11 September 2017
When it comes to supporting startups, the ecosystem in Asia is limited in many ways. Traditionally, the region’s startups look to Singapore and Hong Kong as sources of funding and support to help them move beyond the region. However, there is another rising ecosystem that Asian entrepreneurs have been overlooking—Australia.
I recently went to Sydney to participate in the H2X program organized by H2 Ventures. This was a compulsory training for me, as my startup, Inspitrip, recently joined H2’s portfolio. Over three weeks, I had the chance to be on the ground, meet up with successful startups founders and corporate ventures, and gain great insight into Australia’s thriving startup ecosystem.Australia’s robust economy
Here are some statistics:
Although the investment in venture capital remains low, this is changing quickly. Sydney-based AirTree, a venture capital firm, raised a record VC fund in Australia at US$250 million last year. Blackbird Ventures, a venture firm investing in Australian startups, also secured a US$110 million funding from First State Super (a public super fund) in 2015.
Australia is a leading country in many industries but mining has been the “cash cow” of the economy, contributing US$170 billion annually (or 60 percent of Australia’s exports in goods and services). As the mining boom has ended, though, the Australian government is looking to use the wealth that it gained in mining to invest in innovation and startups to drive the country’s economy forward. This investment in the future includes welcoming the best talent and startups from overseas into the country.The fast-growing tech scene
The vibe of Sydney’s tech scene is almost tangible. While I was there, it became evident how much tech startups are progressing in the country. Australia has many successful technology companies including:
However, what I can clearly see is the rise of the fintech sector. As a regional financial hub, fintech in Australia is truly booming, with many companies innovating the industry. According to the World Economic Forum, Australia is the sixth biggest fintech hub in terms of market size and investment. Stone and Chalk, a fintech co-working community where H2 Ventures is based, is one of a few co-working spaces dedicated to supporting fintech and artificial intelligence startups and is one of the largest of its kind in the world.
Innovation is also happening within big corporations in Australia. During the program and throughout my time in Sydney, I had the chance to visit the KPMG innovation center and was amazed at their world-class facilities. Many large firms are realizing the importance of being innovative and are setting up venture arms to stay competitive. I also had the chance to meet with representatives from NAB Ventures, the venture arm of the National Australia Bank, and was told that they function more like a startup themselves. (The firm doesn’t have a fixed office. Rather, they move around, embed themselves into the startup community, and talk to entrepreneurs in their search for investment opportunities.)
Despite the rise in tech and innovation, I found it surprising that Australian startups do not easily attract software engineers. According to Zack Gazak, a VC associate at H2 Ventures who has spent a few years working in Silicon Valley and Sydney:
The Asian focus
“It is not that Australia cannot produce world-class tech engineers. There is a shortage simply because the supply is not enough for the growing demand in both Australia and Silicon Valley. Many choose to work in the Bay Area or big corporations for more attractive salaries. We should start looking at the Asian market as an alternative because there is so much talent there.”
The Australian government understands that the country’s prosperity relies heavily on its relationship with Asia, especially ASEAN countries. The government has been encouraging Australian startups to look beyond Silicon Valley and expand to the Asian region. Muru-D, an Australian accelerator backed by Telstra (Australia’s largest telecommunications company), has set up an office in Singapore to invest and groom regional startups in Asia. Many other Australian startups have set up back offices in Vietnam as well. One example is Australian fintech startup Employment Hero. The firm, which specializes in a SaaS HR platform, has recently expanded its tech team to Saigon.
Most businesses in Australia seem to understand the importance of the “Asian Century.” However, when I asked a few Australian VCs why they haven’t invested in Asia yet, they said their knowledge of the region is limited and that they’d need to learn more before investing. Fortunately, this trend has recently started to change. There is a new startup hub called Haymarket HQ which specializes in providing Aussie startups and investors with the knowledge they need to expand into Asia. Considering the increasingly strong relationship between both regions, I have no doubt that there will be many more of these hubs in Australia in the future.Government’s support for innovation and startups
Corporate ventures and capitalists are not the only ones showing support for startups. The Australian government has backed the emerging sector tremendously. In late 2016, the government committed US$1.1 billion to invest in the country’s innovation over the next four years. The Entrepreneur Visa was recently launched for founders who attracted more than US$200,000 investment from specified investors to develop and commercialize their ideas in Australia. Perhaps the best part of all of this is that the founders of these startups don’t have to be Australian citizens to set up or run their company in the country.
If Paris has Station F as a startup campus, Sydney will soon have a similar one following New South Wales State Government’s US$35 million investment to build the Sydney Startup Hub, the first incubator of its kind in the southern hemisphere. The hub will be home to more than 2,500 people across 11 floors. It will be the home of the country’s largest coworking space, including Stone and Chalk, Fishburners, Tank Stream Labs, and The Studio.
The government has also introduced several generous incentives to ensure startups take risks and stay innovative. One such incentive is the research and development tax offset. As an Australian company, you can claim a refund of 43.5 percent of the money you spend on developing your product, which might include experimental costs to bring your minimal viable product (MVP) to life.Conclusion
Now is the time for Asian startups to begin exploring the Australian ecosystem as an alternative to Singapore and Hong Kong. In terms of funding, the Australian economy is gaining strength, and the government is showing its willingness to invest heavily in tech startups.
Since overseas entrepreneurs are welcomed in Australia, I think this is an exciting opportunity for Asian tech entrepreneurs to seek funding in the country. Another reason to move down under is that the tech scene is expanding quickly, especially in fintech and AI. Finally, Australian businesses are shifting their focus to Asian countries and want to gain more knowledge about the region, proving that Asian entrepreneurs should feel encouraged and excited to reach out to Australia during their own startup journey.
Originally published on Tech in Asia - https://www.techinasia.com/talk/australia-place-asia-startups