But while Ryan Sweeney says Australia’s economic performance is a big factor, it isn’t the only one. He believes the “global focus” of Australian firms is much more attractive.
“It’s a thriving community right now, and there are plenty of opportunities. We’ve been very impressed with entrepreneurs here, because they aren’t just thinking about Australian strategies.”
“They’re thinking about how they can get into Asia, and so on. There isn’t this thriving venture capital community for start-ups here, so they think globally from day one. And although it makes investing from overseas a lot harder, it also makes it much more exciting.”
With such little venture capital investment for tech here, SMEs are forced to look outwards. Sweeney says this particularly attracts investors in Silicon Valley, who want products to eventually reach tens of millions of customers – not just the fairly limited amount of consumes here.
“To be a successful Australian technology company you need to have a global focus, or at least have a very defensible local focus,” Cannon-Brookes says. His company now has millions of customers around the world – including Microsoft.
“If you look at all the tech companies here, Seek, RealEstate.com.au and so on, they have a clear advantage and local focus. And there are real, high-quality businesses here that are turning over profits.”
Sweeney says this is especially important – investors won’t look at companies that haven’t catered their offering to the local market.
“They’ve shown they can have a global focus, but they really also need to be able to build great businesses within their own geographies.”
Believe it or not, Accel partner Andrew Braccia – who sits on the 99Designs board and spearheaded most of that project – says some businesses in the valley don’t have that type of vision.
“It’s a different mindset there because the focus is so big. It’s such a different and competitive market,” he says.
But while entrepreneurs are no doubt excited over the world’s new-found enthusiasm in the Australian tech sector, there are legitimate questions over whether the recent punts are just an extension of a bubble that will see Silicon Valley crash – and bring the local sector down with it.
Although these experts don’t believe that to be the case.
“I think web businesses are different now, and you can’t really compare them to the 1990s,” Sweeney says. ”It’s not like you get some servers and start selling pet food online. These are real businesses with real revenues.”
Nevertheless, there are some concerns, especially after LinkedIn’s shares gained over 100% in the first day of trading last week and ended with a market cap of $US8.9 billion on revenue of $200 million. This trend, some say, could continue.
American investors have been starved for growth for so long, they will latch on the one area that seems to be doing well – the tech industry.
Sweeney says it’s sustainable as long as the businesses are making money.
“There are a lot of dollars chasing the same deals,” Sweeney says. When you start getting worried is when you hear things like ‘You can do this deal because eventually someone will buy the business’. That’s when it gets dangerous.”
“You can’t make investment decisions based on some proverbial safety net that just doesn’t exist.”
While Cannon-Brookes agrees that the local market is doing better overall, he also says that “we are quite small… and we do have to keep that in mind”.
“But we’re doing better as an industry.”
According to Waller, the attraction is based on a real and tangible view of a market that is actually making quite a lot of money.
“They are generating great profits. What you can see in this two-speed economy is that you have older-style businesses that aren’t doing well, and yet the tech sector seems to be doing fine. It’s growing very well.”
There certainly seems to be a growing link between Australia and other nations when it comes to capital investment.
More entrepreneurs are heading overseas to work in start-ups, (such as Andrew Lacy, who founded iOS studio Tapulous which was snapped up by Disney Interactive), and European investors Klaus Hommels and Oliver Jung are well connected with the founders of Pollenizer and Spreets.
While locals in the tech scene have complained about all the talent leaving for Silicon Valley, this trend seems to have worked in our favour – more locals can attest to the growing online sector here and help attract buyers.
Cannon-Brookes says he has heard multiple reports of Australians moving to California, acquiring skills by working for start-ups and then bringing them back. Dean McEvoy, who started the group buying site Spreets, followed that plan exactly – and got some European investment as a result.
“Certainly there is a growing connection between Australia and Silicon Valley,” Cannon-Brookes says. “Many more Australians are over there now, and our presence is quite strong.”
Sweeney agrees, and says he is impressed with what Australian companies and entrepreneurs have done not only at home, but abroad as well.
“Business in Australia is now about having a global plan,” Morris says. “Everyone is very globally focused, and I don’t think it’s a trend that will fade away. Right now the trend is to make something global and valuable.”
Cannon-Brookes says this connection “can’t be undersold”.
“The conditions are being built here, and entrepreneurs are travelling back and forth. The more bridges we have over the Pacific Ocean the better it’ll be for our local industry.”
“We see it as a cycle. In five years’ time, our employees will have been on this journey with us, and then they see it can happen, and go out and do it themselves. You have founders who get investment, exit, and it creates a cycle of angel investments. It will help the industry over time.
International investments in Australian companies:
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
