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How Australian Tech Companies Can Think About Silicon Valley

99 points by nreece 9y ago

jwilliams 9y ago
One of the common mistakes I see Australian (and other incoming) startups make is "hiring/setting up a sales person in SF". It seems like a highly leveraged thing to do. Surely someone in-market, full-time, with sales experience should do 10x. But you learn so much in the sales process. If you have someone remote, new and purely incentivized on sales you lose much of that information. Quite often the sales person "fails". The company notches it up to being the wrong person, fires them and tries again. However, more often it's the product, the positioning, so many other things.
- garagemc2 9y ago
  So what is the correct thing to do here? Do the selling yourself or go along to sales meetings?
  - danieltillett 9y ago
    You can’t sell remotely from Australia via a US sales team. You either sell directly from Australia (with all the downsides this involves) or you move the management team to the USA.
    - sharkdesk 9y ago
      The third option is to acquire a US competitor, let them sell your product into the US market, and make sure they have the same executive decision making power as the team in Australia
      - danieltillett 9y ago
        Yes - I am actually considering doing this right now. The difficulty is the massive mismatch in valuation between Australian and US companies makes this difficult.
      - brongondwana 9y ago
        Yeah, that sounds about right...
  - jwilliams 9y ago
    Really depends on your business, but getting on a plane is the easy solution. It's relatively cheap to fly AU-US nowadays. If it's a bigger deal, you can probably justify it. Or you stack smaller deals in to one 2-4 week trip. Sounds inefficient, but you can pack a lot in - plus you'd be surprised how convincing getting on a plane and flying around the world to a customer is. "I'm coming in from Australia" is also a great door-opener. Doesn't work in all businesses - but for a lot of B2B it is effective.
hyperpallium 9y ago
> Build local, sell global. This is the ideal. Hire the local talent (keeps government people happy) but sell into the big market. Yes. But if you're selling components (pretty rare TBH, most sell a service provided via a web page, or maybe a desktop or mobile app), you have to pay "royalty" tax to the IRS. Only about 5% IIRC under the us-aust tax treaty, and you're not double-taxed by the ATO - but it's paperwork, complex, and a little scary. Being subject to one jurisdiction's set of tax legislation is bad enough....
- stephenr 9y ago
  Can you provide some reference, or even the law/statute name that you're referring to here?
  - hyperpallium 9y ago
    Was a few years ago, I'd have to google it myself. google: US australia tax treaty; search: "royalty" within it (has a particular meaning in the act). The term "component" is not actually used, IIRC. When the IRS audited a US firm I know, they had to sort it out with their non-US component suppliers. I'm not at all sure, but maybe "w8-ben" is the relevant form (though it serves several purposes). Whatever the form is, I noted that Atlassian had a pdf of it on their site, and avoided all the complexity because their products were used directly by users (i.e. aren't components). HTH!
    - stephenr 9y ago
      All I can find is about if a contract between parties involves royalties, it may be taxed. Maybe that's what you meant?
      - hyperpallium 9y ago
        Doesn't sound like it but unfortunately that's not enough information for me to tell. It might be. BTW a "contract" includes pretty much every transaction, even if immediately performed. From ATO tax treaties: https://treasury.gov.au/tax-treaties/income-tax-treaties/ https://treasury.gov.au/tax-treaties/income-tax-treaties/ to USA DTA (double taxation avoidance) "Convention between the Government of Australia and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income" http://www.austlii.edu.au/au/other/dfat/treaties/1983/16.html http://www.austlii.edu.au/au/other/dfat/treaties/1983/16.htm... > Article 12 Royalties > (4) The term "royalties" in this Article means: > (a) payments or credits of any kind to the extent to which they are consideration for the use of or the right to use any: > (i) copyright, patent, design or model, plan, secret formula or process, trademark or other like property or right; So, by 12.(a)(4)(i), if a customer pays you so they can redistribute your copyrighted code (i.e. a component), it's a "royalty". BTW Reading it literally, this "right" includes the mere use of copyrighted material - but here it's meant as more serious aspects of copyright, like the right of (re)distribution. IIRC, there's a wrinkle: in something like a compiler, which is used by the customer and not redistributed, but includes some part that is redistributed (like stdlib), this anxilliary distribution doesn't alter the character of the primary transaction. IIRC, the ATO stated this in what I think is called a "tax note" - a decision made internally (i.e. not held by a court). tl;dr you can get away with a little redistribution
Innercode 9y ago
While the US will always be dominant, there are some advantages for Australian Tech companies to take advantage of: Cheaper tech teams with less competition. Australia has a lot of talent in the software space, but without the eye watering wage bills. Even in the most expensive cities of Sydney and Melbourne, software developers generally cost a lot less than in the Bay Area. You can get even better value if you can build your team outside of Sydney/Melbourne. You can build more slowly, there is alot less pressure to build grow fast and fail type startups. While venture capital heavy startups are the most celebrated in the press, there are plenty of great smaller scale self/revenue funded startups that can build up over time. Most of our celebrated tech successes built their business models over a long time and focused on building a good business first. There are also great incentives to keep the development team in Australia. As a pre revenue startup you can get over 43.5% of your development cost back through the R&D Tax Incentive. While its a tax incentive, the way that they designed it was to provide tax refunds to loss making companies. Plus there are other great grants/incentives you can also take advantage of. (disclaimer: I'm a consultant for software startups/companies in this area) The best course of action is to take a global approach, don't limit yourself to selling or developing in only one location.
- adventured 9y ago
  > Cheaper tech teams with less competition. Australia has a lot of talent in the software space, but without the eye watering wage bills. Since you're referring to all of Australia - those advantages are all neutralized by choosing any of two dozen other US cities to start in. You get the advantages of the vast US market, other cities have far lower real estate costs than you see in most of Australia, you can choose states like Texas and Florida which have no income tax and large local talent pools, you can choose various cities based on their unique value propositions such as eg Pittsburgh due to Carnegie Mellon, or perhaps Denver Colorado due to lifestyle. You can also still choose Seattle, Los Angeles, NYC, Boston if you want to just step down one notch in cost on engineering salaries, while still being at a world-class level of talent (with each of those having their own distinct value propositions). The US has 280 million people living outside of California and an economy 16 times the size of Australia that is now growing far faster than Australia.
stephen_g 9y ago
One massive advantage of our company doing the build local, sell global strategy from Australia is that in our game (satellite/microwave comms, mostly for the defence industry) is that if we were in the US, our products would be under ITAR. Not having to do all that paperwork is a huge selling point for our European and Asian customers. I do spend a lot more time on planes than I might otherwise, but at least we are close to Asia.
jlangenauer 9y ago
One of the strange things about Australia's startup scene over the last decade or so is the sheer number of what I like to call "meta-entrepreneurs" - people who help other people become entrepreneurs, and present themselves as experts on technology, business, Silicon Valley etc, but have declined to actually do the hard work of setting up a business, let alone growing it to success. So when Australians give advice about "how to start a tech company", the first question to ask is "How many have you personally started? And how did they go?". One of the things that I've come to understand about Australia since leaving (I've live in Berlin now, before that I was in London) is that the average level of professional work is quite mediocre by global standards - this is not just in tech, but across all industries. Australians have had it very easy for about 2 decades now, getting rich through a property boom and a mining boom, but most have never had to really compete on a global level. An awful lot of people cruise in their jobs, doing something that's good enough for the Australian market, and they've had a comfortable career doing it. So why change? The problem is, that if you do achieve PMF in an economy that operates primarily at this level, you're not going to have PMF in an economy that operates at a higher level of sophistication and competence. That's why I think the strategy of "start local, grow global" is a fool's errand, and risks turning into "start local, burn some cash trying to go global, stay local". I also dispute that there is an advantage to keeping a tech team in Australia. The salaries are still quite high (particularly in Sydney) but the talent is again, not that good. This is both in tech and tech management, however there ARE exceptions[1], and the situation is improving - Atlassian have produced a lot of people who know what it takes to run a global, successful tech business, and now we are starting to see a second generation of top-notch people being developed in fast-growing Australian startups like Canva and SafetyCulture[2]. There are plenty of companies who have sold into the US market from day 1 from outside the US. HotJar from Malta. My current employer, ChartMogul. Travis CI, also from here in Berlin. There are hundreds more, but those are the ones that just jumped to mind. If you want to be a global company, then think like a global company from day one. This is as true in Australia as anywhere else, but it's taken a long time to sink in there. [1] Of course, the exceptional people generally know it, and command matching salaries. As an aside (to this aside), I'm currently reading Camille Fournier's excellent "The Manager's Path", which is like a museum of management practises that I've never seen in Australia. [2] SafetyCulture is an exception to my "start global" thesis. They did start locally, then grow. I think this is because of two main things: In health and safety things, Australia does generally lead the world, or come close to it. I used to work in construction in Australia, and am continually shocked at the practises I see in the EU and the US when I visit. The other thing is that I've seen SafetyCulture hire a lot of very good people, which is never a bad thing for a business to do.
nopassrecover 9y ago
The liveability of places like Adelaide (and even Melbourne, Sydney, Brisbane, and Perth) is such an undersold secret. Personally I'm so torn between wanting to tell everyone how good we have it and wanting to keep it to ourselves. Melbourne, Adelaide, and Perth are all in the top 10 cities to live in the world. Taking Adelaide for example (1.2 million people), we can live within 10-15 minutes of the CBD in a roomy townhouse for highly-affordable rent, get paid pretty well, be 20 minutes from the beach, 20-60 minutes from four different world-class wine regions, have a great festival culture, delicious local food and wine, and a highly safe and welcoming culture. If you want a larger city you have Melbourne (3.9 million) with a fantastic bar and food culture and endless high-paying work. As a company, and this is somewhat anecdotal, you have high availability of highly-educated workers who are used to working collaboratively and doing whatever's needed to get things done to cover the work of N other people (low population after all).
- eng_monkey 9y ago
  Too bad the Internet in large parts of those cities belong to the last century.
- brad0 9y ago
  I have to disagree with the high-paying work statement. I moved from Melbourne to the USA because I hit a salary ceiling. Just over 100k AUD is not that much compared to west coast salaries.
  - nopassrecover 9y ago
    Depends on your skills of course, but most dev jobs on seek / I run into and hire for are paying quite a bit more than that, particularly contract. When the AUD was stronger than USD this was an even more compelling argument. However I acknowledge the opportunities of equity returns are far higher in the states.
    - ianhowson 9y ago
      A quick Glassdoor search places 'senior software engineer' in Melbourne at 101k: https://www.glassdoor.com.au/Salaries/melbourne-senior-software-engineer-salary-SRCH_IL.0,9_IM965_KO10,34.htm I agree with the parent commenter. I reached a salary cap around 5 years out of university and wasn't able to break it within Australia.
jamix 9y ago
> You’re starting a journey of effort, consideration and perseverance because... > You can succeed there. Just bear in mind that "you can" doesn't mean "you should".
jacques_chester 9y ago
I think that an Australian business going deeply into the US market is going to struggle with the E3 visa. It is so easy for a talented technologist to be recruited by a US firm that once someone works it out, you will see a rapid turnover unless you offer US rates.
gsvclass 9y ago
In my view with Australia cancelling the 457 visa that a lot of tech talent uses its pretty much over for everything tech related in AU. If you're looking for a fast growing tech city thats less expensive than the valley then head to Toronto https://www.gostudy.com.au/blog/australian-457-sponsorship-visa-to-be-cancelled/ https://www.gostudy.com.au/blog/australian-457-sponsorship-v...
- ta444555 9y ago
  It was being abused to bring down local salaries. Good riddance.

99 points by nreece 9y ago

One of the common mistakes I see Australian (and other incoming) startups make is "hiring/setting up a sales person in SF". It seems like a highly leveraged thing to do. Surely someone in-market, full-time, with sales experience should do 10x. But you learn so much in the sales process. If you have someone remote, new and purely incentivized on sales you lose much of that information. Quite often the sales person "fails". The company notches it up to being the wrong person, fires them and tries again. However, more often it's the product, the positioning, so many other things.

garagemc2 9y ago
So what is the correct thing to do here? Do the selling yourself or go along to sales meetings?
- danieltillett 9y ago
  You can’t sell remotely from Australia via a US sales team. You either sell directly from Australia (with all the downsides this involves) or you move the management team to the USA.
  - sharkdesk 9y ago
    The third option is to acquire a US competitor, let them sell your product into the US market, and make sure they have the same executive decision making power as the team in Australia
    - danieltillett 9y ago
      Yes - I am actually considering doing this right now. The difficulty is the massive mismatch in valuation between Australian and US companies makes this difficult.
    - brongondwana 9y ago
      Yeah, that sounds about right...
- jwilliams 9y ago
  Really depends on your business, but getting on a plane is the easy solution. It's relatively cheap to fly AU-US nowadays. If it's a bigger deal, you can probably justify it. Or you stack smaller deals in to one 2-4 week trip. Sounds inefficient, but you can pack a lot in - plus you'd be surprised how convincing getting on a plane and flying around the world to a customer is. "I'm coming in from Australia" is also a great door-opener. Doesn't work in all businesses - but for a lot of B2B it is effective.

hyperpallium 9y ago

> Build local, sell global. This is the ideal. Hire the local talent (keeps government people happy) but sell into the big market. Yes. But if you're selling components (pretty rare TBH, most sell a service provided via a web page, or maybe a desktop or mobile app), you have to pay "royalty" tax to the IRS. Only about 5% IIRC under the us-aust tax treaty, and you're not double-taxed by the ATO - but it's paperwork, complex, and a little scary. Being subject to one jurisdiction's set of tax legislation is bad enough....

stephenr 9y ago
Can you provide some reference, or even the law/statute name that you're referring to here?
- hyperpallium 9y ago
  Was a few years ago, I'd have to google it myself. google: US australia tax treaty; search: "royalty" within it (has a particular meaning in the act). The term "component" is not actually used, IIRC. When the IRS audited a US firm I know, they had to sort it out with their non-US component suppliers. I'm not at all sure, but maybe "w8-ben" is the relevant form (though it serves several purposes). Whatever the form is, I noted that Atlassian had a pdf of it on their site, and avoided all the complexity because their products were used directly by users (i.e. aren't components). HTH!
  - stephenr 9y ago
    All I can find is about if a contract between parties involves royalties, it may be taxed. Maybe that's what you meant?
    - hyperpallium 9y ago
      Doesn't sound like it but unfortunately that's not enough information for me to tell. It might be. BTW a "contract" includes pretty much every transaction, even if immediately performed. From ATO tax treaties: https://treasury.gov.au/tax-treaties/income-tax-treaties/ https://treasury.gov.au/tax-treaties/income-tax-treaties/ to USA DTA (double taxation avoidance) "Convention between the Government of Australia and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income" http://www.austlii.edu.au/au/other/dfat/treaties/1983/16.html http://www.austlii.edu.au/au/other/dfat/treaties/1983/16.htm... > Article 12 Royalties > (4) The term "royalties" in this Article means: > (a) payments or credits of any kind to the extent to which they are consideration for the use of or the right to use any: > (i) copyright, patent, design or model, plan, secret formula or process, trademark or other like property or right; So, by 12.(a)(4)(i), if a customer pays you so they can redistribute your copyrighted code (i.e. a component), it's a "royalty". BTW Reading it literally, this "right" includes the mere use of copyrighted material - but here it's meant as more serious aspects of copyright, like the right of (re)distribution. IIRC, there's a wrinkle: in something like a compiler, which is used by the customer and not redistributed, but includes some part that is redistributed (like stdlib), this anxilliary distribution doesn't alter the character of the primary transaction. IIRC, the ATO stated this in what I think is called a "tax note" - a decision made internally (i.e. not held by a court). tl;dr you can get away with a little redistribution

Innercode 9y ago

While the US will always be dominant, there are some advantages for Australian Tech companies to take advantage of: Cheaper tech teams with less competition. Australia has a lot of talent in the software space, but without the eye watering wage bills. Even in the most expensive cities of Sydney and Melbourne, software developers generally cost a lot less than in the Bay Area. You can get even better value if you can build your team outside of Sydney/Melbourne. You can build more slowly, there is alot less pressure to build grow fast and fail type startups. While venture capital heavy startups are the most celebrated in the press, there are plenty of great smaller scale self/revenue funded startups that can build up over time. Most of our celebrated tech successes built their business models over a long time and focused on building a good business first. There are also great incentives to keep the development team in Australia. As a pre revenue startup you can get over 43.5% of your development cost back through the R&D Tax Incentive. While its a tax incentive, the way that they designed it was to provide tax refunds to loss making companies. Plus there are other great grants/incentives you can also take advantage of. (disclaimer: I'm a consultant for software startups/companies in this area) The best course of action is to take a global approach, don't limit yourself to selling or developing in only one location.

adventured 9y ago
> Cheaper tech teams with less competition. Australia has a lot of talent in the software space, but without the eye watering wage bills. Since you're referring to all of Australia - those advantages are all neutralized by choosing any of two dozen other US cities to start in. You get the advantages of the vast US market, other cities have far lower real estate costs than you see in most of Australia, you can choose states like Texas and Florida which have no income tax and large local talent pools, you can choose various cities based on their unique value propositions such as eg Pittsburgh due to Carnegie Mellon, or perhaps Denver Colorado due to lifestyle. You can also still choose Seattle, Los Angeles, NYC, Boston if you want to just step down one notch in cost on engineering salaries, while still being at a world-class level of talent (with each of those having their own distinct value propositions). The US has 280 million people living outside of California and an economy 16 times the size of Australia that is now growing far faster than Australia.

stephen_g 9y ago

One massive advantage of our company doing the build local, sell global strategy from Australia is that in our game (satellite/microwave comms, mostly for the defence industry) is that if we were in the US, our products would be under ITAR. Not having to do all that paperwork is a huge selling point for our European and Asian customers. I do spend a lot more time on planes than I might otherwise, but at least we are close to Asia.

jlangenauer 9y ago

One of the strange things about Australia's startup scene over the last decade or so is the sheer number of what I like to call "meta-entrepreneurs" - people who help other people become entrepreneurs, and present themselves as experts on technology, business, Silicon Valley etc, but have declined to actually do the hard work of setting up a business, let alone growing it to success. So when Australians give advice about "how to start a tech company", the first question to ask is "How many have you personally started? And how did they go?". One of the things that I've come to understand about Australia since leaving (I've live in Berlin now, before that I was in London) is that the average level of professional work is quite mediocre by global standards - this is not just in tech, but across all industries. Australians have had it very easy for about 2 decades now, getting rich through a property boom and a mining boom, but most have never had to really compete on a global level. An awful lot of people cruise in their jobs, doing something that's good enough for the Australian market, and they've had a comfortable career doing it. So why change? The problem is, that if you do achieve PMF in an economy that operates primarily at this level, you're not going to have PMF in an economy that operates at a higher level of sophistication and competence. That's why I think the strategy of "start local, grow global" is a fool's errand, and risks turning into "start local, burn some cash trying to go global, stay local". I also dispute that there is an advantage to keeping a tech team in Australia. The salaries are still quite high (particularly in Sydney) but the talent is again, not that good. This is both in tech and tech management, however there ARE exceptions[1], and the situation is improving - Atlassian have produced a lot of people who know what it takes to run a global, successful tech business, and now we are starting to see a second generation of top-notch people being developed in fast-growing Australian startups like Canva and SafetyCulture[2]. There are plenty of companies who have sold into the US market from day 1 from outside the US. HotJar from Malta. My current employer, ChartMogul. Travis CI, also from here in Berlin. There are hundreds more, but those are the ones that just jumped to mind. If you want to be a global company, then think like a global company from day one. This is as true in Australia as anywhere else, but it's taken a long time to sink in there. [1] Of course, the exceptional people generally know it, and command matching salaries. As an aside (to this aside), I'm currently reading Camille Fournier's excellent "The Manager's Path", which is like a museum of management practises that I've never seen in Australia. [2] SafetyCulture is an exception to my "start global" thesis. They did start locally, then grow. I think this is because of two main things: In health and safety things, Australia does generally lead the world, or come close to it. I used to work in construction in Australia, and am continually shocked at the practises I see in the EU and the US when I visit. The other thing is that I've seen SafetyCulture hire a lot of very good people, which is never a bad thing for a business to do.

nopassrecover 9y ago

The liveability of places like Adelaide (and even Melbourne, Sydney, Brisbane, and Perth) is such an undersold secret. Personally I'm so torn between wanting to tell everyone how good we have it and wanting to keep it to ourselves. Melbourne, Adelaide, and Perth are all in the top 10 cities to live in the world. Taking Adelaide for example (1.2 million people), we can live within 10-15 minutes of the CBD in a roomy townhouse for highly-affordable rent, get paid pretty well, be 20 minutes from the beach, 20-60 minutes from four different world-class wine regions, have a great festival culture, delicious local food and wine, and a highly safe and welcoming culture. If you want a larger city you have Melbourne (3.9 million) with a fantastic bar and food culture and endless high-paying work. As a company, and this is somewhat anecdotal, you have high availability of highly-educated workers who are used to working collaboratively and doing whatever's needed to get things done to cover the work of N other people (low population after all).

eng_monkey 9y ago
Too bad the Internet in large parts of those cities belong to the last century.
brad0 9y ago
I have to disagree with the high-paying work statement. I moved from Melbourne to the USA because I hit a salary ceiling. Just over 100k AUD is not that much compared to west coast salaries.
- nopassrecover 9y ago
  Depends on your skills of course, but most dev jobs on seek / I run into and hire for are paying quite a bit more than that, particularly contract. When the AUD was stronger than USD this was an even more compelling argument. However I acknowledge the opportunities of equity returns are far higher in the states.
  - ianhowson 9y ago
    A quick Glassdoor search places 'senior software engineer' in Melbourne at 101k: https://www.glassdoor.com.au/Salaries/melbourne-senior-software-engineer-salary-SRCH_IL.0,9_IM965_KO10,34.htm I agree with the parent commenter. I reached a salary cap around 5 years out of university and wasn't able to break it within Australia.

jamix 9y ago

> You’re starting a journey of effort, consideration and perseverance because... > You can succeed there. Just bear in mind that "you can" doesn't mean "you should".

jacques_chester 9y ago

I think that an Australian business going deeply into the US market is going to struggle with the E3 visa. It is so easy for a talented technologist to be recruited by a US firm that once someone works it out, you will see a rapid turnover unless you offer US rates.

gsvclass 9y ago

In my view with Australia cancelling the 457 visa that a lot of tech talent uses its pretty much over for everything tech related in AU. If you're looking for a fast growing tech city thats less expensive than the valley then head to Toronto https://www.gostudy.com.au/blog/australian-457-sponsorship-visa-to-be-cancelled/ https://www.gostudy.com.au/blog/australian-457-sponsorship-v...

ta444555 9y ago
It was being abused to bring down local salaries. Good riddance.