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Source: Corbis

Silicon Valley Successes from Down Under

The Hot New Players in Silicon Valley

Why you should care

Because the hottest new players in Silicon Valley are not who you think they are.

There’s an exciting new set of players in Silicon Valley. Not a new kind of engineer. Not designers. Not Zuckerberg’s sister. It’s a new group of expats flocking in from their home country: the Australians.

These newcomers from the land Down Under, the world’s 12th largest economy, aren’t starting from scratch — they’re arriving with small companies in search of the next big thing.

And bigger is what they get here: bigger markets, bigger investments, more chances at big-time capital.

Australian tech founders are well-educated but under-supported — unlike the ecosystem in Silicon Valley.

“No one wants to do anything small here,” said Joe Ward, former director of the Australian American Chamber of Commerce and CEO of now-Silicon-Valley-based xTV. “In Australia, it’s very much about: If you can make some money and get some earnings and be profitable, that’s fantastic. Here, it’s: Forget about profit — just grow the revenues.”

OZY spoke with several Australian entrepreneurs of the roughly 8,000 now operating in the Valley — that number is according to Ward. Those entrepreneurs told us that, while there’s talent in their home country, Aussie investors are risk-averse and the startup ecosystem can’t deliver what’s in Silicon Valley.

James Cattermole, the 36-year-old founder and CEO of a tech startup called Hexigo, says Australians are coming around to the fact that they can’t avoid competition by staying in Australia, so they figure they might as well move to the ultimate startup capital and really give it a shot.

Headshot of Bill Tai

Source: Corbis

Bill Tai

And give it a shot they have. Companies like Atlassian, OzForex and 99designs have reportedly secured huge Silicon Valley investments, bringing in more than $130 million and attracting big-name VC firms like Accel Partners. Valley investors like Bill Tai and Dave McClure have opened their wallets to a dozen Aussie startups through their advising in Blackbird Ventures. Australian entrepreneur Phil Bosua — who had a wildly successful Kickstarter campaign for his wireless lightbulb company LIFX — traded Melbourne for Silicon Valley in search of bigger opportunities. This month, he raised $12 million for LIFX, led by top-tier VC firm Sequoia Capital.

The Aussies have advantages: They already speak English, and their country has a strong engineering education system.

“In Australia, it’s a very bootstrap mentality: You generate revenue early, you have mentality to make money rather than … fund it through capital,” said Jindou Lee, who moved his company Happy Inspector from Adelaide to San Francisco.

The Aussies may be off to a good start, but they have yet to score a huge brand-name win.

Lee has raised over a million dollars (including funding from well-known Dave McClure of 500 Startups) and says there’s a convenient domino effect. Once American investors put money into Aussie startups, it de-risks them in the eyes of Australian investors.

And the big advantage of the Valley? The network, of course. Australian Paul Naphtali’s fund Rampersand is trying to foster a greater community for mentorship among Aussie entrepreneurs across the world. He told OZY that Australian tech founders are well-educated but under-supported — unlike the ecosystem in Silicon Valley.

The Aussies may be off to a good start, but they have yet to score a huge brand-name win. Infosys, the company led by Nandan Nilekani, put Indian companies on the map. Swedish-born Spotify successfully crossed the Atlantic to become a digital-service superstar in the Valley. And what’s a key challenge for the Aussies? The traditionally risk-averse mindset that governs Australian investing means we don’t see companies like Facebook, Twitter or Instagram starting there. Such companies began, after all, as startups that made no money for years.

But even if they’re not making a splash with their own companies, Australians have earned the top spots in iconic American tech companies: Andrew Wilson is CEO of Electronic Arts and Jacques Nasser was CEO of Ford Motor Co. And then there’s Rupert Murdoch, one of the world’s richest moguls, who started with a family-run newspaper in Australia before launching his decades-long conquest of the American and British media landscape. Which all explains why today, Australians are among the wealthiest in the world.

But here’s one key fact: Australia survived the 2008 financial crisis better than most of its peer countries. The nation’s GDP growth has been positive throughout the last decade, thanks in no small part to close trading relationships with China. And America’s suffering has been Australia’s gain, making it easier for folks like xTV’s Ward to move to the U.S. You might not think Silicon Valley is affordable — but Ward told us it was cheaper and easier to move in 2009 than when he first considered it during the 2000s dot-com bubble.

Headshot of Paul Naphtali

Source: SMH

Paul Naphtali

The truth, though, is probably that American consumers are among the biggest draw. That’s part of what attracted Lee’s Happy Inspector and Anthony Goldbloom’s Kaggle to California.

“I started spending a lot of time in the U.S. and ultimately ended up raising quite a lot of venture capital from American investors,” Goldbloom said — and the rest was history.

Call them the Aussie mafia, sure, but remember that this is all just the overture. As with any hot new group making it big in the Valley, we’re just seeing the seeds. The big booming growth? Look out for it over the next year, as established Australian companies could start buying up Silicon Valley’s hottest homegrown startups. That’s when Down Under would really take center stage.

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