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Think Big. Move Fast.

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.

  • http://www.linkedin.com/in/msmallcombe Mark Smallcombe

    Good article (small typo – Syndey on the first line and Eruope). As an Aussie expat (and also ex-Citysearch), I’d love to have been able to start something in Australia but have had to move to the Valley for opportunities, VC connections and personal networks.

  • jeremyliew

    Thanks Mark. I’ve corrected the typos. My wife rapped my on the knuckles for sloppy proof reading last night!

  • http://claycook.minti.com Clay Cook

    Hey Jeremy,

    Thanks for mentioning Minti.

    FYI – to date we have successfully raised AUD$2.8M without VC participation, and we recently acquired a strategic stake in our technology partner. We also have a couple more verticals in the pipe which we hope to launch in the next couple of months.

    We haven’t felt the need to be US based.

    Cheers from Sunny Perth ;)
    — Clay

  • http://www.veetro.com Daniel

    Hi Clay – I’m a founding partner in Veetro (www.veetro.com). We’ve had a pretty hard time finding any sort of seed/angel capital in Australia and are now sinking in more personal funds to take the business to the USA to raise money.

    I would love to hear your story.

  • http://www.carbonblack.com.au Jodi

    Jeremy,

    Your post was refreshing to read and timely as we embark on our own search for funds for a US leap. But an investment must be prudent, rationale and top/left on the efficient frontier – benevolent investing such as social responsible VC funds or perhaps, home town nostalgia, could be a difficult sell at the board level when you’re the only Aussie and the local business plans stack up by the mile.

    So let’s speak in tangible, practical terms. I’ll introduce this one start-up opp, and see just how attractive it is for Australian expats.

    CarbonBlack TyreXchange is a new online reverse auction to buy tyres and related services – bringing new technology to an old industry.

    We are currently rolling out state by state, http://www.carbonblack.com.au, an online tyre buying site, but the real opportunity is the more fragmented, higher volume US tyre market. The sooner we get there the better.

    Globally, tyre supply exceeds demand (1.3b units supplied against a demand of .97b). While manufacturers and wholesale margins are slimming as brands are commoditised with low-cost imports, tyre dealers are enjoying upwards of 40% margins in an industry that’s relied on a lack of consumer product knowledge.

    But consumers, particularly women, want more control and understanding over their tyre buying. The Tire Rack in the US and MyTyres.com.au in the UK are leading a growing industry of online tyre buying. In Australia, Unique visitors in the automotive online classifieds have grown from 1.5m (Apr 2005) to 2.5m (Apr 2006) and unique visitors in online automotive news have grown from 1.6m (Apr 2005) to 2.5m (Apr 2006).[Neilsen/NetRatings] (Oh so unimpressive if you’re sitting in California).

    CarbonBlack provides consumers with competitive bids, tailored product/service offers, dealer and tyre comparative information, tyre safety, education and general advocacy and expert tyre advice.

    CarbonBlack seeks AUD400k and a strong partner with which to accelerate it rollout nationally in Australia, with strong potential and scalability to enter the US market within the next 5 months.

    So I brace myself for the flow of funds from Sand Hill :)

  • http://blogspot.nudgemarketing.com Jake-Nudge

    Australia seems to be a bit of a “chicken and the egg” issue. I have no doubt that the moment an Aussie startup sells a company to google/yahoo for a couple of billion the search will be on for VC’s to head down under and check out what is going on down here. I find it somewhat ironic that internet startups who are all about “bringing people from all over the world together” are still forced to pack their bags for California.

  • http://www.carbonblack.com.au Jodi

    By the way, skype was Australian, to name one of many you would recognise!