It seems to me that Australia has a unique problem. There is a massive brain drain of engineers & tech entrepreneurs moving to the US to start their own business (E3 Visas). These are American, not Australian companies.
* The current tax law is a nightmare for those AU startups wishing to dole out equity.
* Lack of talent, the majority of students have steered clear of tech disciplines in university after the dot-com bust, the effect of this is being felt now as engineering talent is needed.
* The government is not focused on the needs of startups preferring to invest heavily in pie in the sky ideas or just digging the dirt out of the ground. There is no decisive strategy from the opposition nor the current gov in power.
* Lack of funding. There are just not enough investors in Australia looking to fund in Australian tech startups.
The Australian startup scene is booming! Hopefully this series will highlight some of these issues so things can get even easier for new Australian companies.
I know these are the default complaints about startups in Australia, but to address each point:
The current tax law is a nightmare for those AU startups wishing to dole out equity.
100% true
Lack of talent, the majority of students have steered clear of tech disciplines in university after the dot-com bust, the effect of this is being felt now as engineering talent is needed.
There is talent around if you know where to look.
The government is not focused on the needs of startups preferring to invest heavily in pie in the sky ideas or just digging the dirt out of the ground. There is no decisive strategy from the opposition nor the current gov in power.
Mostly untrue. I've done work for two local startups in the last 18 months, and both received significant government help, to the point where my services were at least partially funded by gov programs. Yes, getting government help can be a slow process, but I doubt anyone would except anything else.
The Shoes of Prey guys spoke specially about this recently at the Google startup event in Sydney. They praised the tax concessions and other gov funding available to startups.
Lack of funding. There are just not enough investors in Australia looking to fund in Australian tech startups.
Mostly untrue. There are plenty of YC-Style accelerator programs giving seed funding, and a decent number of individual investors interested. The VC funds don't seem to be playing the same game as Silicon Valley VCs though (but then - Boston VCs aren't playing that same game either).
A local Australian startup I've done some work for raised a $2 million angle round recently[1] and didn't seem to have a lot of trouble with it.
"massive brain drain of engineers & tech entrepreneurs"
Bollocks. There is a massive amount of self-promotional noise coming from a medium-sized group of people going over to the US, not all of whom are that much or a loss to Australia.
Certainly Australia has its problems. And moving to the Bay Area to start a startup is obviously a good idea from many parts of the world. That being said, having a bit of a whinge in the SMH about how lousy Australia is is a great way to get some free media coverage for your startup.
In general, the Australian government's attempts to foster innovation have simply been disasters, the main reason being that they take two approaches — creating funds (which simply lead to feeding frenzies by people who know how to get grants) and tax incentives (which simply encourage companies to create tax shelters). In general, the US VC scene thrive precisely because the government does virtually nothing in this space.
Don't expect or even hope for the Australian government to help anything.
* Lack of talent, the majority of students have steered clear of tech disciplines in university after the dot-com bust, the effect of this is being felt now as engineering talent is needed.
Very much so in QLD from experience. I'm studying [software] engineering at the University of Queensland and they give seemingly all their attention towards mining and civil majors.
I've heard really poor things about UQ's IT department though. I've heard that if you're doing IT related things, the reputation of the universities is backwards: Griffith is best, followed by QUT, and UQ is rather poor.
QANTM and QUT are the 2 top In my opinion. I did programming at QANTM in 06-07 and it was fantastic as most of what I learnt was practical useful information and all the work we did was actually creating software rather than just studying theory / algorithms. Also got job offers at Halfbrick, Krome and Firemint upon graduating.
Honestly I haven't met (or even heard of) any good coders from Griffith and UQ is as said good for most disciplines but not sure about IT.
That seems to be true. Unluckily enough, or at least a mistake on my behalf, I was at Griffith last year and had the choice out of all three uni's for engineering and went with UQ because of their record, amongst other things. Oh well.
Why won't these Aussie companies hire American or Canadian devs? The scene down there seems so insular. Couldn't they mitigate the "brain drain" somewhat by recruiting in countries where English is already the default language and there is talent on the ground?
US/Canadian devs are probably equally attracted to the US tech scene over Australia, no?
Anecdotally, I'm an Australian who moved to the US fresh out of college, and the salaries here were waaay higher than what I was being offered in Australia - like 150% to 200%.
Plus Australians don't have massive student debt -- we have income-contingent loans that don't count income earned overseas. So if you move to the USA ... you don't have to pay back the loan.
Every time I see people on HN bitching about "low" wages and "high" costs in the valley, I laugh bitterly. American programmers really have no idea how good they have it.
I've heard this explanation from others and it seems reasonable enough. I still wonder if they couldn't get "B" or "C" grade devs though. A lot of SV companies just won't settle for anything but "A" players, and if they can't get them (because of the incredibly competitive war for talent) many will just leave the job unfilled. That means that there are American and Canadian devs who might be willing to move to Australia to get some experience under their belt.
Why would an Australian company want to hire "B" and "C" grade devs, let alone import them?
Wow, this thread is misinformed. There's plenty of world class "A" grade talent in Sydney. Some of those people leave, some of those people stay. You just have to know where to look.
Funnily enough, not everyone wants to move to the US, because if you're not a founder of a tech company, there's very little reason to leave Sydney for SF.
I didn't say there was no A-grade talent in Sydney. Don't get defensive.
Of course I don't know much about the Australian startup scene. That's why I asked the question. It's on the other side of the Earth from the US. So the question remains unanswered. If there's plenty of startups in Australia that have no intention of leaving, why can't they hire US/Canadian devs if there isn't enough homegrown talent to go around? I for one would consider living and working in Oz.
Games companies always underpay. It's never financially worthwhile working in that field (except maybe in social gaming if you are in SV)
Taking any permanent job as a developer in Australia is almost always a bad move financially. You should be looking at contracting.
If you are prepared to work in enterprise software then rates are around $70-$90/hour for mid to high level developers (rates go higher for architect positions too). Contracts typically are 6 months, and almost always are renewed.
(These are Adelaide Java rates - East Coast rates are typically $5-10/hour higher, and I've heard Perth rates are higher still)
Sounds about right. I graduated from UQ in 2008 - I had job offers from Honeywell in Sydney ($56k) and a local Brisbane firm ($45k) but took Microsoft (US$80k). Banks and IBM were offering ~$50k. A couple friends who went to Google in Sydney were at ~$60k, those who stayed in Brisbane were generally on ~$40-$50k. 5 or 6 of us from my graduating class came over to MS that year.
It's a good read, and to me it highlights just how difficult it is to get funding in Australia. To put it in perspective, they are a well established company with solid founders and a proven business model, and they still had a great deal of difficulty raising money.
It's less that it's a nightmare, and more that there aren't enough people that have done it to know the right way to go about it. We've been trying for 6months to get an ESOP off the ground, and have had a hard time finding an accountant/lawyer who knows their way through it, EVEN THOUGH we know what needs to be done.
Anyways, the major problem is that shares and options are taxed like income at the time of issue, with no easy way to defer the tax bill. This makes it essentially untenable to hand out equity to employees. This then makes it a lot harder to employ people as a bootstrapped startup.
there are a lot of legal fees to set up the kind of employee equity plan that can cost a few thousand dollars in the US.
we're talking 10-30 times as expensive.
These incubators/VCs have the ability to bring more money to the table. They simply choose not to. And let's be honest here. The only reason they are pushing them to the US is so they can make money. They are sycophants.
If they really cared about the industry they would be encouraging these people to stay in Australia, build something to benefit the local market and help them expand into Asia like every country dreams of and which we are uniquely positioned.
And so far every successful Australian startup that I know of mad it in Australia BEFORE expanding to the US. Not when you have nothing more than an idea/prototype.
But I would hope that when many are taking TAXPAYER money that they would think about something more than short term money. After all it is in their best interest to have successful Australian startups.
Wait -- what VCs are funded with tax dollars? Either you guys do things very differently in Australia, or I'm missing your point altogether.
Regardless, it isn't necessarily as black and white as you've stated. They aren't just looking for the 'short term' money, but to give the teams the best opportunities for success.
Per beilabs' argument, it seems that their best chances for success aren't in Australia.
You also seem to be missing the fact that it's a boon to the Australian economy for companies to succeed, even if they succeed elsewhere, unless they completely emigrate. Every Australian success story sparks another entrepreneur in Australia to get motivated.
Yeah, it sucks that the deck is stacked against them at the moment, but that's not a problem the VCs can fix until the government gets cracking to foster startups. That's a long slow process... and as the existing government watches startups leave for those reasons, it should serve to motivate them to fix their laws and better retain local talent.
8 companies from this year's Startmate batch incorporated in the US from day 1 (last year only 2 flipped up post incorporation).
Flightfox is in YC. Happy Inspector is in 500 startups. Scriptrock raised in the US. Ninjablocks went nuts on Kickstarter and also raised in the US. The other 4 I believe are either back in Australia or are heading back here, most of them also raised money in the US.
So why did they incorporate in the US instead of Australia? Because ONE company from Startmate 2011 raised in Australia (that'd be us), and even then most of our first round came from the US.
So the choice is either to run an incubator that results in no companies getting funded, OR you get them to a place where they can raise money and be successful, and last I checked that's the whole point of an incubator.
As far as VC's go, it makes literally no sense for a VC to be pushing their portfolio companies to the US were valuations are higher. All they'd be doing is making it more expensive for themselves to invest in future rounds. They're not that dumb.
There will continue to be no investment in startups in Australia until there is PROOF that investing in Australian startups isn't a dickhead investment. The best way to do that is to do everything you can to get these companies to be successful. These companies are doing great things in the US and it is ALREADY encouraging several (up to 6 that I know of) new funds to get started in Australia WITH substantial incentives from the Aus Govt.
I work in the Auto industry, and yep, the amount of code in a typical car is enormous.
Just do a simple, back of a envelope style calculation. A typical car has about 25 electronic modules, ranging from simple seat beat controllers and complex controllers like engine management units and instrument clusters. Assuming that each modules have about 250K line of code, that would take it up to 6.25M line of code. That goes up if we start to consider high end cars like BMWs and Mercs.
Let's not forget about the development infrastructure around the code development, that is another story..
I don't believe that for a minute. It sounds like they've added up every single line of code that goes into a Ford, kernel and all, and compared it with the frontend code for Facebook (~9M lines?). Given that we don't actually have acces to either number I'm calling bullshit on this one. It's how you present your data when you have something to hide.
"Ford’s 2005 models contain between two and three million lines of code. Current 2007/2008 vehicles have an average of six million lines of code. The company is expecting about 10 million lines of code in its vehicles in 2010."
http://www.plm.automation.siemens.com/en_sg/about_us/success...
Although it's an unfair comparison if you're counting all the dozens of subsystems in the car, mostly developed by third parties, but not counting the OS kernel, full MySQL source, libraries, etc. used by Facebook & Twitter.
Atlassian as a company is awesome, their products quality varies and of course the best sellers (Jira and Confluence) are also the worse one code wise since they are the oldest.
The point I'm starting to get mad about is this BS about not having sales. I've worked with an Atlassian partner and, well, Atlassian huge partner network is their sales force.
And over the last year Atlassian itself has started hiring internal sales people too so please stop with this "no sales"
Firstly, congrats to the Atlassian boys. Whichever way you look at it, it's a great accomplishment.
This thread has turned into a discussion about startups in Australia in general and let me add some perspective as an Australian who now lives in the US (NYC).
Firstly, a disclaimer: I'm from Western Australia, specifically Perth. WA is different to most of the rest of the country (except maybe Queensland) in that it awash in the biggest resources boom probably ever. Iron ore and oil and gas primarily but others too (aluminium, nickel, etc). China is of course the largest buyer.
In many ways Perth, the capital of WA and a city of some 1.5 million, is a boom town and really two cities: the haves and the have nots.
The haves are in the resources game, directly or indirectly. The biggest indirect benefactor is construction. There is some $50B+ in infrastructure projects in the pipeline and prices paid for construction are just astronomical. This was worse in the housing boom (up to 2008) but is still bad.
My brother-in-law who manages construction projects (apartment buildings and so forth) says that to build a two storey brick-and-tile house is about $2,000+/m2 (roughly $200/sq ft). Single storey is still probably $1500. Apartments in West Perth (close to the business district but not much else going on) sell for over $10,000/m2).
The have nots are everyone else including software engineers.
Post-housing bubble and because of the high cost of entry to the market (you will not find a house in Perth cheaper than $250,000 period and I'm including rundown houses built 50+ years ago) and tighter lending practices by the banks (anecdotally, the wholesale cost of lending pre-bubble bursting was 20 basis points about the RBA rate, now 100+) rents are going through the roof.
A one bedroom apartment I rented in 2005 for $300/week is now $600+. There are far more extreme examples than this.
On top of this the cost of living is ridiculous. Food, utilities, you name it.
Basically if you aren't in the resources/construction game, you have experienced a drop in your real standard of living over the last 10 years. Commercial property is expensive. Everything is expensive.
One big problem Australia has (IMHO) is stamp duty. Stamp duty as it applies to most people is a state government tax on the sale or transfer of property. In the US instead you pay property tax (typically 1-1.5% of assessed value AFAIK). In Australia you might pay as much as 5% of the sale value in tax.
Now consider that a "normal" family home in Sydney or Perth might be $1 million. So if a family in Sydney wants to pick up and move to Perth they may be $80,000 in the hole (including agent fees and the like) before they even start... all for a job that might only pay $100-150k. This I believe really hurts labour market flexibility.
Through a combination of taxing property and not the transaction and lower overall property values, this is not a problem the US has.
I often joke to friends and family that it is cheaper for me to live in Manhattan than in Perth now.
This has several negatives when it comes to tech:
1. There is a strong incentive go to the US, Real standard of living is higher, jobs are more plentiful and so on;
2. The high cost of living makes bootstrapping a startup in Perth expensive and not very attractive. More broadly to varying degrees I believe this applies to a large part of urban Australia;
3. Perth at least has never really had a tech scene per se. The norm is for any sufficiently large company to headquarter itself in Sydney or Melbourne. The only exception are resource companies (Rio Tinto, BHP, Woodside Petroleum and the like); and
4. Because there is so much "easy money" floating around in resources it's just to justify a tech startup comparatively.
Plus there are usual reasons: Australia is far from everywhere (Europe, Australia, even Asia) and Perth is even further (it is I believe the most isolated capital city in the world and you need to go 3000 miles before you find another city above 100,000 people).
Startups don't start in a vacuum. There is an ecosystem that makes them thrive. Angel funding, VC, etc.
As far as regulation goes, I don't see any particular barrier here. Forming a company in Australia isn't cheap (~$1000 for a private company, more for a public). Financial regulation is much stricter such that operating in financial services is a difficult proposition because of regulatory burden. For example, I don't believe Mint.com could ever have started in Australia.
I largely discount the "lack" of government involvement. Businesses will grow and thrive largely independently of the government and it's not something the government tends to be good at encouraging anyway (just look at the whole Curt Schilling thing).
If I was going to do a startup today I'd go and hole up for 6-12 months somewhere cheap to get an MVP and then base myself somewhere with a decent tech scene, maybe NYC or Boston.
From what I read the housing market is just nuts in SF now. Attracting and, more importantly, retaining staff I imagine is difficult in the Valley now. So much so that I think I would skip it entirely.
Whatever the case, Australia would be pretty low down on my list.
Several things are killing Australian non-resource workers at the moment.
1. Dollar strength : used to be you could make software or movies in Australia at a decent discount to doing it in the US for roughly the same quality. Not any more. This is unikely to change anytime soon.
2. Hostile government : the current rhetoric is about 'tax the rich' and 'pay your fair share'. For now, it's mostly aimed at Mining and Banking companies, but the overall tone is very negative when it comes to creating wealth. Whatever your thoughts about this as a political strategy, it's not exactly conducive to attracting capital either domestically or internationally.
3. Extreme housing + other living costs. Just taking a family out for a modest meal can easily push a C-note when you're all done. Adding movies onto that is going to be a buck fifty. Moving cities for another job is pretty much out of the question unless you get a $100k bonus to do so.
The one good thing Australia has going for it is the health insurance side of things. A startup doesn't have to take out health insurance for it's employees - if it does, it doesn't cost the earth. Whatever risks one might take in signing up with a small company, healthcare isn't one of the issues.
Some US places like the Bay Area or Manhattan might have high rent, but other costs are much, much lower.
But the overriding fact is : you're more likely to meet Australian tech entrepreneurs at a USA conference than somewhere in Australia. Conferences and the like are dominated by enterprise employees and talk of starting new things is relatively rare.
Pay for your fair share isn't about robbing the rich to feed the poor. Higher tax rates for high income earners and boom industries (mining) etc, is all about generating tax revenue to _reinvest_ into the same system that gave you the opportunity to be successful! What are those benefits? Low tax rates for low income earners, family financial assistance, the free primary/secondary education that you received as a child, the heavily discounted tertiary education and free Medicare (at least in Australia). This stuff doesn't pay for itself.
Realise that just because you had some level success, it doesn't mean it was all because of you and that it's not fair to pay your dues - it is fair. Economic and social welfare policies that were enacted more than 20 years gave you the environment to thrive. Now its your time to give back to that system so we can give others in the future their chance too.
It is all nice in theory and sounds good if you are in church but in reality it is bad for economy of any country overall if it is not balanced well. If you are very rich you usually have freedom to move your business to other country with lower taxes. In result your country loses. If you are just somewhat rich that's starts to be funny. E.g. with my salary I'm in top 25% of people and to enter this rich class I need to yearn more than 1000$ per month (before taxes). E.g. this number is smaller than minimal wage in USA (8$*160 hours). Any progressive taxation on rich in my country would make people simply emigrate to other countries with lower taxation (e.g. Ireland) or will cripple any motivation to work more (why should I work extra hours for several dollars per hour? That's what would left for me after taxes if some aggressive progressive taxes were introduced here).
Don't get me wrong. I don't have anything against progressive taxes but usually they are balanced poorly and do more harm than give value.
My point was not whether you agree with the current taxation changes or not.
My point was that the rhetoric surrounding these is very anti-investment. The public attacks of rich people by politicians is extremely dissappointing and concerning.
As for the actual tax changes, taxing miners extra at the upswing of their cycle and handing out the cash as welfare isn't reform, it's naked vote buying and bad for the short, medium and long term.
Australia indeed should be listening to people wanting to invest in this country, and working out ways for them to double or triple the amount they're planning to invest. Not slagging them off and looking for new ways to loot their pockets.
Australia does not need foreign investment. It's a reasonably developed country with a high standard of living and a small population (22 million). If anything they are better of discouraging foreign investment until after this boom as it drives up domestic prices and effectively acts as a loan which is paid back when the foreign investors pull their profit back.
Perth is not that expensive if you're prepared to put up with a 40 minute commute (O horrors).
The town I grew up in, Darwin, is now regularly amongst the most expensive capitals in the world for rent. And food, petrol etc is a helluva lot more expensive there than it is here in Perth.
Getting investment in Perth is tricky though. Investors in Perth understand the mining lifecycle. If you see something interesting on a map, you can round up some geologists and drillers and raise $10 million in a few weeks. It's basically the Silicon Valley of mining.
But god help you if you want to launch a software business. There's one venture fund and so far they've invested in one (1) software venture -- and that was Filter Squad, after Discovr was successful.
All the Australian action is happening over east. And there's nothing much there either.
If I could up stumps, right now, and move to the US, I would.
Disclosure: I work for the funded startup mentioned, Filter Squad.
There may only be one venture fund locally, but there are several around Australia that have invested in startups out of Perth.
Also, That one VC (Yuuwa for those playing along at home) have invested in companies other than Filter Squad (Agworld being one of them - very much a tech startup, despite focusing on very non-traditional web / mobile audiences).
Likewise, Yuuwa invested in a seed round pretty early in Filter Squad (I can't remember exactly when since I wasn't around at that point) - it was just their follow up that was a bit later.
Hey Darcy, nice to see you again. I guess I got it wrong -- I went by the announcement on Yuuwa's blog.
That makes it two (2) software companies they've invested in. The rest are bioscience doodads. Admirable and impressive, but it means I'm competing with university spinoffs with commercialisation offices to back them up.
As another Perth resident, and one working for a local startup I think that whilst all of your points re. increased cost of living are very true, Perth still has a lot of potential in terms of it's tech and startup scene.
One of the biggest advantages IMHO we have over other states in Australia (that I believe makes up for most of the distance factor) is the more relaxed atmosphere which is very conducive to, lacking a better description, "Getting shit done".
Rent is very high across the board, but more frustratingly getting houses is becoming harder and harder - When I was looking a while ago it was almost impossible to find a single bedroom apartment between Mosman Park and Mount Lawley (admittedly, a reasonably expensive area) for under $350, even if they were old, undermaintained places. The demand for them was significant (most viewings had a fair amount of people) - From the people I've talked to searching for places since, that demand has only gone up further - Driving the prices even higher.
With all of that said and done, Perth is finally getting into the swing of having a startup scene - over the last year and even more focused the last six months, there have been more and more startups popping up in Perth (not just as side projects, but as actual companies working full time on products) and there has been a surge of interested. We're still behind other Australian cities, but it is definitely ramping up in a noticeable way.
Also, one thing I missed - there is a definite startup market here for those catering to the mining industry and its boom. I know of at least one (I believe self funded startup) doing just that and they appear to be doing well for themselves.
As someone attempting to create a MVP and then bootstrap in Perth, thanks for helping me feel less-bad about my efforts :) It is possible to have a startup here (one of my day jobs is at one), but it is certainly less common than I imagine it to be in the US.
One thing I've noticed is that people here tend to aim for services rather than products. You can make money a lot faster contracting for a big mining company than you can trying to develop a product, fund it, market it, and make profit off it.
I'd even go as far as to say it's cultural - we're less likely to take the risk - probably because the big reward (anything to do with the mining industry) is so low risk to begin with. You even see it in other sectors - for example musicians over here are more likely to try making a living in a related service (music teaching etc) with guaranteed income than "risk" investing in their own music and trying to get big selling a product.
If you don't have dependents, start looking at ticket prices now. But choose west coast rather than east, you'll find it a better cultural (and climate) fit.
All the episodes are here:
Episode 1 - http://media.smh.com.au/technology/digital-dreamers/digital-...
Episode 2 - http://media.smh.com.au/technology/digital-dreamers/digital-...
Episode 3 - http://media.smh.com.au/technology/digital-dreamers/digital-...
Episode 4 - http://media.smh.com.au/technology/digital-dreamers/the-new-...
Episode 5 - http://media.smh.com.au/technology/digital-dreamers/milliona...
It seems to me that Australia has a unique problem. There is a massive brain drain of engineers & tech entrepreneurs moving to the US to start their own business (E3 Visas). These are American, not Australian companies.
* The current tax law is a nightmare for those AU startups wishing to dole out equity.
* Lack of talent, the majority of students have steered clear of tech disciplines in university after the dot-com bust, the effect of this is being felt now as engineering talent is needed.
* The government is not focused on the needs of startups preferring to invest heavily in pie in the sky ideas or just digging the dirt out of the ground. There is no decisive strategy from the opposition nor the current gov in power.
* Lack of funding. There are just not enough investors in Australia looking to fund in Australian tech startups.
The Australian startup scene is booming! Hopefully this series will highlight some of these issues so things can get even easier for new Australian companies.