Just last week, I returned from two weeks in the U.S with elevate61, KPMG Australia and Advance’s rapid growth entrepreneur program. Over these two weeks, we toured across the country with nine of Australia’s greatest-potential startups, meeting and talking with entrepreneurs, venture capitalists, co-working spaces, accelerators and enterprise sales specialists. It was a wonderful program.
But, as a passionate Australian involved in the startup ecosystem, what struck me the most was – where are all the Australian unicorns*?
KPMG US and CBInsights recently published a presentation titled ‘I got 99 unicorns’. From 2013-2014, startup unicorns (or those valued greater than $1bn from fundraising) have doubled, with now more than 100 in existence. Atlassian is the only Australian private company to make this list (that’s only 1 percent for those doing the maths).
This is troubling, and begs the question, why do we have so few?
The simple answer to this is access to, and attraction of venture capital, the lifeblood of a fast growing tech startup. The more complex answer to this is that many Australian startups do not possess all or some of the three simple ingredients to be a scalable startup on the trajectory to be a billion dollar startup (and be attractive investment for venture capital).
As most venture capitalists would tell you, these are:
- Team – A solid team of founders preferably with a technical co-founder and demonstrated experience
- Differentiation – Your value proposition must be truly unique. What is your secret sauce? You may have a good product in Australia, but how does it compete globally?
- Market – Build a product and or service that has a market that could result in revenues of $100m or more
So what can Australian startups do to become the next unicorn to join the list?
- Go global from the start – Australia and New Zealand markets just aren’t big enough. Therefore, you need to target a bigger market. This needs to be a population of at least $100 million according to Steve Blank in his article on ‘Building a Regional Startup Playbook’. The technology and business model should also be scalable to meet this market, with roadmaps on how to get there.
- Have a face where the money is – The venture capital market is strong in the U.S, particularly Silicon Valley. Therefore, to help attract and close U.S venture capital, it helps to have a U.S legal presence together with U.S customer validation. Does this mean you have to leave Australia? No, we want you to stay here! But, there are ways to setup effective legal structures and operations in more than one location. A good advisor, preferably an entrepreneur who has built and sold a startup in the U.S. would help here.
- Build a globally experienced team – Having a team (and broader network) that has experience in your target market and scaling enterprises globally is critical. This is difficult for all startups when you are just beginning your journey. However, Australia does have some advantages over Silicon Valley such as a strong (and cheaper) market for talent.
Finally, Australian entrepreneurs and contributors to the startup ecosystem should collaborate, collaborate, and collaborate. Despite the U.S startup ecosystem being highly competitive, everyone is willing to help each other and contribute to the ecosystem (for example through introductions to networks).
Becoming the next Australian unicorn does not mean beating other Australian entrepreneurs on the way. In a global market, there is room for all of us.