Revealing the best that Melbourne has to offer: from the City of Melbourne to the University of Melbourne and the Melbourne Accelerator Program.
MAP recently hosted Masters Candidates from Stanford University’s Graduate School of Business on their Australia Study Trip. MAP Director Rohan Workman and the Konosuke Matsushita Professor of Management from Stanford, Professor George Foster, answered their burning questions about the Australian startup ecosystem.
At Stanford it has been difficult at times to get students from different Schools (eg. Business or Engineering) to engage. How does MAP approach this issue?
RW: It can definitely be a challenge to get cross-faculty engagement. MAP’s founder open mic nights have helped encourage students and alumni to mingle more. Any time we provide a forum where people can get to know each other, whether that’s networking, drinks, talking before and after events and getting to know each other… it all helps. It’s really the activities around the content we deliver that helps the most.
Stanford offers coursework that gives students a chance to try building something. Is this available at Melbourne?
RW: Absolutely! In 2016 the University of Melbourne launched the Master of
Entrepreneurship at the Wade Institute which is an entire one year Masters program designed to teach the fundamentals of entrepreneurship.
More broadly we’re also finding more entrepreneurially-focused classes on offer across a variety of Master programs in different faculties. This is where MAP comes in too. We’re focused on providing experiential education and giving people an opportunity to learn how to be an entrepreneur in a relatively risk free environment.
GF: What Stanford does perhaps better than anyone else in this respect is bring venture capitalists (VCs) and industry experts into the classroom. We have the cases written for students to study, but then we also bring the entrepreneur into the classroom to co-deliver the classes. This is what I see MAP building up to, and that’s what makes for a great entrepreneurial education.
How do startups feel about operating in Australia, rather than going over to Silicon Valley?
RW: There are a number of reasons why Australian founders choose to stay in Australia. There are favourable R&D tax incentives for being based in Australia where you can get up to a 43.5% refundable tax offset. Visas for entrepreneurs and more entrepreneurial activities in high schools are also helping to build awareness and understanding about entrepreneurship as a career path in Australia.
Many of the difficulties Australian-based startups face are linked to geographic location and a smaller market size. Australia has a population of 24m and the US has approx. 330m, so it is a vastly different market and so people from Australia will travel there to explore it.
Because of Australia’s geographic proximity to Asia, this presents a strong opportunity for our startups. Naturally there are cultural and business lessons to be learned in this space, which is where MAP is partnering with institutions like the University of Melbourne’s AsiaLink and Asia Institute to deliver content to Australian founders.
Also, Australians are typically used to travelling. A number of the startups who have come through our program spend a lot of time in the US but they’ve maintained a base in Melbourne simply because it is cheaper to do so. Tax incentives coupled with lower labour costs for highly skilled Australian workforce (paid in Australian dollars) make it more affordable to be based here and just travel back and forth.
GF: In my opinion there is also greater loyalty in Australia too. In Australian-based companies you would expect to see less turnover than you would in Silicon Valley, where everyone is looking for their next move. In Australia, if you make a good hire, they’re more likely to stick with you.
Are major investors domestic investors or do they come from the US or Asia?
RW: Recently we’ve seen a major influx of investors from China, but there’s no doubt that the best VCs in the world are in Silicon Valley. The best entrepreneurs in the world will raise funding from these top tier VCs, so a sign of success, in my opinion, is not seeing more Australian VC firms start up, but seeing top tier VC firms open offices in Australia because the there is a critical mass of quality deal-flow.
The current debate in Australia is about whether we have enough venture funding. I’m a strong believer that if you have the quality, the deal flow and funding will follow. We’re also seeing an increasing number of Asian investors demonstrate interest in Australian startups – especially where they see opportunities to link back into china for production or scaling purposes.
There is a high likelihood of failure in startups. How do you normalise the idea of failure, especially in a risk averse culture?
RW: I’ll start with the silver lining here in that a greater aversion to failure does result in more tenacious entrepreneurs, who will doggedly pursue an idea. This can be beneficial because they are just determined to make it work when others may give up earlier.
We also see more bootstrapped companies here in Australia than you typically see around the world, so you find ways to mitigate or minimise the risks.
However, there is no doubt that failure is a bigger fear here than in the US. MAP is playing a role in encouraging the conversation around failure, for example, MAP alumni founder Scott Li honestly broached the topic at our Melbourne Entrepreneurship Gala last year, and MAP Deputy Director, Dr Clare Harding, stood up alongside fellow panellists at Melbourne Knowledge Week 2016 to talk about ‘That good ‘F’ word; the beauty and necessity of failure’.
For MAP, the focus is always about the individual’s development as well. While we support and encourage them to take risks during the program, we’re equally preparing them with an entrepreneurial skill set that is equally useful and increasingly valued in other areas (be that joining a different startup, founding a new company or joining a larger company).
Is there much interest in the double or triple bottom line in Australia?
RW: There is a growing impact investing scene in Melbourne. This is attributed to both a long history and legacy in philanthropy and the growth in startups that impact driven and mission focused. Work needs to be done around translating what impact investors are looking for so that startups can better understand and showcase their value in order to access the available funds that exist and are growing.
GF: The Australian ecosystem has also adapted. Smaller pools of VC funding have been offset by startups appealing to or approaching private families. There are a large number of families that immigrated to Australia in the early 20th century and made their fortune in more traditional businesses. These families now have private offices to manage their wealth and have made investments in startups.
Tell us about Australia as a destination for startups from overseas.
RW: There are a few factors that help Australia attract entrepreneurs. Firstly, people tend to like Australians – not sure why but we’ll take it.
Australia is also a great place to live. Melbourne has been named the world’s most liveable city for 6 years in a row now, with a number of other Australian cities also listed in the top 10. This ranking is turning into an economic advantage in that several international companies are now using the Australian lifestyle as a reason to set up their offices here. Go Pro, Slack, Square and Stripe are all companies that have set up their regional HQ in Melbourne in the last couple of years.
People tend to underestimate and therefore underplay the cultural differences between Australia and the US – there are actually a lot of differences but they tend to be nuanced. With our neighbours in the Asia-Pacific region the cultural differences are more obvious and as such we tend to spend more time trying to understand and navigate them. The Australian Government has been proactive in encourage primary and secondary schools to include Chinese as a language and there are many soft diplomacy initiatives between specific markets.
GF: I would also add that in the last 20 – 30 years, Australian Universities have been a favourable destination for Asian students for their tertiary educations. This means that we now have a heritage of Asian students and alumni who are open to Australia and who view Australia favourably, so are keen to pursue business opportunities and connections with Asia and Australia. As Universities across Asia get better, the concern and challenge for Australian Universities will be to continue to attract the best students from the region, to ensure these relationships continue to be built from an early age.
What is appealing about the Australian lifestyle?
RW: The beer is cold, the food is amazing and Melbourne is the cultural capital of Australia with events on every week in a range of areas. It’s just a great place to live. Although the cost of living is slightly higher than other cities the average wage is too so it evens out in the end.
GF: Australian startup culture is much the same as in New Zealand. Entrepreneurs work to achieve the three Bs: beach house, BMW, boat. Once entrepreneurs get to this stage, they tend to sell up and live happily ever after. There is less serial entrepreneurialism than in the US. Aussies and Kiwis really respect the weekend, and the focus is on lifestyle, so it takes a very strong person (entrepreneur) to break away from that culture and push on.