Australian startups taking on international growth in the world’s largest startup market cannot afford to be under-prepared, under-resourced and over-there.
At a series of events this week to launch the KPMG and Advance enterprise technology accelerator elevate61, New York-based venture capitalist, Brad Harrison of Scout Ventures and Remo Carbone of ianden shared their insights of what Australian startups in enterprise technology need to do to find success in the USA.
Without going into the debate of whether leaving Australia is a good or thing bad for our startup eco-system, the reality is that there comes a time in pretty much every tech startup founder’s life when the decision needs to made: should I stay or should I go to the US?
The US boasts the most liquid venture capital markets. It is home to the most sophisticated global technology firms and the largest enterprise technology clients. In many ways, it’s the major league for startups.
From the perspective of the majors, the Australian startup eco-system has evolved considerably over the past two years. The quality and quantity of ‘investible’ new ventures continues to increase. At the same time, many US venture capitalists are increasingly focused on finding startups from international markets, as the competition over local US deals increases and the quantum of capital available for startups booms. Venture capitalists generally don’t care where a startup comes from, good companies are good companies. Concurrently, the shift to mobile and the cloud means that many large organisations have experience and a stronger appetite than ever before for new technologies and new ways of doing business.
This environment has created the perfect storm for startups seeking global prominence.
So, for ambitious Australian startups, when is the right time to seek a US investor or to start targeting US customers?
Here are five insights from the experts:
Beyond seed funding, the investment needs to be able to build an idea into a business. If looking for venture capital, startups should demonstrate continued and accelerating growth in sales or users. Venture capitalists tend to prioritise companies with around $250,000 monthly recurring revenue. However, they will also prioritise products over services and your revenues to date and planned growth needs to demonstrate this.
In regards to winning both sales and investment, confidence is key when arriving in the US. Australian entrepreneurs have to feel like they belong and show their belief that their product is as good as anything available internationally. It also helps to have an idea of your exit strategy, where you want your business to be and how involved will you be in 5 to 7 years.
Know the landscape, the competition and the customer. It is vital to get both your business model, marketing and sales strategy right for the US. First, getting on ground support and networks to help you with warm introductions is critical. You also need to have great marketing collateral if you’re going to be taken seriously. A smart approach to sales is to have both a self-service model and enterprise model running in parallel. That way individual or smaller customers can sign up automatically using self-service, giving you time to close those often long term enterprise deals.
When it comes to locking down major customers, the sales cycle can be as long as 18 months to seal a deal. Often the primary customer contact dealing with startups is not going to be the key decision maker. A good tactic is to concentrate on mid-range sized customers while working on the larger corporate clients.
Be flexible with your pricing and know your customers price points. One startup selling a $1 million a year tech solution into US government discovered that at a local level, managers could sign off on $250,000 expenditure. They dropped their pricing to $250,000 for a limited version of their product, signed up a bunch of bigger clients on one year contracts, and can now upsell on renewals from a position of strength.
With hundreds of people from local startup eco-systems coming to hear from Brad, Remo and local experts in events in Sydney, Brisbane and Melbourne it’s clear that Australia’s appetite for global success is as strong as ever. One thing that both Brad and Remo were clear on in their discussions is that if Australian startups are going to realise their ambition to take on the world, they’re going to need their home supporters to get behind them.
For corporates, this means participating in the eco-system, sharing knowledge and resources and helping our local innovators give things a go on the international field. It’s possible to make a major difference. Of the nine startups who took part in the first elevate61 accelerator program, two are already in the process of setting up US operations. Others are re-calibrating their business model to better take on global expansion. As Australia moves to build its future economy and reduce its reliance on minerals and resources, growing and building more enterprise tech companies could help Australian startups hit more home runs.
Applications for elevate61 2016 close December 14th 2015. For more information and to apply, visit elevate61.com.au.