Last week, I sat in on an event hosted by the Blackstone Entrepreneurs Network showcasing the 20 or so companies that were part of its current ScaleUp program here in Denver. It was surprising to all in the room (to the point of actually being discussed at some length) that 3 of the 20 companies, comprising every international startup in the program, were Australian founded companies. Interesting.
In fact, the Australian startup community in Colorado has been growing rapidly recently — so much so that a group of us here recently formed an informal collective to bring it all together, which is now — with some scale — starting to coordinate with the well-established Aussie Founders Network.
So beyond this BEN cohort, what other signs are there of this growing aussie startup scene in CO? In the last 5 years, there has been:
- A growing number of aussie founders directly setting up US operations in Colorado (e.g. Propeller Aero, Assignar, Dingo, Straker, Flightfox, Simpro, Redeam, Agworld, Perenso, Campus/Ucroo, Good Crisp)
- A growing cohort also moving their US headquarters from San Francisco to CO (e.g. Switch Automation, Accelo, Xero — yes, we can call it aussie for being on the ASX!)
- Some bigger companies landing their US HQ here (e.g. Cochlear, Trisco Foods)
- A couple of big aussie wins on the scoreboard (e.g. Noosa Yoghurt — sold to Savos in 2018; Avoka — sold for $250M in 2018 too)
- A bunch of companies coming through the local accelerators and angel forums (e.g. Atomos Nuclear and section.io — 2 of the only 5 international companies in the Techstars Boulder cohorts over the past 3 years; Beacon Health and Careapp — the only international companies to be pitching at this year’s Rocky Venture Club events)
- 3 Colorado-linked accelerator programs launched in Australia — 1) Techstars launched a program in Adelaide; 2) Conduit Accel, in partnership with Rockies Venture Club (a local angel investing group), launched its first Australian program in Feb 2019, aiming to connect Colorado investors to Australian startups; and 3) Upslope (a cable industry-focused accelerator) is launching a new program in the Sunshine Coast in 2020
- The Denver City Government’s launch a “Landing Pad” program targeted at aussie startups coming over to provide a soft landing with free co-working space and services to those accepted — the first aussie company through the program was SportsHosts this year
So what is actually going on here? This is not only a question I have been asking myself, but one that a lot of locals here have been asking me too. And to which I haven’t had a good answer. So I decided to try and connect the dots by conducting a bit of research and surveying a bunch of the locally based aussie founders (n=11). Here is what I found…
(1) There is undoubtedly an Australian startup boom underway
According to Techboard, $1.1B was invested into Australian startups during Q4 2018, bringing the total for 2018 to over $4B (this includes all sources of funding including venture capital, debt, private placement, grants, IPOs, crowdfunding, etc). Crunchbase finds that Australian startups attracted $1.4B of venture capital dollars in 2018, up from roughly $600m in 2016. That might seem peanuts compared to the US ($99.5B invested in 2018) but not bad for a small country and impressive in terms of its growth. Venture funding as a category rose 230% Q4 2018 on 2017 versus ~130% in the US.
And other metrics point to the growth of the tech scene Down Under — for example, comparing 2013 to 2018:
- Growth in VC dollars: there were 3 VC funds who raised $155m in total in 2013 vs. $1.5B raised across many funds in 2018 (including 5 VCs with $200m+ funds). 2019 hasn’t slowed down — already Salesforce Ventures has entered with a $50m Australia-focused Trailblazer Fund, Artesian Venture Partners announced a $50m agtech fund, King River Capital launched with a similarly sized fund, and more.
- Increase in accelerators: there were 4 accelerators in 2013 vs. 25 accelerators in 2018
- Good runs on the scoreboard: our biggest software startup — Atlassian — was valued at $460m with a $60m raise vs. $13B following a US IPO (we’ve since also seen a number of other $billion+ success stories such as Canva, Aconex, WiseTech, SirTex Medical, ThreatMetrix, etc)
Australia’s strong underlying economy is certainly fueling this growth. It’s the world’s 13th-largest economy with the 9th-highest per capita income. The job market is solid, salaries are high (the minimum wage is approx. $15 USD), homeownership is high, citizens enjoy universal health care and a robust public education system (40 of the country’s 43 Universities are public), and the country hasn’t faced an economic recession in almost 30 years (yes — it was the only developed country not to “recede” during the 2008–2009 crash).
Other factors are likely at play too, such as (not an exhaustive list): 1) increased government support — e.g. federal tax incentives to the startup community in the form of R&D credits and capital gains tax forgiveness; programs such as the National Innovation and Science Agenda and the Incubator Support Initiative Entrepreneurs’ Program; State-level initiatives such as NSW’s Sydney Startup Hub and Jobs for NSW and QLD’s Business Development Fund. And 2) a cultural change that is becoming more open to risk-taking (historically very conservative) and celebrating entrepreneurial success (historically very modest — google “Tall Poppy Syndrome” to understand this better).
(2) Promising aussie startups generally look overseas (to the US) for growth
In a country of 26m people, it is very difficult to find the sufficient scale of market (aka TAM or “Total Addressable Market”) to drive a big success story. Very few verticals (perhaps fintech, healthtech / biotech, ecommerce, and anything servicing mining/industrials being the exception) are sizable enough to warrant a big “Australia-only” business case. Fintech startups accounted for approximately 46% of all australian startups and attracted an estimated 30% of all venture funding during 2018, which would seem to support this logic too.
By comparison, with a population of over 327m and economy of almost $20t, the US is absolutely massive. You hit the economic scale and population of Australia by simply attacking half of California.
To give you an example — in 2012, when I joined my sister to build Kanopy, a video streaming platform for education, it was pretty clear early on that there were only 43 universities in Australia, compared to 4,140 colleges in the US (745 in California alone), and that the success of the business would require thinking cross-Pacific.
And this story is not uncommon — many aussie startups, once finding proof of concept, naturally begin to cast their eyes overseas. The 2018 Australian Startup Muster report surveyed over 1,100 Australian founders at all stages of growth and found (excuse the pun) that within the next 12 months:
- 41.1% planned to significantly expand their sales outside Australia
- 28.4% planned to seek to raise capital overseas
- 21.2% intended to join an overseas program
- 16.4% intended to open another office overseas and 3.5% planned to move their primary office overseas
When asked about the 12+ month plan, all of the numbers increased — and I imagine if one were to cut this data to focus only on seed / series A+ startups (and exclude earlier stage companies), the percentages would be significantly higher as well. So “overseas” is on the minds of many, if not most, australian growth companies, and “overseas” most commonly means the US — not only for its size but also its ease of access (accessible visas — read Geoff McQueen’s infamous E3 how to, english-speaking, accommodating startup ecosystem, etc).
(3) When looking to the US, a lot of aussie companies are landing on Colorado
So we have a booming Australian tech scene and a growing number of promising startups looking to the US for growth. Where do they set up shop? Historically, it was all about the Bay Area / San Francisco and for good reason. Until recently, few other ecosystems had the depth of technical talent, financial support, and “halo effect” to build a scaling technology business.
However, over the past decade, the general trade winds have shifted and very respectable ecosystems with big success stories have emerged in the likes of Austin, Boston, Chicago, Denver, Seattle, Salt Lake City, and elsewhere. Some core factors, general to all startups whether Australian or not, have been fueling the growth of these places and the concurrent flight from San Francisco. I wrote a piece recently on why many startups were looking to Denver over San Francisco here — namely lower cost of living, lifestyle and culture, lower cost of business, convenience of location, and access to affordable talent and strength of community.
Interestingly, in interviewing 11 of the Australian startups based here in Colorado, it was clear that whilst each of these factors above played a role in their decision-making for their pick of US office, there was often a very specific Australian twist or spin to their considerations. For example —
For the point on convenience of location…
Most Australian startups in town either have another office to manage in Australia, fly home regularly, or both — which means two things. First, keeping to a time zone that supports cross Pacific team collaboration and overlap of office hours is really important. That often strikes off the East Coast. 5pm in New York is 7am in Sydney and 5am Perth. 5pm on the West Coast is 10am in Sydney and 8am in Perth — so more opportunity for teams to work together across offices. 10 of the startups I interviewed specifically mentioned cross time zone team management as a top business challenge. Second, keeping to a location that supports easier travel between the offices is important, and getting to the US East Coast is a long haul.
Rory Miguel and Francis Vierboom of Propeller note “we’re a tight-knit team, if spread out. Being able to collaborate with colleagues is essential… Denver is eight hours off from Sydney, which is actually pretty good. It’s also a reasonable flight time to get from Sydney to Denver, with an average flying time of about 17 hours… compared with 21 hours to New York or 18 hours to Texas. Further, Denver strikes a locational balance between our Sydney office and the remote workforce we have spread out over the globe, which includes people in the Philippines, New York, Sweden, the Netherlands, California, and Poland. (Basically, someone at Propeller is always working.)”
For the point on lower cost of business…
It is much cheaper to set up and run a company in Colorado than the Bay Area. I spoke at length on this in the piece linked to above, but to put it in the most simplest terms — if you raise $1m in venture capital, that will give you 1.31x the purchasing power (or $1.31m equivalent worth of cash runway) in Denver than you get in Silicon Valley. So, in simple terms, if you get say 12 months of lifeline in San Francisco with the financing you raise, you will get 3 extra months in Denver.
That’s pretty significant for any company, but especially for Australian startups which are often coming from a position of financial backing (both for the company as well as founder) based in a weaker Australian dollar. Darren Walls of SportsHosts said “We couldn’t afford to live in San Francisco as a startup… It’s ridiculous, and New York City is not far different.”
Some of the Aussie startups I interviewed also noted that there are great Colorado government programs to tap into as well. Vanessa Clark of Atomos Nuclear says, “The tax credits and grants offered by OEDIT are fantastic. Apply!” and Accelo benefited from $14.8m in State tax credits in setting up its operations here.
For the point on lifestyle and culture…
Culture is obviously much harder to measure and define, but the folks I interviewed consistently pointed to it as the crowning factor that brought them to Colorado. And, speaking personally as someone who has lived in Boston and San Francisco and traveled to 43 of the 50 US States, I would suggest Colorado has a culture, community, and lifestyle that is perhaps most closely aligned to that of Australians of any place I have found so far in the US — laidback, outdoorsy, spacious living, friendly and open, beer loving, sporty… yet a professional vibe too. Here are how some of the others put it —
Stewart McGrath of Section.io — “The culture of the Boulder business and tech community is much more closely aligned with our values regarding how we believe a business should be built in a scalable sustainable manner, and … Boulder is an awesome place for our families to live. We believe we will be more successful personally and as a business where our families are happy and healthy.”
Geoff McQueen of Accelo — “[Denver, Austin and Salt Lake City].. all have a well-educated, tech-savvy work force and a lifestyle drawing a lot of millennials. What made Denver stand out was its steady city and metro area leadership, regional investments in transit and infrastructure, and a business culture that’s open and emphasizes helping each other’s companies succeed”… “My family would have probably gone crazy had I selected anywhere else”.
Sean McCreanor of Assignar — “I looked at Denver, Austin, Los Angeles and San Francisco… Denver is a great ecosystem for amazing tech talent… You work hard, but then we can also offer them this great lifestyle, which is really important.”
Deb Noller of Switch Automation — “I looked at Seattle, San Francisco, Los Angeles and Denver. Denver is not only central with a major airline hub, but attracting the right team and having them happy is the most important factor. My team loves it. That’s what matters.”
Rory San Miguel and Francis Vierboom of Propeller Aero — “when planning our expansion, we considered a number of US cities in addition to Denver, including New York City, Austin, Chicago, and Portland. But the numbers don’t lie: Denver gave the best balance of location and quality of life… It has a great cost-of-living index compared to similar sized cities, coming in more affordable than the majority of locations we were considering… Further, Denver’s sunny weather can’t be beat. It’s a growing tech center with lots of amazing talent. It’s got all the activities you’d want to do on the weekend, from hiking to skiing to exploring new breweries, in addition to low average commute times and good walkability.”
Here in Colorado, we are pumped to see the growth of Australian startups, founders and operators and excited to welcome newcomers to the community. If the US is on your radar and you are thinking of moving here, feel free to hit us up and we can get you plugged in.