Aussies venture into Silicon Valley’s elite investment world

Nassim Khadem Reporter

Aussies venture into Silicon Valley’s elite investment world

Published 27 November 2013 09:46, Updated 28 November 2013 07:56

Silicon Valley investors and companies are more attracted to Australian start-ups and engineers than ever before, the co-founder and managing partner of fast-growing recruitment firm MitchelLake Group says. Australian Phaedon Stough heads San Francisco-based MitchelLake Group, which is ranked 75th in the 2013 BRW Fast 100 and is on track to reach $US2.4 million ($2.6 million) in revenue in 2013-14. He has spent the past few years helping Australian tech companies establish themselves in Silicon Valley.As well as recruiting for major businesses like 99designs, in the past year alone MitchelLake Group has recruited for companies including Uber, Yammer, GoCanvas and Pandora.

He says the major trend since setting up his business there in 2007 (he later moved from Sydney to Silicon Valley in 2010) is that Australians are gaining the respect of leading Silicon Valley investors, who are prepared to back them ahead of US start-ups.

As BRW wrote last week, talented entrepreneurs are moving back and forth between Silicon Valley and other start-up hubs in New York, Texas, London, Israel and Singapore.

“We’re seeing a lot more Aussie companies come over because of venture capital funding,” Stough says.

“There’s the major Aussie success stories but more and more we are seeing very early stage companies coming over and going to incubators like Y Combinator.”

Aussies earn respect in Silicon Valley

Stough says whereas previously Australians were unknown in Silicon Valley’s venture capital community, today home-grown start-ups have the respect of leading venture capital investors and funds.

Companies like Atlassian, 99designs and OzForex have paved the way for a new generation of start-ups. Australians running online companies in areas such as mobile, gaming and consumer enterprise are increasingly setting up in the US and looking to his firm to help recruit talent.

“Previously, a lot of US firms would have gone, ‘who’s this Aussie?’,” Stough says. “There’s a bit of elitism in the valley. But now, Australians have a high level of respect here. It’s come about simply through a bunch of Aussies being here and leading the way. Companies like Atlassian have really put Australia on the radar.”

As a result of Australians being more respected, “they get more money”.

“They’re getting more face time with the people that have access to capital and want to invest.”

He gives the example of VC firm Technology Crossover Ventures’ general partner, David Yuan, based in the firm’s Palo Alto office, visiting Australia every three months to scope potential investments.

“They have $7.7 billion under management and said to us that they’re tracking 10 investment deals that they would love to do with Aussies,” Stough says. “That’s a significant amount.”

He says the other reason overseas VC firms like Australian outfits is that they are usually self-sufficient start-ups, which grow based on gaining customers, rather than immediate investment.

“What you find is companies like Atlassian grow up without doing a round of capital,” he says. “There’s a lot of very lean Aussie tech companies because there’s no VC community in Australia, and that hones the start-up founders’ skill set. In the US, it’s not too hard to go out and get angel-round funding. In Australia, it’s very hard. As a result, Aussie entrepreneurs know how to run a lean business and tend to think globally from day one. That attracts investment into Australian entrepreneurship.”

Growing demand for Australian engineers

MitchelLake Group also helps US tech companies expand into the Asia-Pacific region.

The group’s total revenue, including its US and Australian businesses, is expected to hit more than $11.4 million this financial year.

Its American business revenue grew from less than $US250,000 in 2011-12 to $US1.1 million in 2012-13. It’s on track to reach $US2.4 million in revenue this financial year. The Australian-based business will deliver more than $9 million in revenue this financial year.

Stough says Australian engineers and software developers are in huge demand.

“Australia is a very hot market for us,” he says. “We’re seeing a lot of American companies look at Europe, and then Australia.”

Most of the recruitment firm’s revenue comes from US clients either setting up overseas or looking to inject Australian talent in their Silicon Valley-based business.

“We want to own the pathway between Australia and the US,” Stough says. “It’s hard to make money from Aussies coming here because most are at seed stage. But we are starting to make money on the US side. US companies are not only launching into Australia, but they also want to hire Australian engineers.”

He says Australian talent is not only respected but US company bosses also like Australian engineers because they tend to stick around for longer.

“In the valley, a US engineer may stay with the one company between 12 to 14 months,” he says.

“But the company may be able to keep an Australian engineer for two years or more. I think, as a result, we will see greater demand for Australian talent over the coming years. In the short-term, it’s a drain out of Australia. In the longer-term, it will allow skilled Australians to return home with better skills.”