Let’s Talk… Startup growth

Rivalry

The heated Sydney-Melbourne rivalry has played out over many years, with both cities laying claim to having the nation’s best coffee, culture, standards of living… well, the best of just about everything. But how do Australia’s two largest cities – and, more broadly, NSW and Victoria – stack up against one another in terms of conditions conducive to growing an early-stage company? That’s the very question we put to a dozen thought leaders, this week, for our final “Let’s Talk…” feature of 2017.

Some commentators expressed a clear preference for one city or state (e.g. “Victoria…has been the gift that keeps on giving”). Meanwhile, a few played devil’s advocate, claiming that “in some instances, you wouldn’t choose either” or that startup founders in regional NSW and Victoria lack the support afforded their peers in Sydney and Melbourne.

Most, however, were of the view that “compelling opportunities” exist for startups in NSW AND Victoria, with one claiming that founders should have “some form of on-the-ground presence in both”. As many pointed out, the answer will vary between startups, depending on a range of factors including access to relevant customers, talent and capital as well as the industry they operate in (e.g. “if someone wanted to set up a Fintech company, I would strongly recommend Sydney over Melbourne”).

Read on for further insights form this week’s “Let’s Talk…” line-up of commentators…


“NSW or Victoria…where’s best for growing a startup?”

Dr Kate Cornick, CEO, LaunchVic: “Victoria of course! Victoria is the only state in the country with a dedicated startup ecosystem development agency, LaunchVic, that invests in programs and events to support the growth of the startup ecosystem.

“Last financial year, we supported 28 projects across three funding rounds helping 48 individual startup businesses and more than 450 individual entrepreneurs and founders who participated in accelerators, incubators, hacks and workshops funded by LaunchVic.

“We also have one of the strongest and most established grassroots communities, supported by a range of organisations including Startup Victoria, who provide a terrific program of events for people at the start of their startup journey.

“In terms of infrastructure to support startups, there are currently 26 startup accelerators either operating or soon to be in Victoria. We also have approximately 190 meetup groups specifically focused on startups and entrepreneurship, and a further 460 focused more broadly on tech.

“And our liveability cannot be ignored. For the seventh year running, Melbourne topped the Economist Intelligence Unit’s (EIU) Liveability Index for the world’s most liveable city.

“What’s there not to love about growing a startup in Victoria?!”

Michael Muehlheim, Senior Wealth Advisor, Macquarie Bank & Board Member, Heads Over Heels: “Ultimately if a business is going to scale – and given Sydney and Melbourne are Australia’s biggest markets – any early stage founder and team will be travelling quite a bit between the two cities and will require some form of on-the-ground presence in both.

Personally, I believe both states provide strong ecosystems for founders and talent, angel and venture capital investment and consumers and companies to try and build distribution into.  The spread of Fintech, artificial intelligence, e-commerce and enterprise start-ups seem to be spread nicely between both NSW and Victoria. Having said this, perhaps in some instances you wouldn’t choose either state; with a new space agency being based there and emergence of a lot of spacetech already, if you were a space start-up you would go to South Australia!

Grace Lin, CFO, ReTech Technology: “Both states are equally compelling opportunities for a startup, perhaps with some variation between industries. When it comes to cybersecurity, I think Victoria has the edge. With Fintech, it’s NSW.

“We’re in an interesting spot as a company with Chinese origins that operates in the education space. We already have much of the technological expertise, what we need are education providers to work with. Already, we have a memorandum of understanding with Queensland TAFE.

“As a listed company, we don’t want to pre-empt our discussions with stakeholders in either state… but it’s fair to say one state has shown itself to be more open to our education solution.

“I guess our advice to startups would be select the state that’s more culturally open-minded about your solution and the disruption your technology brings. Then make as many connections as you can in that space.”

Joel Robbie, Co-founder & CEO, Nod: “Both New South Wales and Victoria have really strong draws, both are very liveable cities with good access to capital… but I think the lure of the beaches and weather Sydney offers seem to be pretty key to luring great talent, so I’ll say NSW is better for growing a startup. There’s also a really strong financial services culture in Sydney, which suits our financial advice startup really well.”

Richard Dale, Founding Committee Member, Sydney Angels: “If your startup is a marketplace platform or SaaS business, you can probably build it anywhere there are software developers and broadband.

“However, if it involves medical devices, biotech, hardware, or physical sales channels, then you’ll need a major city with research universities, scientists, engineers, specialised equipment, labs, prototyping facilities, hospitals, industry partners, and trial customers. Grossly simplifying, Melbourne is strong in biotech and hardware, Sydney in medical devices and software, and Perth in mining and oil & gas technologies.

“Innovation support programs also vary between state governments. This could mean one state offers more for a medical device startup, while another’s focus might be engineering. A SaaS business can also kick off with under $100K and 6 months to launch, while commercialising a medical device could require millions and several years. The latter often requires tax incentives or support that often differs significantly from state to state.”

Sarah Moran, Co-founder & CEO, Girl Geek Academy: “There’s a risk of thinking purely in terms of ‘Melbourne versus Sydney’, when regional Victoria and NSW also need to be part of the conversation. Both Sydney and Melbourne have great co-working spaces, government grants, access to faster internet (although, it could be better), and mentors on the ground. But there is both a lack of support and lack of education and mentoring available to aspiring startups who are not based in a major capital city.

“I recently connected two aspiring entrepreneurs in regional Victoria who were working on drone startups — they were from the same regional town, but neither knew each other because they’d been told to network in the city! If there was more support in these regional areas with better networks and facilities established, they wouldn’t need to turn to the metros for mandatory support and connections.

“I’m often meet with wary teachers in regional areas who struggle to see the upside of startups and technology —the economic growth and job/career opportunities. They just see tech as something that has taken jobs away. Unfortunately, that attitude filters down to kids in the classroom — we’re doing a pretty terrible job of selling the benefits to the whole state. The regional areas of both states are being left behind and I strongly feel we need to do what we can to support them.”

Anthony Sochan, Partner, Think and Grow: “Both states have their benefits, but the questions we ask are… where is the talent I need to hire accessible? Where are my customers? Where are my investors and advisors? On the talent side, San Francisco is reputed to have some of the best talent globally for fast-growth tech but unfortunately much of that talent is inaccessible due to the high level of competition. But regardless of what business you are building we believe you should be as close to all three as possible.”

Rony Chiha, Founder & Managing Director, AdCreators: “NSW has a larger startup community, a greater investor network and – if you want to take a startup global –  international investors are more familiar with Sydney than they are with Melbourne. The Victorian government are more clued up when it comes to start-ups but that’s only if you require a grant from the government. I would still say NSW is best for growing a start-up because there is a more diverse economy, a stable business environment and a larger talent pool.”

Greg Taylor, Group VP (APAC), New Relic: “Both Victoria and NSW are great cities to build and grow a startup. However, selecting a city to start a business should not be based on location alone. There are a number of things that founders and entrepreneurs should consider before choosing where they want to be based.

“Founders need to have an in-depth understanding of the industry that they are operating in and have a clear go-to-market strategy that’s based on where the customer base and partners are located. By understanding where the industry is stronger, and where they will have easier access to talent or R&D resources, startups will have a better chance of selecting the right location that will help their business thrive and grow.

“For example, if someone wanted to set up a Fintech company, I would strongly recommend Sydney over Melbourne due to the region’s strength in the sector. Sydney is where you would have easier access to human capital to build a company as well as to build a funding model, which typically comes from people who closely understand the industry.”

Tom Amos, CEO & Co-Founder, Sidekicker: “Victoria as a state to launch a startup has been the gift that keeps on giving. Having the opportunity to work at Inspire 9 for several years gave Sidekicker the opportunity to work amongst some of Australia’s fastest growing startups.

“Being able to be surrounded by the likes of Culture Amp, REA, CarSales, SEEK, MYOB, 99 Designs, Envato, Rome to Rio (the list goes on) has been integral to our learning and growth.

“The cost of living in Melbourne has made it affordable to live while working the startup grind and accessible public transport has been a lucrative asset to establishing our two-sided marketplace. For our Sidekicks, travelling to-and-from jobs across the city in other states just isn’t easy as it is in Melbourne; however in saying that, Melbourne isn’t where the majority of our growth is coming from.

“Our startup community been lucky to have the support of the Victorian government, particularly Phillip Diladakis, along the way and we’ve been lucky to have Melbourne born and bred SEEK come on as a major investor of Sidekicker in 2016.

“Sidekicker for the past 18 months has been scaling on-the-ground operations in major cities across Australia and New Zealand, and each state definitely has its benefits. For us, Melbourne has been fantastic as a place to set up HQ and there’s a reason why companies such as Slack are choosing Melbourne as their Australian launching pad.

“At end of day you, need to work out where the best place is for you to learn from others and have front-row access to your customers – which is the only thing that matters.”

Patricia Kelly, Director General, IP Australia: “When determining whether to launch an IP-driven startup in NSW or Victoria, it’s useful to look at some relevant state-based trends. Comparing startups from NSW and Victoria, we found that…

  • Across both states, startup activities in trademarks and patent has grown over the past three years – patents filing grew 34% while trademarks grew 21%.
  • NSW generally has slightly more startup activities than Victoria (by ~5%) in patents; however, there is no significant difference from a trade mark perspective, accounting for the a slightly larger population in NSW.
  • Comparing Victoria and NSW, there are significant differences in terms of where start-ups file IP rights comparing NSW to VIC. These differences are significant for both patents and trademarks.

“Additionally, we saw – with regards to patents – that NSW dominates in textile and paper machine, thermal processes audio-visual and medical technology sectors, while Victoria dominates in pharmaceutical, telecommunications, food chemistry and machine tools. This information illustrates Victoria and NSW both perform strongly when it comes to the establishment of startups, however each state is stronger in certain categories.”

David Jones, Business Growth & Innovation General Manager, WREDA (NZ): “Is New South Wales or Victoria better for startups – I couldn’t say. It would be better for the two states to focus on connection rather than competition. Best of all would be a networked approach across the Tasman, with startup-focused regions like Wellington.

“Separating one startup ecosystem from another suits those of us who have to highlight local benefits to secure public investment. But it ignores the reality of the sector.

“Yes, distinct local quality of life factors enhance entrepreneurial talent attraction, while infrastructure like co-working spaces and acceleration programmes do provide a framework for growth. But an overly competitive approach to these factors is inefficient and closed-minded.

“Governments who truly want to support success recognise that startups are agile and organic. Ultimately thriving when given access to opportunities for collaboration.

“Investing in an acceleration programme that’s designed to compete with a near-identical one that the neighbours have reveals a ‘zero-sum game’ mindset, where a competitor’s loss equals a gain. That’s just not how an innovative, fertile startup ecosystem operates.

“Building networks across borders allows regions to leverage each other’s investments and specialities, improving the overall health of the ecosystem.

“In Wellington, we’ve made valuable connections between our incubator CreativeHQ and Canberra’s CBRIN, sharing expertise between startup communities. CreativeHQ’s 2018 Lightning Lab FinTech Accelerator is supported locally, but is actively looking for collaboration with teams from Australia and beyond.

Cultivating a world-leading startup ecosystem across Australasia requires us to open doors for our startups, not build walls around them.”


About “Let’s Talk…”

“Let’s Talk…” is an exciting weekly initiative that provides entrepreneurs and industry experts with a forum to share rapid-fire views on a range of issues that matter to start-ups and SMEs. Every Wednesday, we pose a themed question to a line-up of knowledgable industry figures, with a view to picking their brains for valuable insights to share with you, our readers.