Why Aussie start-ups shouldn’t move to Silicon Valley

Adeo Ressi: why Aussie start-ups shouldn’t move to Silicon Valley

Published 30 September 2013 11:54, Updated 30 September 2013 13:49

The flight of many Aussie entrepreneurs to Silicon Valley has been well documented, so I’ll explain why I don’t understand this trend one bit. Let’s start with the obvious benefit of doing business in Australia. First, you have a largely wired and untapped market back home, with generally favourable regulation, a rapidly expanding technology sector and big opportunities in the growing domestic healthcare, transportation, education and government markets.Secondly, you have an extremely beneficial geographic advantage, having time zone alignment with, and being a short flight from, the world’s largest population (along with several of the world’s fastest-growing internet populations). Small markets can kill good companies and good, large markets can pull mediocre companies into greatness. Being so close to such a massive market is an absolutely huge competitive advantage.

Third, you would be hard pressed to find a faster-growing start-up ecosystem than Australia’s, and this is very important. A lot of people dismiss the notion of an ecosystem, portraying it as a “fluffy” word that doesn’t contribute to actual economic value. But one of the main reasons why Silicon Valley is a hotbed for innovation is the collaborative ecosystem and culture that exists here. For example, there are at least 20 different events every night here where successful entrepreneurs share knowledge with the next generation and where fledgling entrepreneurs are exchanges tips and tricks. Everyone works together here to push the ecosystem forward, because we understand it leads to faster market growth, local accountability among all the players, and faster and more efficient innovation.

An epidemic of options

A similar environment is growing in Australia like a virus, as support options spawn for entrepreneurs in every facet of the food chain. For example, in Sydney alone there are events such as Startup Weekend and SydStart, training programs including The Founder Institute, incubators such as Pollenizer andBlueChilli, new sources of seed capital such as the Sydney Seed Fund and a growing network of local angel and venture capital. For these reasons and many more, we are now in our fourth Sydney Founder Institute semester, and are looking at Melbourne as our third Australian location (we launched in Perth earlier this year). The Founder Institute is on pace to launch at least 40 new start-ups per year across the country and that number will only rise.

So why are people leaving?

The overwhelming feedback I hear is that founders flee because of a dearth of start-up funding in Australia. In other words, there is not enough capital to support their entrepreneurial ambition, so they decide to go to Silicon Valley to increase their chances of raising money.

This logic does not make sense to me, for two reasons.

First, it focuses on the wrong element of building your business. There was a great article recently by Tim Cheadle that really resonated with me, where he implored start-ups to “stop focusing on what you don’t have”. As I mentioned above, there are distinct advantages to building a business in Australia and founders should be trying to leverage those advantages, not negate them.

Second, I simply don’t think a company has a significantly better chance of raising funding in Silicon Valley if they could not do so with the same team, product and traction they had in Australia. I can tell you from experience that strong ideas and teams will get funded, whether you are in Silicon Valley or not. For example, seven out of nine of our first Founder Institute graduates in Columbia are funded. Investors are increasingly putting money into strong companies regardless of location. If you build a strong company, the funding will follow (or, you may not need funding at all).

In 2006, Paul Graham said you only need “rich people and nerds” to create a tech hub. I couldn’t agree with him more, and since that statement there has been a number of developments. The supply of angel capital has exploded. New tools like AngelList and Gust have made connecting the nerds and the rich people easier than ever. Money has become increasingly global as professional investors open offices and hire reps overseas to find new talent. And crowdfunding has emerged as a viable alternative to equity or debt funding.

In addition, success begets success, and one successful local company can create enough value to change an entire ecosystem (just look at PayPal, whose success has played a pivotal role in almost every meaningful Silicon Valley start-up since their IPO).

Rather than look to set up shop elsewhere, Australian founders should look in the mirror and focus on building an enduring company at home. The capital will follow.

Adeo Ressi is the founder & CEO of The Founder Institute, an entrepreneur training and start-up launch program that has helped start more than 900 technology companies in six continents.