree. The only thing I think is that the lead-ins as well as the fibres running in the streets (but not even really those in the road, for the most part), the passive infrastructure components only should be in public ownership. Think water or electricity. except it'll be private further than about a few hundred metres away from the average premises.
But the coalition privatised Telstra in 1997 without any structural separation whatsoever. That was at a time where Telstra was overbuilding its competitor's HFC network to 85% instead of the 20% previously expected by Keating-era Labor.
And Telstra was pretty much the only telco in the world that was privatised and allowed to keep both its HFC and copper networks. In Germany, the EU stepped in and forced a sell-off of Deutsche Telekom's HFC operations.
But in Australia, the coalition's obsession with privatisation to make the "surplus" look as big as possible has lead to an absolute fiasco. One where seven years later the copper network was described as "five minutes to midnight" and now ten years after that in turn, we're paying money to rent it back.
Absolute insanity - what the hell kind of government would buy or rent a copper network and invest dozens of billions into it that its current owner said was five minutes to midnight ten years ago.
I agree with the private market aspect - except for aspects of the passive infrastructure. But the government here created a shit-heap of a problem that only the government has the ability to fix.
But now they're just going to make it all worse - thanks, once again, primarily because of the coalition. But Labor's not blameless either, by a long stretch.
Oh, what's this? I think it was the sound of Tony Abbott on Jon Faine's program back in February last year lambasting Labor for treating the NBN like an infrastructure project instead of a broadband project.
Between this and ensuring that the maximum guarantee they'll have on upload speeds will be all of 1 Mbps I can assure you that the coalition's idea of an NBN is much more geared towards a video delivery mechanism for FOXTEL than anything else.
Apparently Microsoft upped their storage plans to 1 TB for a pretty cheap price, but forget about using even a fraction of that capacity here in Australia. What matters is that Murdoch gets a free extension of his HFC network and FOXTEL can use the spectrum on that liberally for free forever. And then they'll just call all the lines, regardless of technology, "Fixed line" (oh waitaminute, they already have) and just tread it all the same way to make sure FOXTEL will and Telstra will always have a leg up.
Those FTTN nodes? Those tens of thousands. Only Telstra's hands will be on those, and the coalition has put enough Telstra share holders on NBN Co's board to ensure that'll forever remain the case.
This isn't about agreeing or disagreeing. The coalition's policies are so pants on head stupid ass-backwards that there's hardly a word that could be said that isn't immediately pointing out its idiocies.
If people can't even put together ten words about the coalition's "NBN" policies without sounding stupid, then that's not a surprise.
And, if you haven't noticed, the coalition has already abandoned the pretense that it's going to be a national network.
So, it's not agreeing or disagreeing, nor is it slander. It's an object fact that it's not a country-wide Internet project any longer.
By all means, try me. If you have anything to say about the coalition's "NBN" policies I'll be happy to dismantle anything that's been presented to you as an actual thing but is really just a ridiculous pretense.
tl;dr: The coalition ain't interested in country-wide Internet. They're interested in delivering a "video entertainment system" because that's synergetic to Murdoch's interests and because it smells similar to the average drooling FOXTEL-subscribing moron in an election period to an actual broadband network that they've kept up the appearance of building. But when you get down to it, to the physical layer it's 1 Mbps for guaranteed coalition upload speeds vs. 1244 Mbps for Labor with fairly tiny contention to make it a little worse than that. All for about the same amount of money in peak funding and you don't want to know how much worse the coalition's is beyond that.
Seriously, interesting article. I can relate to many of the points (online payments, for instance). I'd put premature taxing of stock options at the head of the list - it's something the government could change at the drop of a hat, and it would change the whole landscape.
It's not THAT bad here. I'm starting a new company and tossing up where to incorporate (Oz v. NZ) as one of the other partners is Australian and most of our sales will be in Australia. What's super annoying is how frustrating doing business between the two countries is, especially considering CER. Oh, and the payment thing straight sucks.
As a founder of several Silicon Valley startups, now living in Tokyo and exploring the "startup scene" in Asia, allow me to comment.
TOP 5 REASONS STARTUPS IN COUNTRY ___ ARE SO DIFFICULT
1-4. Exits, exits, exits and exits. Exits are scarce in country ___ and valuation multiples are low [because strategic acquirers are far away].
5. VC money. VC money is scarce in country ___ and on shitty terms, because EXITS ARE SCARCE AND ON SHITTY TERMS, and for no other reason.
Beyond that, this article reflects mostly bad decisions and wishful thinking.
> The Government Does Not Support Online Businesses
Neither does the US Government.
> Nor Does it Support Venture Capital
Nor does the US government. Also, see "VC Money" above.
> Foreign Investors Want You to Have a Global Vision
No they want you to sell into a big market. Australia has billionaires, ergo there are large markets in Australia. Go find one. Or go to a place that has a market you like better.
> start-up employees are liable for the tax charge on shares when they vest (not when sold), even though the value can’t be realised properly yet.
The one interesting point in the article! Thank you! Now you have one specific point that you can address. Set aside your blanket criticism of Australia, and people will be able to hear your one good point.
> Very Few Tax Breaks or Grants
What Silicon Valley successes can be attributed to tax breaks or grants? Actually it's just the opposite. Government programs that support startups are most common in countries where there are structural reasons that startups are hard.
> Australia is Getting Really Expensive
Neutral point, it affects your pricing and costs equally.
> We’re both in our early 30′s, with a family & mortgages.
So you want to be a startup founder, AND own a house, AND have a family? How is this Australia's problem? Founding a startup requires tremendous focus. Seems like poor judgement with a touch of entitlement.
> Timezones Make Communication Hard
Locating yourself far away from your target market is foolish, not unfair (see "foreign investors" above).
> we’ve got more incubators than ever before, we got lots of amazing co-working spaces & everyone is really just trying to find their product market fit in the big bad world.
I recommend looking a little more intently at the /results/ side of the equation, and a little less on the /effort/ side of the equation.
Missing from this article is that most places outside California don't have laws in place to prevent employers claiming all the IP you generate on the side while being a salaried employee.
Ditto for non-competes. This can make it even harder to raise money, because of the risk of litigation.
The tax burden of receiving stock options is also pretty terrible, it effectively reduces the spread of equity in the Australian startup scene. So there is no broad base of benefactors from this list of successful exits to seed the next round of founders.
>Foreign Investors Want You to Have a Global Vision
a reasonable expectation given that it is a part of big space speaking the same language and close [relatively, like closer than Russia for example] culturally.
>In a nutshell start-up employees are liable for the tax charge on shares when they vest (not when sold)
the same for the shares - RSU - here, in the US. Or may be the author meant "options"? It is really 2 different things...
> I’ve witnessed a huge explosion of enthusiasm in Australia, we’ve got more incubators than ever before, we got lots of amazing co-working spaces & everyone is really just trying to find their product market fit in the big bad world.
sounds like a gold rush, or at least sounds very similar to the one happening right now here in SV.
The write-up misses postage as an issue for any startup moving a physical product or trading anything physical between customers. Postage prices within Australia are rough and even worse if you're trying to ship out of the country. People buy from Book Depository (free shipping, at least in the past, from the UK) and Deal Extreme (free shipping from Asia) often getting products more cheaply than they could even ship them here.
I'm a French citizen living in Singapore after Sydney (in one of the companies you quote). I think you get a lot of things right there, and they apply to other countries as well.
Where I disagree:
- Australia is a much bigger market than it looks because Australians are connected to the internet and have high disposable income. For example, only 10% of South East Asia's 618 million inhabitants are connected (and many, only on smartphones), and their basket value is as much as 5x lower for similar products, so you could almost argue that Australia is a bigger market than the whole of South East Asia! 70-90% of e-commerce depending on the products was coming from abroad in 2011 according to CBA crunching 1 million of their customers' accounts - that's heaps of local opportunities.
- the government does not need to "support" young businesses, it just needs to get out of the way of entrepreneurs and investors. To be fair, compared to most of Europe, it does. Australia is a capitalist Anglo-Saxon country and if you are a citizen, it's pretty easy to start up. Singapore recently made it much harder to get government money, for example SPRING funding is only available to companies with investments from an approved list of VCs, and they have to be Singapore-based, but it still wins because it's the easiest country with the rule of law anywhere in the world to start a company in, especially when it comes to things like visas being granted in a few hours or days.
- you forgot to talk about immigration law. It's better than the US' yearly H1-B lottery, but still pretty hard to import technical talent, which is scarce locally. Some of us get in for a year under the WHV scheme, which is a nice way to test foreign talent before you apply for sponsorship. From memory, of the 120 developers who applied to our last job posting, around 20% were from the US, 5% from Australia, 50% from Europe and the rest from countries where visas will be painful. If this is representative, Australian and US immigration policies hurt businesses. Australia's entrepreneur visa requires 1 million AUD capitalization, which is ridiculous - in Singapore you can theoretically capitalize your company with 50k SGD, and then apply for an Employment Pass for yourself; all you will need is someone else on an Employment Pass or better to act as director for the company in the meantime. Guess where all the Asian startups incorporate!
But you are correct that there is a hell of a lot of places (such as tax law, with equity as you state or even with income, capital gains and corporate tax) where the government could make Australia considerably more competitive, and the funding environment is really bad (although I've found Australian investors much smarter in aggregate than elsewhere in the region).
Lack of mentoring is also a huge problem. I know of an Australian B2C SMS startup which had a killer value proposition and secured over a year's worth of runway funding.
Unfortunately they chose the wrong tech stack to deliver - Enterprise Java instead of something nimble - and didn't have the correct focus on building traction.
With a bit of mentoring and tough truth they could easily have hit a home run.
You can be very nimble with Enterprise Java. Plus you get the benefit of the biggest library bar none. The issue isn't the technology it's the mindset.
Sure you can, especially with eg Groovy and Grails, but I wouldn't say it's Java's "sweet spot". Plus you tend to attract a lot of corporate enterprise Java devs who on average have a different mindset to quick-moving product devs.
I moved into a Perl shop straight after and the difference in productivity using off-the-shelf language features was staggering. Ironically I'm very interested in Clojure right now, I get the feeling it could deliver impressive productivity while leveraging underlying Java technologies.
There is now enough tech information (videos, stories on scaling & stack etc etc) freely available online that there should be no excuse for getting the tech foundations wrong. Unless of course the head of the fish isn't tech savvy running a tech company then you have a classic technology issue I have seen too often.
Bingo, the information was out there but the execs running the show didn't listen. A mentor with gravitas and a track record would likely have talked sense into them. This was 8 years ago though, so many more stories are accessible these days.
Unless that mentor was on the board it would still be hard to change a fixed mindset. But then again times have changed in the last 8 years.
Influencing people is a hard game. You can only do so much and the rest is inception. That's why you want the right people with the right skill-set driving the ship to avoid it grounding.
not directly related, but the article mentions Singapore many times: can any non-Singaporean with experience in running (ramen) startup in Singapore give some information? maybe in a blog post like this?
EDIT: to clarify, esp. if you're not there (e.g. you're an Australian in Australia thinking of starting up in Singapore).
The gist of it is: if you have residency, it's a no brainer. Incredibly cheap and easy, the only issue (as anywhere not the Valley) is funding, which is still not at Valley levels or with Valley culture. This is changing as more entrepreneurs exit and become angels.
A lot of people have written long posts about it on Quora, so try a quick search there. The regulatory environment is changing somewhat this year, particularly regarding visas (apparently the EntrePass was abused by people buying themselves residency on the cheap and the government is cracking down).
In my experience the talent pool is quite small in Singapore compared to Australia. That being said there isn't a lot of good opportunities available to the top talent so you can probably employ a significant chunk of it.
Definitely not going to be a tech hub anytime soon though.
It is (out of 120+ applicants, we had 1 PR and 1 EP holder, rest foreign) but it's also incredibly easy to import talent. Pay them enough for an EP, and you get the EP approved in hours if not days.
In one case, the guy was in Colombia when we made him an offer and sent him his flights, his EP was rejected when he was transferring in New York (because he didn't have a degree, so the government thought we were "overpaying" and asked us to explain), his appeal was approved just before he landed in Hong Kong, where he downloaded the Letter and showed it to border control in Singapore. Total time from offer to walking into the office: 36 hours. Good luck doing that in the US.
Half of the comparisons in the article are irrelevant, nit picking on stuff that isn't important. However I do agree that Australia doesn't have enough post seed money.. but Blackbird Ventures (and others) are changing that.
So I am an Aussie living in Silicon Valley for the past 5 years. Done 2 tech startups in AU and now in USA. Here is my take on the article based on my experience in both markets.
You don't need an exit strategy. Stop focusing on exits overseas. Just build something people want!
It isn't difficult to scale products worldwide from Australia. Infrastructure wise you now have AWS in Sydney, the best worldwide infrastructure platform (see Gartner’s Service Magic Quadrant). On the business front you only ever want to do an international strategy once you proved your product has a scalable business model. Same applies for US companies before they go global after Seed. While in the "Seed" phase use the local market to learn & iterate before scaling out.
5 years ago iTunes App store / Google Play did not exist. That sort of distribution is a door to the world! Not to mention the internet itself. Learn ASO, SEO and if you don't have a mobile product.. then build one asap. The future is mobile. Humans are mobile creatures and we engage now more via that computer (mobile phone) in our pocket.
Look at WhatsApp. Based in Silicon Valley built an empire out of sight. They focused on an international market. By the time local competition noticed what a monster of a business it became, Facebook snapped them up for $19B.
I often hear business people that run tech companies complain more than software engineers about how hard it is to build companies without funding. As Chris Dixon pointed out at Startup School 2013, "Business people vote with their dollars. Engineers vote with their time". Maybe it's time to learn to code? If you can code you can build product now, iterate now etc.. without sitting around day dreaming ideas while waiting for "funding" so you can pay someone else to code it for you.. and potentially mess up the foundations.
Tax Breaks or Grants don't matter. I have not heard any startup even consider those in the USA.
Australia is Expensive - have you seen the rentals in SF/bay area? Food and clothing - yeah dirt cheap in the USA compared to AU.
Timezones - West & East coast in the USA are 3 hours apart. If you need 24 hour support outsource it via oDesk.
Have you considered Health care? in the USA it is insanely expensive. If you don't have a job you will pay around $1.7K for good coverage per month for your family (you, spouse & kid). If you don't, you have no coverage. In Australia.. oh yeah it's free. And not tied to your job. Now say you have employees. You should consider this a massive expense because if you don't cover them, there are plenty of other companies that will with better benefits. You won't have these issues/expenses or competition for talent in Australia.
When I left Australia few years ago there was no Fishburners (Sydney coworking space) or Startmate (YC like mentorship and seed financing) or a swarm of similar entities now all over Australia supporting local startups & talent. Yet people still built business. When I did my 1st tech startup straight out of University there wasn't even enough free online content to tell me how to do stuff, no support networks and infrastructure cost an arm and a leg. If you ask me, I think it is far easier today to build a tech business in Australia then it was few years ago.
"Basically, for startups it’s super expensive to do business in Australia compared to other big cities—wages, compliance, tax and even software costs are high, and to make it even more tough, there’s typically less funding available to meet these costs."
This is what happens when government gets too big and the labor unions are mandated by law.
What type of nonsense is this ? It's super expensive to do business in Australia because it's super expensive to do anything in Australia. It has a high cost of living, high salaries, high property prices, small population and it located far from everyone.
We've seen over the last few months what a smaller government looks like. Moving to a "user pays for everything" model means less take home wages with a flow on effect of less money for startups.
Labor unions are not mandated by law and for all intents and purposes irrelevant for 99.9% of startups. They do serve an incredibly valuable part of society being the only counterweight to large corporations who are easily able to buy their way into politics.
> We've seen over the last few months what a smaller government looks like. Moving to a "user pays for everything" model means less take home wages with a flow on effect of less money for startups.
I don't know much about Australian government, but how is a "user pays for everything" model different from taxation? In your state, doesn't a user still pay for a service through taxation, whether an income tax (less take home wages), sales tax (less money for startups) or some other tax?
Reductions in public services/welfare supposedly matched by temporary levies on high earners. Those levies will be gone soon enough and the high earners will make back any shortfall through super changes anyway.
"It's super expensive to do business in Australia because it's super expensive to do anything in Australia. It has a high cost of living, high salaries, high property prices, small population and it located far from everyone."
Labor jobs pay $16/hour minimum. There is heavy regulations and taxes on businesses. With a company over a certain amount of employees, firing an employee ends up being a court case with the head of the labor union.
Startups can't thrive in an environment like this, which is why we don't see VC firms flocking there. It's no coincidence that they are flocking to the US.
"They do serve an incredibly valuable part of society being the only counterweight to large corporations who are easily able to buy their way into politics."
Labor unions are just as bad as corporations. They destroyed GM in the US and continue to create waste in many other industries (teacher unions creating an environment where bad teachers can't be fired).
It's not a shock to me that I was down voted. The leftists here on HN love unions.
Here's an alternative view: As collective safety nets (unemployment benefits, public housing, Medicare, ..) are removed in the name of lower taxes, it becomes much riskier to strike out on a new venture. With collective safety nets, you can take a risk and know that in the worst case you will have food, shelter and health. Without the safety nets, you stand to loose everything. I'd argue that a reasonable level of tax is a subsidy to founders and a promoter of start-ups.
Yes, but would it be as effective as a universal scheme? Also, there is a chicken and egg situation, whereby only people with the advantage of enough wealth to join in the voluntary scheme could access a safety net, biasing against people who do not have advantage but do have the ability to contribute.
> Why should a startup founder be able to bet on someone else's money?
Because we're all linked by, and benefit from, our societal connections and as a society we've collectively decided that it's the best way forward.
Every system has its own set of drawbacks. A non-voluntary system has the drawback of forcefully extorting money from people with proven capability[1] and then handing it over to possibly incapable / lazy people.
[1]: Assuming an uncorrupted system. Else, all systems are equally bad.
Er... where are unions mandated by law in Australia? I've worked in a variety of industries, and have only been in a union for one of them, which I dropped out of. I have a friend who's worked as a union recruiter, and he was very certain that there was no legal obligation to join a union.
I think the bigger issue in Australia is that the VCs here have a terrible investment track record, so banks and other investors are less likely to given them funds to invest.
There are a couple of things that could change here to improve things. The first is that it's currently easier to bet $15K on Melbourne FC to win the AFL Grand Final than to invest the same amount of money in an Aussie startup. That's completely crazy - it makes becoming an Angel in Australia a burden.
The second potential is Australia's vast pool of super funds (401Ks in US terminology). They can't invest in either startups or VCs because it's "too risky". However they should be allowed to invest a portion of the fund - say 10%. That would make a huge difference to the funding available to startups here.