Ben Keighran was just 22 when he packed up and moved to Silicon Valley. He’d already founded his own mobile messaging business, bluepulse, back in Australia at the age of 19. But it was in Silicon Valley that he thrived.
In 2007 Keighran raised US$6.5 million from US investors, and was named by BusinessWeek magazine as one of America’s top entrepreneurs under the age of 25. He then left bluepulse in 2008 and spent two years making angel investments and performing advisory roles in San Francisco.
While his home town of Sydney looms large in his long-term plans, when it came round to getting serious about building a new technology business – this time based on search technology – he had no hesitation about where he would do it from.
“The advertising dollars are here, the search engineers are here, and the experience is here,” Keighran says.
His new company, Chomp, is focused on making it easier for smartphone and tablet users to find useful applications amongst the plethora available. The company recently announced a deal with the US mobile carrier company Verizon Wireless, which will make Chomp the default application search engine on all phones on its network running the Android operating system.
His backers include Silicon Valley A-list investors such as Ron Conway, who was one of the first to see the potential of Google, and Kevin Rose, co-founder of the popular online information-sharing service Digg.
That investors of this calibre are willing to put serious money into a business run by a 29-year-old from Sydney says a lot about the high regard with which Australian entrepreneurs are held. A few years ago the idea of Australian start-ups attracting A-list Silicon Valley entrepreneurs was almost unheard of, but Keighran helped start a trend that other Australian entrepreneurs have been quick to take advantage of.
Recent years have seen a flurry of high-profile investments from American venture capital firms and angel investors in Australian fast-growth businesses. One of the most active has been the tier-one venture capital investor Accel Partners, which in May 2011 joined in a US$35 million investment round in the Australian design contest company 99designs. This was Accel’s third investment in an Australian company, following an investment of US$60 million in Atlassian Software in July 2010 and US$70 million in OzForex in November 2010.
For 99designs’ CEO Patrick Llewellyn that investment represented a rapid payback on his decision to relocate himself and his family to Silicon Valley. Llewellyn was only appointed as CEO in January this year with the responsibility for growing 99designs’ US operation, but soon found himself negotiating the funding round with Accel Partners.
Llewellyn says that Accel has bought more than just money to 99designs.
“Being in Silicon Valley has created a whole new network, and we are tapping into that network on a daily basis now,” Llewellyn says.
“When we start to think about our growth plans, we can feed off some of the really fast growing companies that are based here.
“The other day I had lunch with Rob Solomon, the ex-COO of Groupon. And talking to Rob opened up my mind to what fast-paced growth is. He started with 150 employees and when he left they were 13,000. So the network has been super important.”
While established companies are doing well, Australian start-ups have also featured prominently in many of the US-based pitching contests and incubation programs, including the prestigious DEMO and TechCrunch events.
Ryan Junee, for example, was the first Australian to participate in the highly-regarded Y Combinator intensive incubator program.
“In almost every cycle there has been an Aussie company, and there have been at least two that are going to get in this year,” Junee says.
Junee moved across in 2003 to study at Stanford University, before founding Omnisio, a video search technology maker which participated in Y Combinator and was subsequently acquired by the YouTube division of Google in 2008.
The latest Australian to be accepted into Y Combinator is 20-year-old Nikki Durkin, whose business 99dresses began by providing a means for women to easily swap fashion pieces using a virtual currency. Her business is evolving rapidly – a process that will be assisted by the Y Combinator experience.
“(Y Combinator) is a three-month program and at the end it culminates in a demo day where you show what you have done to a whole bunch of investors,” Durkin says. “The aim, if you need to, is to raise money off that.”
Durkin says she will use the experience to size up whether the company needs investment, and where it would be best located. She has big plans to develop 99dresses into a competitor to eBay. But doing so requires breaking into the US market, as the Australian market simply isn’t big enough.
“I’d love to build 99dresses up to something really big and valuable, because I think it has heaps of potential, especially with the new direction we are moving in,” Durkin says. “We’ve learned a lot in Australia, but what we are doing now is quite different, so we have a lot of assumptions to test out.”
On her first trip to Silicon Valley in late 2011 Durkin says she was impressed by the focused nature of the people she met, and she is keen to make more connections. On her trip she took a tour of Facebook’s facilities and was able to get direct information from the company about how to solve problems.
“We met awesome people, who live and breathe this start-up life,” Durkin says. “That kind of stuff you only get by talking to people working in the companies, and you can get a sneak peak of what is coming up.”
That these opportunities are open to Durkin and other Australian entrepreneurs is in part due to the work of Junee and those who came before him. Junee is now developing Inporia, which is applying search technology to fashion retailing to help shoppers find the latest fashions and bargain items that match their tastes. Like Keighran, he has raised money from A-list Silicon Valley investors.
Junee says there is much more to Silicon Valley than just the money.
“There is so much support here from other entrepreneurs who are successful and willing to give you advice,” Junee says. “There is a culture where it is almost expected that doing a start-up is a natural thing, and that when you do a start-up it’s risky and you are probably going to fail. The culture around risk taking and doing start-ups is strong.”
It is that combination of investment dollars and business opportunity that is seeing Australian companies flock in increasing numbers to Silicon Valley, with an estimated 65 Australian companies resident in Silicon Valley and many more on their way.
One Australian who arrived in Silicon Valley well before the current generation is Larry Marshall. He first arrived in 1987 with the goal of commercialising communications hardware developed at Macquarie University.
There were far fewer Australian companies on the ground back then.
“There were definitely less than five of us,” Marshall says. “When I used to present to conferences 10 years ago it was a novelty to have an Australian accent and be at a venture capital CEO summit.
“We are not an anomaly anymore.”
Marshall says many of the Australians who have been successful in Silicon Valley have since moved back to raise families, or for other reasons, and have taken their experience – and money – back with them. This has provided the basis for incubators and angel investment groups that are backing the latest batch of US-bound Australian start-ups.
“The new generation are more accepting of risk, I think because they tended to make money faster and easier through the evolution of the web,” Marshall says. “This is a really good thing for the country because they are willing to re-invest both in themselves and in each other.”
And they are also providing the expertise and contacts that are essential for breaking into Silicon Valley.
Junee says he has noticed a marked increase in Silicon Valley-style thinking back in Australia.
“When I go back to Sydney I notice there are a lot more people talking about start-ups and it is a lot more in the minds of people graduating from university,” Junee says.
A network of Australian entrepreneurs now stretches across the Pacific, and has been instrumental in assisting many start-ups into the market. The not-for-profit ANZA Technology Network and Advance expatriate network have been responsible for giving hundreds of Australian and New Zealand start-ups a taste of Silicon Valley through their programs, run in conjunction with the Australian Trade Commission. Many more entrepreneurs have visited courtesy of government programs.
Recent years have seen the formation of Australian-based incubators and angel investment groups dedicated to helping start-ups raise money and break into global markets. Pollenizer, which is best described as a start-up factory, recently raised $1.1million from successful Australian entrepreneurs, doubling the amount it raised 12 months earlier. That money is being used to fund start-ups such as Wooboard, a team incentive tool which is now being readied to take across to Silicon Valley.
Similarly the Startmate group brings together Australian start-up executives to offer mentoring and seed finance to founders of Australian internet and software businesses. It runs a three-month program which includes an introduction round in Silicon Valley. One of its portfolio companies, the shopping application Grabble, was acquired in November by US retail giant Walmart.
Australian entrepreneur Bardia Housman is hoping to extend that assistance further. Together with partners he has bought a warehouse in San Francisco’s start-up epicentre, the South of Market (SoMa) district, and is turning it into an incubator.
Housman sold his Australian-founded software company Business Catalyst to the Silicon Valley software maker Adobe in 2009, and subsequently left that company in May this year.
“The idea is to get this space ready for a couple of hundred people,” Housman says. “When I came out here I thought it was pretty difficult – there were a lot of questions that I had, that I didn’t have the network to answer. And now I get hit up by entrepreneurs at least once a week asking questions.”
Like many other Australian entrepreneurs, Housman has been infected by the buzz that permeates Silicon Valley.
“It is just such a massive amount of energy,” Housman says. “You go to any number of coffee shops and there are people just punching code on their laptops. You get a feel for how big the Valley is and how many people are involved in wanting to build great products, which is why it is so important that Australian companies come across for a couple of weeks to get a feel for it.”
Elias Bizannes first moved to San Francisco to develop a project that aimed to make it easier to move data between social networks. But it was through the real-world Silicon Valley contacts that he formed that he wound up being offered a job with Charles River Ventures.
In his spare time Bizannes has been developing programs to support entrepreneurs and start-ups from Australia and around the world. He is the driving force behind StartupBus, which began in 2010 as a light-hearted idea of taking 25 entrepreneurs on a business-building road trip to the emerging technology conference South by Southwest (SXSW) Interactive in Austin, Texas. StartupBus grew six-fold in 2011, and 1,200 people are expected to participate in 2012.
He is now developing StartupHouse, which will be an incubator to fund the people he finds through StartupBus.
“When they are ready I can get them into the incubator for three months and give them access to the network that I have in the investor community and the media,” Bizannes says.
There is no shortage of fresh Australian companies wanting to test their wares on the other side of the Pacific. Geoff McQueen of Internetrix arrived in the US this year and has launched his company’s key software product Affinity. McQueen is now working on building his team and raising funds.
In the past, residency restrictions made setting up in the US difficult, but McQueen says it’s now easy thanks to the E-3 temporary business visa, which is available only to Australians.
The hard part definitely comes after touching down. “You are competing against the best in the world,” McQueen says. “And as a consequence it is a lot harder to succeed when you get here than it looks from a distance. But having said that, it is not an impossible mountain to climb.”
Rebekah Campbell is still deciding which US city she will use to launch her social sales tool Posse into North America. Posse enables music fans to earn rewards from promoting concerts and merchandise, with more than $700,000 in sales made through the site to date. Campbell says her push into the US will also focus on extending the concept to promote retail brands.
She has already raised capital from A-list Silicon Valley angel investors, including a member of the founding team at eBay, thanks to a series of introductions from the Australian investment company MLC. “People really responded to the idea, even though we were at an early stage,” Campbell says.
In particular she impressed Bill Tai from venture capital firm Charles River Ventures, who was instrumental in putting together Posse’s $1.1million angel investment round.
“Because we eventually want to end up as a Silicon Valley company we thought it would be great to have someone like Bill on board now, to help us get to the next stage,” Campbell says. “Australia has been a great test market, but now it is working well, it is time to start growing. If we get it right, the US is the big prize.”
Article by Brad Howarth, for Australia Unlimited. Australia Unlimited is an initiative from Brand Australia to enrich Australia’s global reputation by communicating the skills and contributions of contemporary Australia to a global audience. They also recently launched an iPad app, which you can download for fresh content weekly.