The Young Ones

25 Jan 2012

Author: Brad Howarth

Photography: Ben Sullivan


The networks, the expertise and serious dollars. There’s no argument about Silicon Valley’s allure among this growing band of successful young Australian start-up entrepreneurs.
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Ben Keighran was just 22 when he packed up and moved to Silicon Valley. He’d already founded his own mobile messaging business, bluepulse, back in Australia at the age of 19. But it was in Silicon Valley that he thrived.

In 2007 Keighran raised US$6.5 million from US investors, and was named by BusinessWeek maga­zine as one of America’s top entrepreneurs under the age of 25. Two years later, having left bluepulse in 2008, Keighran founded his next tech startup, Chomp. Focused on making it easier for smartphone and tablet users to find useful apps, Chomp was eventually bought by Apple in 2012.  A few years ago the idea of Australian startups attracting such deals was almost unheard of, but Keighran helped start a trend that other Australian entrepreneurs have been quick to take advantage of.

While his home town of Sydney looms large in his long-term plans, when it came round to getting serious about building a new technology business – this time based on search technology – he had no hesitation about where he would do it from.

“The advertising dollars are here, the search engineers are here, and the experience is here,” Keighran says.

A few years ago the idea of Australian start-ups attracting A-list Silicon Valley entrepreneurs was almost unheard of, but Keighran helped start a trend that other Australian entrepreneurs have been quick to take advantage of.

Recent years have seen a flurry of high-profile investments from American venture capital firms and angel investors in Australian fast-growth businesses. One of the most active has been the tier-one venture capital investor Accel Partners, which in May 2011 joined in a US$35 million investment round in the Australian design contest company 99designs. This was Accel’s third investment in an Australian company, following an investment of US$60 million in Atlassian Software in July 2010 and US$70 million in OzForex in November 2010.

For 99designs’ CEO Patrick Llewellyn that investment represented a rapid payback on his deci­sion to relocate himself and his family to Silicon Valley. Llewellyn was only appointed as CEO in January this year with the responsibility for growing 99designs’ US operation, but soon found himself negotiating the funding round with Accel Partners.

Llewellyn says that Accel has bought more than just money to 99designs.

“Being in Silicon Valley has created a whole new network, and we are tapping into that network on a daily basis now,” Llewellyn says.

“When we start to think about our growth plans, we can feed off some of the really fast growing companies that are based here.

“The other day I had lunch with Rob Solomon, the ex-COO of Groupon. And talking to Rob opened up my mind to what fast-paced growth is. He started with 150 employees and when he left they were 13,000. So the network has been super important.”

While established companies are doing well, Australian start-ups have also featured prominently in many of the US-based pitching contests and incuba­tion programs, including the prestigious DEMO and TechCrunch events.

Ryan Junee, for example, was the first Aus­tralian to participate in the highly-regarded Y Combi­nator intensive incubator program.

“In almost every cycle there has been an Aussie company, and there have been at least two that are going to get in this year,” Junee says.

Junee moved across in 2003 to study at Stanford University, before founding Omnisio, a video search technology maker which participated in Y Combinator and was subsequently acquired by the YouTube divi­sion of Google in 2008.

The latest Australian to be accepted into Y Combinator is 20-year-old Nikki Durkin, whose busi­ness 99dresses began by providing a means for women to easily swap fashion pieces using a virtual currency. Her business is evolving rapidly – a process that will be assisted by the Y Combinator experience.

“(Y Combinator) is a three-month program and at the end it culminates in a demo day where you show what you have done to a whole bunch of inves­tors,” Durkin says. “The aim, if you need to, is to raise money off that.”

Durkin says she will use the experience to size up whether the company needs investment, and where it would be best located. She has big plans to devel­op 99dresses into a competitor to eBay. But doing so requires breaking into the US market, as the Austral­ian market simply isn’t big enough.

“I’d love to build 99dresses up to something really big and valuable, because I think it has heaps of potential, especially with the new direction we are moving in,” Durkin says. “We’ve learned a lot in Aus­tralia, but what we are doing now is quite different, so we have a lot of assumptions to test out.”

On her first trip to Silicon Valley in late 2011 Durkin says she was impressed by the focused nature of the people she met, and she is keen to make more connections. On her trip she took a tour of Facebook’s facilities and was able to get direct information from the company about how to solve problems.

“We met awesome people, who live and breathe this start-up life,” Durkin says. “That kind of stuff you only get by talk­ing to people working in the com­panies, and you can get a sneak peak of what is coming up.”

That these opportunities are open to Durkin and other Australian entrepreneurs is in part due to the work of Junee and those who came before him. Junee is now developing Inporia, which is applying search technology to fashion retailing to help shoppers find the latest fashions and bargain items that match their tastes. Like Keighran, he has raised money from A-list Silicon Valley investors.

Junee says there is much more to Silicon Valley than just the money.

“There is so much support here from other entrepreneurs who are successful and willing to give you advice,” Junee says. “There is a culture where it is almost expected that doing a start-up is a natural thing, and that when you do a start-up it’s risky and you are probably going to fail. The culture around risk taking and doing start-ups is strong.”

It is that combination of investment dollars and business opportunity that is seeing Australian compa­nies flock in increasing numbers to Silicon Valley, with an estimated 65 Australian companies resident in Sili­con Valley and many more on their way.

One Australian who arrived in Silicon Valley well before the current generation is Larry Marshall. He first arrived in 1987 with the goal of commercialis­ing communications hardware developed at Macquar­ie University.

There were far fewer Australian companies on the ground back then.

“There were definitely less than five of us,” Marshall says. “When I used to present to conferenc­es 10 years ago it was a novelty to have an Australian accent and be at a venture capital CEO summit.

“We are not an anomaly anymore.”

Marshall says many of the Australians who have been successful in Silicon Valley have since moved back to raise families, or for other reasons, and have taken their experience – and money – back with them. This has provided the basis for incuba­tors and angel investment groups that are backing the latest batch of US-bound Australian start-ups.

“The new generation are more accepting of risk, I think because they tended to make money faster and easier through the evolution of the web,” Marshall says. “This is a really good thing for the country because they are willing to re-invest both in themselves and in each other.”

And they are also providing the exper­tise and contacts that are essential for breaking into Silicon Valley.

Junee says he has noticed a marked increase in Silicon Valley-style thinking back in Australia.

“When I go back to Sydney I notice there are a lot more people talk­ing about start-ups and it is a lot more in the minds of people graduating from university,” Junee says.

A network of Australian entrepreneurs now stretches across the Pacific, and has been instrumental in assisting many start-ups into the market. The not-for-profit ANZA Technology Network and Advance expatriate network have been responsible for giving hundreds of Australian and New Zealand start-ups a taste of Silicon Valley through their programs, run in conjunction with the Australian Trade and Investment Commission. Many more entrepreneurs have visited courtesy of gov­ernment programs.

Recent years have seen the formation of Aus­tralian-based incubators and angel investment groups dedicated to helping start-ups raise money and break into global markets. Pollenizer, which is best described as a start-up factory, recently raised $1.1million from successful Australian entrepreneurs, doubling the amount it raised 12 months earlier. That money is being used to fund start-ups such as Woo­board, a team incentive tool which is now being readied to take across to Silicon Valley.

Similarly the Startmate group brings together Australian start-up executives to offer mentoring and seed finance to founders of Aus­tralian internet and software businesses. It runs a three-month program which includes an introduction round in Silicon Valley. One of its portfolio companies, the shopping application Grabble, was acquired in Novem­ber by US retail giant Walmart.

Australian entrepreneur Bardia Housman is hoping to extend that assistance further. Together with partners he has bought a warehouse in San Francisco’s start-up epicentre, the South of Market (SoMa) dis­trict, and is turning it into an incubator.

Housman sold his Australian-founded soft­ware company Business Catalyst to the Silicon Valley software maker Adobe in 2009, and subsequently left that company in May this year.

“The idea is to get this space ready for a couple of hundred people,” Housman says. “When I came out here I thought it was pretty difficult – there were a lot of questions that I had, that I didn’t have the network to answer. And now I get hit up by entrepreneurs at least once a week asking questions.”

Like many other Australian entrepreneurs, Housman has been infected by the buzz that permeates Silicon Valley.

“It is just such a massive amount of energy,” Housman says. “You go to any number of coffee shops and there are people just punching code on their lap­tops. You get a feel for how big the Valley is and how many people are involved in wanting to build great products, which is why it is so important that Austral­ian companies come across for a couple of weeks to get a feel for it.”

Elias Bizannes first moved to San Francisco to develop a project that aimed to make it easier to move data between social networks. But it was through the real-world Silicon Valley contacts that he formed that he wound up being offered a job with Charles River Ventures.

In his spare time Bizannes has been develop­ing programs to support entrepreneurs and start-ups from Australia and around the world. He is the driv­ing force behind StartupBus, which began in 2010 as a light-hearted idea of taking 25 entrepreneurs on a business-building road trip to the emerg­ing technology conference South by Southwest (SXSW) Interactive in Austin, Texas. StartupBus grew six-fold in 2011, and 1,200 people are expected to participate in 2012.

He is now developing StartupHouse, which will be an incubator to fund the people he finds through StartupBus.

“When they are ready I can get them into the incubator for three months and give them access to the network that I have in the investor community and the media,” Bizannes says.

There is no shortage of fresh Australian companies want­ing to test their wares on the other side of the Pacific. Geoff McQueen of Internetrix arrived in the US this year and has launched his compa­ny’s key software product Affinity. McQueen is now working on build­ing his team and raising funds.

In the past, residency restrictions made setting up in the US difficult, but McQueen says it’s now easy thanks to the E-3 tempo­rary business visa, which is avail­able only to Australians.

The hard part definitely comes after touch­ing down. “You are competing against the best in the world,” McQueen says. “And as a consequence it is a lot harder to succeed when you get here than it looks from a distance. But having said that, it is not an impossible mountain to climb.”

Rebekah Campbell is still deciding which US city she will use to launch her social sales tool Posse into North America. Posse enables music fans to earn rewards from promoting concerts and merchan­dise, with more than $700,000 in sales made through the site to date. Campbell says her push into the US will also focus on extending the concept to promote retail brands.

She has already raised capital from A-list Sili­con Valley angel investors, including a member of the founding team at eBay, thanks to a series of introduc­tions from the Australian investment company MLC. “People really responded to the idea, even though we were at an early stage,” Campbell says.

In particular she impressed Bill Tai from ven­ture capital firm Charles River Ventures, who was instrumental in putting together Posse’s $1.1million angel investment round.

“Because we eventually want to end up as a Silicon Valley company we thought it would be great to have someone like Bill on board now, to help us get to the next stage,” Campbell says. “Australia has been a great test market, but now it is working well, it is time to start growing. If we get it right, the US is the big prize.”