“What is the biggest growth barrier Australian startups are facing?” That’s the question Dynamic Business put to more than 20 entrepreneurs and industry experts, this week, for our exclusive “Let’s Talk…”, exploring success (and barriers to achieving it).
Some commentators pointed to environmental factors such as a scarcity of local capital, customers and talent as well as a shortage of women in STEM, recent visa changes and Australia’s remoteness from global markets. Others pointed to problems within the founding team – these included not having a clear business plan, failing to think global, an inadequate focus on company culture, relying on conventional growth tactics, neglecting to learn new tricks, failing to consider market fit when fine-tuning the product and buying into the perception that Australian startups are held back.
Read on for further insights, advice and some hard-hitting truths from this week’s line-up…
“What is the biggest growth barrier Australian startups are facing?”
Alex McCauley, CEO, StartupAUS: “Access to global talent is the biggest barrier to growth facing Australian startups currently. There’s whole series of new job types being born in the digital economy, and Australian companies need to be able to tap into the international talent pool. As it is, startups got left behind in the recent visa changes, and we need to do a fair bit of work to help our best young companies access the world-class people they need to become globally successful.”
Terry Gold, Managing Director, Techstars: “To my mind, the biggest barrier Australian startup founders are facing is one that has long been a challenge; namely, reaching customers and partners in international markets. When it comes to growing a tech startup, your most dangerous competitor is as likely to be in Berlin as Brisbane. Consequently, to truly reach your growth potential, you need to be able to scale and win quickly abroad, not just at home.
“As an example, just look at the taxi and transportation app market where several high-profile Australian transportation startups came into direct competition with Uber here, and really struggled to keep growing. “Australia has some great startups that truly have the potential to be global companies. That’s why connecting local startups to global networks is so important. Accelerators like Muru-D, Startmate, and Techstars are playing a really important role in helping Australian startups take the leap to global markets.”
Colin McNeil, Director (M&A), EY & Board Member, Heads Over Heels: “Commonly and rather unsurprisingly, we find a barrier to growth for Australian start-ups is accessing the capital to seed concepts, fund commercialisation and support expansion. Despite an increase in VC funds and a growing pool of private investors, we find start-ups need support in being able to both open doors to funders well as in articulating and presenting the opportunity to get them ‘on the hook’.
“The Australian market is still maturing for early-stage investing and the level of on-the-ground support (for both entrepreneurs and would-be investors) does not meet the demand. Start-ups should not be afraid to leverage their networks to unlock support and introductions to investors. Don’t be afraid to ask for advice and mentorship from those that have experience which could prove invaluable in your own growth journey.”
Rafael Niesten, Co-founder, Bricks + Agent: “Two key factors in the growth of Aussie startups: the size as well as the amount of capital available in our market. That’s also compounded by an oft, insular viewpoint and small-minded thinking in terms of how we spend or money. Australia is a massive land with very few people, which in turn means much lower income possibilities compared to other countries with hundreds of millions or billions of people.
“Our pond is small and geographically very spread out. All this makes capital much harder to come by as investors are willing to invest amounts commensurate with the size of our market. Thinking global is admirable but not an easy thing to do, so reach for the stars by all means but bear in mind you only have access to a few of them.”
Anny Havercroft, Head of Brand, Yahoo7: “The Australian startup scene is thriving given the increase in government-backed incubator support initiatives, accelerator programs available and new tax incentives for early stage investors. However, the biggest barrier to growth for startups in Australia is the lack of understanding on how to successfully market or ‘growth-hack’ their product or service. In fact, recent research published by Startup Muster indicates that marketing is the top skill founders wished they had in their founding team.
“The ability to position and drive demand for a product or service is a matter of survival for any business starting out. Talented startup marketers (or growth-hackers) are as rare as unicorns. They are resourceful in taking advantage of low or no cost opportunities while constantly testing new channels or formats to generate better return. But for those who don’t have this skill, it’s about finding the right partner or guide.” “Executing a successful marketing campaign is an early indicator of scalability that potential investors and venture capitalists find highly desirable.”
Jonathan Englert, Founder, AndironGroup: “This is going to sound funny coming from someone in communications but not only is the perception of Australian startups being held back wrong, it doesn’t even matter. When it comes to building a successful company, perception is critical; but when it comes to building successful communities and systems, I’m not so sure perception matters nearly as much as we often think it does.
“Business builders focus on fairly specific and narrow challenges and respond to the reality of the market. If the business builder is sufficiently motivated to build something and the market sufficiently favourable, then growth will happen no matter what, incubators, accelerators, government policy be damned. This is what I think is happening now in Australia. In sector after sector, I see Australian startups punching above their weight and visionaries putting together world-beating offerings. It’s not that every startup will be successful, it’s that if you fail here, don’t blame Australia.”
Cassandra Do Carmo, Strategist, Atomic 212º Group: “Growth barriers depend on what stage a start-up is at and how they are funded, but if I had to put it down categorically I see two barriers…
“Chasing growth before having product market fit: This one sounds like a no brainer, but if there is no need or want for your product or it doesn’t work as promised all the marketing in the world won’t allow you to grow (or your growth will be very short lived!). I’m not saying your first iteration of the product/service needs to be perfect for your initial users, but if you are going to start to scale make sure your initial users love it, would be sad to see it disappear and would recommend it to a friend.
“Having the right people to grow: Aussie start-ups need to overcome the pressure to use conventional growth tactics. Hiring an ex-corporate, or fancy marketing executive may seem like a safe bet, but chances are they will give you a set of rules to follow based on what has been successful for their cash-laden, resource heavy clients in the past. Instead, how about tapping into people who are ready to throw the rules out the window – data crunches, engineers or creatives. The people who can help you to test, learn and bring new ways of thinking to grow your start up.”
Mark Gustowski, CEO, QUT Creative Enterprise Australia: “Access to customers is always an issue for Australian startups. We don’t have the large markets of North America, Europe or Asia knocking on our door step, so most Aussie startups need to be thinking about accessing international markets almost immediately. It’s expensive and time consuming to build international channels which is why partnering is so important to help startups gain traction in larger markets.”
Will On, Co-Founder & Joint CEO, Shippit: “Talent. As a founder, I’ve moved from doing the work, to becoming a full-time recruiter and growing/running a successful business. It’s inspirational to see how Shippit has transitioned from finding it extremely challenging to hire key talent to now finding it easier to attract leaders in the industry as our employer brand and our product offering is strong. However, after reviewing 1,000+ resumes and conducting over 200 interviews, convincing mid-senior level talent to leave their high-paying corporate job to work for a startup that’s not Atlassian or Canva (both of which are informed risks) is no easy task, nor is finding technical resources where there is a technical shortage in Australia.”
Jeff McAlister, CEO, Trybooking: “All startups need to scale quickly in order to succeed. The size of the Australian market means that local startups could find themselves stuck in a middle ground in regards to size. This is a major barrier for local startups. If a US company succeeds in its local market it is going to have scale purely due to the size of its local market. On the flip side, startups in smaller countries like New Zealand or Israel cannot survive by just focussing on their local markets – this means they need to go global from day one, effectively another way to scale.”
Dr Steve Brodie, Executive Manager of Innovation, CSIRO: “Successfully turning an invention into an innovation with impact is a barrier that all Australian start-ups face. “To increase chances of success, it starts with a clear understanding of the end customer. This requires solid customer research from the outset – to understand their needs and how, and if, your innovation will help address these. Quite often businesses fail because they have not understood the end customer, and their innovation fails to address real and relevant issues. Customer research can also provide the insight required to adjust the idea or business model early on if required, before too much time or funding has been spent.
“If the business grows with these questions clearly answered, innovation is much more likely to succeed. This is something that we teach our teams on the ON Program powered by CSIRO.” Natalie Goldman, CEO, FlexCareers: “Funding. Australia has a limited pool of funding available for investment, and there are a growing number of start-ups seeking money. This becomes even more evident when you compare it with the US, where there is so much more funding available to startups.
“Being a small marketplace. Compared to other markets, we are very small. However, the upside to this is that testing in a small market could potentially save you $$$ in the long run. “Distance. When dealing with overseas markets, doing business in person can be very costly, both from monterey and time perspectives. Shipping products overseas only compounds this.”
Sarah Moran, Co-founder & CEO, Girl Geek Academy: “We need more women. More women founders, more women investors, more women employees. No-one wants to work in a company that’s full of dudes – it’s a boring way to change the world. Having spent time on the ground in Silicon Valley, I can safely say that Australia’s startup ecosystem is leagues ahead in terms of gender diversity – but there’s still room for improvement.
“We need to review our education system and culture to make sure more girls are engaging in STEM subjects from primary school age, and keep them engaged and included through to graduation. We must secure more women STEM graduates should we aspire to be creating startups that build genuinely useful products for society – and not just cater to one segment of the population. Creating a world-renowned, inclusive startup ecosystem in Australia will also entice more overseas talent and money to our shores.”
Tanya Titman, Founder, Acceler8: “Aussie startups and SMEs have opposite growth barriers in some ways. Startups are great at having the confidence to think about world domination but they often need more structure around their financial planning. SMEs need to have the confidence to think in a bigger way about their ability to scale and grow. The common denominator for both is financial literacy.”
Dean McEvoy, CEO of TechSydney: “Fast access to high-calibre talent is the biggest growth barrier for most high-growth companies in Australia, and Skilled Visas are an important — and often the only — pathway for this talent.
“We need to get our temporary visa system working to world’s best practice standards. That means a clear, accurate, and fast scheme which aligns with the immediate industry needs. “Australia needs to compete with innovation-focused countries such as Estonia, where the visa process costs about $120 and takes up to 30 days. In Australia, 75 per cent of 457 visas are completed within four months and the cost is $1,080.
“Also, currently many of the new positions in tech companies are not even on the Visa skills lists. Four years ago, roles such as machine learning and artificial intelligence engineer or developer didn’t exist as a job title. In another four years there will be many new roles. How do we cater to this demand?”
Tom Amos, Co-founder & CEO, Sidekicker: “We’ve all heard it before but we shouldn’t let this conversation slide. The #1 growth barrier facing Aussie startups is Australia’s engineering talent pipeline. Computer Engineering in Australia is in short supply and for tech startups to grow, they need talented engineers.
“What’s great to see is that the increase in tech companies setting up in Australia like Uber, Airbnb, Square and Eventbrite is encouraging Aussie workers to up-skill to have the opportunity to work with rapidly grow companies with desirable company culture. Credit must go to the Hon Phil Dalidakas for helping make Victoria a home to these companies which will help future startups scale from the IP of these leading companies.”
Nick La, Co-founder, Weploy: “The biggest growth barrier for Aussie startups IMO is not having a clear business plan. Traditionally, startups are very good at having a product (or a solution) that solves a challenge. This is good but it doesn’t mean you’re a business yet. We need to change this shift in mindset.
“You only become a business when you have a go-to-market strategy which involves planning and A LOT of resources – this is where a lot of startups struggle. A good example of this is a lot of startups focus too much on perfecting their offering from day one. Once they launch in the market they realise they don’t have a good market fit, and they can’t change fast enough, and have then exhausted their funding.
“This is why a MVP is so important so you can get your product to market, and see if there is a demand, the fine tuning will come after you find market fit (it’s all about the supply and demand) and iterate and iterate again, based on customer feedback, how the market reacts, and other feedback loops. This was Facebook’s internal motto for a while,’Move fast and break things. Unless you are breaking stuff, you are not moving fast enough’. And this is how our team at Weploy also believes while building the next generation on-demand recruitment platform.”
Peter Holton, Managing Director, Spectur: “It all depends on the business as challenges are dependent on the industry, size, geographic location, etc. It could be a lack of money, a lack of business experience or a lack of a coherent strategy. In the worst case, it’s all three! But as always, having money helps a lot as you can buy the expertise that you may be lacking. Money is always hard for a startup to raise. But of itself, money isn’t always the panacea to every problem. That’s why people who have money are careful who they offer it to.”
“A startup will need to have a strong team and a strong strategy in place prior to trying to raise any capital. There are lots of ideas out there. If you want to raise money you’ll have to convince people that you have the ability to take the idea and turn it into a viable, scalable business – something that is a lot harder.”
Leigh Dunsford, Co-founder, Waddle: “Founding teams focus on speed, ignore most process, and enjoy hacking their way to revenue. There’s a hell of a lot of founding teams that can reach proof of concept achieving revenue growth and market fit. The problem comes once hiring staff begins, building out teams and creating roles and divisions in the operation.
“Where I’ve seen teams suffer is in the culture. Founders typically focus on the technical side unaware that they’ll be dealing with personalities once hiring begins. Founders that have trouble letting go or lack communication skills can suffer the ‘toxic culture effect’. This is only natural as they move from a hands-on role to a manager.”
“I’ve witnessed one entrepreneur hire expensive talent, thinking it would fix all the issues. You need to hire for the stage you’re at – or will be at in the next 12-18 months. Expensive talent hired from larger well-established businesses may not fit your ethos.
“One of my favourite sayings still rings true ‘hire slowly, fire quickly’ and understand that you might not be the one to grow the business past a point.” Mick Spencer, Founder & CEO, ONTHEGO: “Startups are too focused on raising capital, not spending time on their product. The barriers to entry have dropped a lot with technology costs becoming a lot more accessible; execution isn’t often the strongest from startup teams.
“Startups want everything quickly but they need to focus on getting a small group of users and customers and do that very well, then move to another group, another category, etc, to expand their offering. “Some startups may also experience marketplace challenges. Accessibility to virtually everything is a lot easier, from markets that are much more mature, have bigger volume, which drives pricing down, and tightens margin. Startups must adapt and focus on what they are really delivering to the market.
“Customers are everything. It’s a consumer-centric marketplace in every industry. Multinational players hitting Aussie shores (Amazon/Uber/Airbnb/Decathlon) companies that have been primarily built on customer experience. Add the Chinese infiltration and influence (and market potential) and this provides a huge opportunity and challenge for startups who target this space.”
Alok Kulkarni, Co-Founder & CEO, Cyara: “Every day we hear about a promising new Aussie start-up receiving funding, or a new incubator launching. Looking at this, you might think that it’s easy to go to market with a great idea and be successful. But raising money can be a real struggle, and forging a name for yourself even harder.
“The truth is that more often than not, start-ups are judged on appearances. And often at the beginning you need to appear bigger than you really are, which is hard to do without proper funding. “The scarcity of local capital is still the number one barrier Aussie start-ups face when trying to scale up. And while it may seem that there are enough local investors for seed rounds, local capital dries up rapidly in a small, highly saturated market. Start-ups have to bootstrap until they’re big enough to attract the interest of larger global funds.”
Dr Jana Matthews, ANZ Chair in Business Growth & Director, UniSA Centre for Business Growth: “Many start-ups face growth challenges and hit roadblocks because the founders don’t understand what their customers need and value or have the knowledge and skills required to grow. They need to stop doing the things that made them successful in the start-up phase and start doing new things that will lead them to the next stage of growth.
“To grow a start-up into a scale-up, founders need to learn how to delegate, how to choose staff, communicate what you expect of them and lead them to high performance. When leaders understand what to do, when and in what order, which strategies to choose, and how to sell, they have a much higher probability of being able to grow and scale.”
Brad Stevens, Head of Marketing, Reckon: “There are more Australians starting a business than ever before due in part of the greater accessibility of technology. For example, the functionality of cloud based mobile applications such as invoicing, payroll and CRM – previously reserved for much larger enterprises – has aided the established of many new businesses.
“Access to financing has always been significant barrier to small businesses. However, with the rise of smaller, more agile lenders, it only stands to benefit Australian SME’s by providing tailored solutions unique to their needs, such as access to fast loan approvals and rapid funding, in some cases being within one business day.
“Having a physical business presence is also a major barrier, due to the financial, time scale and geographical restrictions it places on a business. With the shifting trend to the mobilisation of businesses, both through co working spaces and the digital market place, business owners are increasing reconsidering the need for a physical tenancy over a one powered from their pocket.”
11th October 2017