Why we kept our Startup in Australia

Matt (my co-founder) and I started BugHerd more than four years ago. In startup terms, we’re not a successful company yet and we’re certainly no unicorn. But we’re still alive, and we still have a dream we want to deliver. It’s been a hard road, and I have to honestly say, we would never have lasted this long if we weren’t still based here in Melbourne. If you subscribe to the notion of “Fail Fast”, then perhaps that’s a bad thing. But for us, the decision to stay here in Australia was the best decision we ever made.

In the first 6 months of 2011, we were back and forth to the US quite a bit. Whilst we had some good interest from investors in the US, we generally found that they were lukewarm about a little Aussie company like ours. Whilst we did get some interest, for the most part they were more interested in whether we were moving to the US or not. The exception really was 500 startups. They seemed to have a far more global view than most investors, particular in 2011. Other than that, there was just a whole lot of jet lag for not much return.

500 startups honestly was fantastic. I can’t speak highly enough of the impact that the people and teams we met while we were there had on us. We’ve made many friends that we still keep in touch with 4 years later. Unfortunately, outside of the programme we didn’t have such a great time. Matt was stuck in the outer suburbs of San Jose, miles from Mountain View with no transport other than the Caltrain or a bus and I was thousands of miles away from my wife and two kids. It wasn’t a great time for either of us to be honest.

Alan and Matt pitching Bugherd

Pitching at 500 Startups Demo Day

Once 500 startups wound up, I headed back home again to spend some time with my new born daughter. Matt stayed on in the US to try and close some deals we had on the table from “Demo Day”. Meanwhile, I went back home to Australia to do the same here. He had a half dozen angels that were keen to invest, and I had a Melbourne VC that was equally keen to get on board. It came down to a coin toss in the end. Do we take the US money, pack our things and move to the US, or do we take the Aussie dollars and stay a startup in Australia. It was a tough call to make.

Ultimately we decided that the one of the most critical factors for BugHerd to be a successful company was to have founders that were happy, engaged and passionate about growing a great company. Being in the US didn’t immediately appear to add anything extra to that. For us to go the US we’d have to have some pretty amazing opportunities that weren’t available here, but there just weren’t any obvious benefits beyond raising money. So the next thing for us to evaluate were the investors, and what we felt they brought to the table.

We met a lot of great people in the US. Amazing investors, amazing founders and amazing teams. However, one thing that was abundantly clear is that us Aussies work a little differently to our friends in the US. There’s a bunch of generalisations here, but this was just based on our experiences and, right or wrong, contributed to our decision.

Most of the investors we spoke to were adamant that it simply was not possible to grow a big company in Australia. They all wanted to know how soon we’d be moving over. I can agree that the opportunities for serendipitous events in a place like Silicon Valley are far greater than here, and I can see how the availability of funds is so much greater. But I don’t think there are inherently better devs or designers there, and team and execution is ultimately were success is found. Once you have investment, it really doesn’t matter where your team is based, it just matters that they’re building great products. So that argument just didn’t fly for me. I can understand why an investor wants to be in close proximity to their portfolio, but that’s a different argument than whether you can or can’t build a company outside of the Valley.

The other thing that bothered both of us is that in the US you have to talk a lot of bullshit. No matter what your company looks like, you have to talk as if it’s the next Facebook. You have to pretend you’re a Unicorn even when you know you’re not. I never once met a founder that when asked, “how are things going?” could give me an honest answer. Everyone is killing it, smashing it and blowing shit up. You have to be moving fast and break things. It’s all a million miles an hour and to hell with the consequences. There’s no room for words like “considered”, “mindful” or “deliberation”. You move now, or GTFO. It’s as if everything and everyone is in a Hollywood production. The facade looks like a million dollars, but it’s all held together with duct tape. It’s great until things go wrong, then the whole thing implodes. And for the vast majority of startup founders, that’s exactly how things end.

The system works great this way because the folks providing the money are placing hundreds of bets at a time. They’re putting money behind a whole range of companies with the intent of reducing risk and maximising returns. But you, as a founder, don’t get that luxury. You get maybe only a few chances to make a great company. If you’re aiming for a 1 in a million outcome and you get 3 shots…well… you do the math. The thing is, in the US that appears to be a perfectly acceptable way to reach success. It’s literally all or nothing.

Personally, I believe it’s unhealthy for founders to operate in those conditions. It’s ok in short doses, but in the long term it’s a road to personal ruin. Once you realise that your own health and happiness (and that of your family) is more important than all else, you start to see that success has different measures for different people. As founders, we just didn’t gel with that success at all costs mentality we found in the Valley. We’re not all unicorns pooping rainbows on a rocket to the moon, and nor should we be.

Fortunately, in Australia it’s perfectly acceptable to build a strong profitable business that just keeps growing year on year. We don’t have unicorns here. There’s no Facebook, Snapchat or Instagram, but then there’s also no Color, Secret or Pets.com here either. Australian founders, and the investors that fund them, seem to be more interested in growing big profitable businesses than they are growing what amounts to “get rich quick” schemes. Perhaps we’re a more laid back culture that is more inclined to take our time to grow success than we are to try and generate it overnight. Perhaps the gap between the rich and poor is smaller here and therefore success isn’t quite as binary as it is in the States. Or perhaps, as a nation, we just don’t idolise the successful but are more inclined to view their wealth with cynicism rather than vicarious optimism.

In any case, the entrepreneurial drive is strong here, but it’s definitely a different beast than in the US.

This binary model for success results in an intensity in American founders that, for the most part, is missing from Australian founders. Whilst the typical US founder will burn the candle at both ends for as long as humanly possible (and then some more), the typical Aussie founder values things outside of work too much to work 100 hour weeks. It’s not that we’re lazy, it’s that we realise that there’s a limit to how much work you can do in a week and still be happy and productive.

It could also be that the typical startup founder in Silicon Valley is far more likely to be in their early 20s (25%) than the average Australian founder (only 6%). We tend not to start companies straight out of school, but tend to start companies with 5-6 years experience under our belts. Perhaps by then we’re more likely to married and have kids, or maybe we’re just more likely to be in the habit of doing the 9-5. Maybe as a result we’re just a little bit more risk averse. Maybe we start businesses to make change, rather than chasing success. Maybe we’ve seen more of the world and know more about what we want our lives to be. The Valley, during the short time I was there, appeared to be a bunch of incredibly talented people either working or partying themselves to death.

I think, in hindsight, we’re just not the kind of founders that want meteoric success above all else. We want to solve a problem that we’re passionate about, and if that happens to be in a market that means we’ll never be billionaires…well…so be it. But we also know that comes at a cost. It makes us un-investable to a lot of US VCs. We don’t dream big enough and we don’t burn fast enough, but we’re ok with that.

The bottom line for us, and for any founder, is knowing what your want your life to be like. BugHerd (and now Macropod) are certainly not a lifestyle business. As I’ve said many times to many people, if this is a lifestyle business, it’s the worst fucking lifestyle anyone ever had! If in 4 years time we eventually see an exit that secures our families’ future, that’s fantastic. But, if all we end up with is a hugely successful business that employees dozens (or hundreds) of people that love to come to work each day… well, I’ll be ok with that too …

And that, in a nutshell, is why we stayed in Australia.

If you’re interested in some of the challenges of raising here in Australia, check out my follow-up post here.

About Alan - Alan Downie has been working in web for over 15 years. He headed up development of the award winning Intranet DASHBOARD before starting his own software company, Angry Monkeys, which produced the successful UsabilityHub and Fivesecondtest products. As co-founder and CEO of BugHerd he participated in Startmate (Australia) and 500 Startups (US). He still programs occasionally, although not as much as he'd like, and far more than his team wants.

22 Comments

  • alan jones says:

    Best read this month for me, thanks Alan. You’ve encapsulated so well why I’m still building and investing in startups in Australia when I’ve had several opportunities to follow startups to Silicon Valley. It’s for many people, but it’s not for me.

    …also the HBR and StartupMuster links are broken fyi 😉

  • Berend de Boer says:

    That’s a great story, and some very good reasons to stay in Australia.

    But you forgot one thing: end up with a product that your customers love. So far at least I do!

  • James Goodridge says:

    Great article Alan. As an aussie startup founder, also just over 4 years in, I can empathise enormously – although am afraid I do still work the 100 hour weeks, and I’m nearly 40. However, I am so happy I never went to ‘The Valley’ chasing VCs when the temptation and all the advice was to go.

    I think the lack of that sort of VC funding here in Australia makes more resilient businesses, more focused on value creation. Our customers rely on our software completely, it’s business critical and there are limited other options for them. Honestly if I was them and we were head up some VCs backside in the Valley I’d have serious trust issues about our sustainability, and who we really are. We’re a global business now and employ in the US, SF even, so really – who cares where you’re headquartered anyway.

    For any would be aussie startup reading this and being advised to go to the US, there are other options – without funding from the Australian Government in R&D and EMDG grants, we’d not be where we are. It’s not mega bucks but it’s definitely not peanuts and has the benefit of being free! And I mean free from pressure to compromise value to our customers for growth more than anything else.

    Best of luck Alan, and I look forward to being a customer one day. 🙂

    • Vincent says:

      Hi,

      I’ve been reading all of the comments and want to ask for your experience with regards to patents. Are patents considered valuable in Australia? Thanks!

      — Vincent

  • Jeff Paine says:

    A solid read, well presented and full of valuable insight that I really hope newcomers to startup life take notice of. I fell into a trap with a couple of my early startups, when I didn’t know the difference between money and smart money – if you want to be 1% of a big US VC’s portfolio, expect to get all of the pressure and hype and very little focused support. Why should they wait for you to grow a solid business, they only need a few of their diversified risks to pay off – hype everyone, and then offset the implosions with the few explosions. Good business model for them, not so much so for you…

    I like keeping mine in Australia – I’ll take smaller rounds of smart money every day of the week when it comes backed by investors/advisors who actually invest their time in me and share my passion.

    At some point I expect to be a BugHerd customer, perhaps sooner rather than later!! Keep up the great work

  • Alistair Michener says:

    Nice post Alan. Please just get a big enough exit to become a Melbourne-based VC that invests in businesses that follow your mantra 😉

  • ulrich schild says:

    Spot on! Great blog post – Bugherders Rock!

  • Graeme Speak says:

    Hi Alan
    I have lived there a few years too, and though now I’m based mostly back here in Australia, I still have a base there. Your article mirrored many of my own insights about life in the US, the people, the risks. There is nothing compared to having balance in life which you can have here in Australia and I’m stoked to see how eloquently you put it. There are some very important qualities spelled out here for Founders to consider when evaluating the risks of spending time and effort at risk a jump to catch rainbows. In my opinion there’s less competition for far more parcels of investment right here in Australia. My advice to the Founder I coach is to get your business really cranking here first and then go for a holiday there to check it out. Life and work is much harder there than it is here.
    Regards
    Graeme

  • Paul Jones says:

    Thanks Alan! A good read, and great to hear your perspective. It comes down to values; the successful billionaire who loses his/her family and health ain’t a success. For the moment we’re keeping our startup, Credosity.com, in Australia.

  • Stuart Snyder says:

    I grew up in Silicon Valley and migrated to Adelaide Australia in 1993. I found that there is great talent in Australia that is often underutilised because of a lack of opportunity whereas in the Silicon Valley there are a lot of mediocre people in high positions because there are a lot of opportunities and BS can go a long way there.

    I believed you could do a successful startup in Australia provided you had a strong sales presence in the USA and that proved to be true with the company cofounded, YourAmigo. And why would you want your technical team located in Silicon Valley where you have to compete with so many other companies for talent? It is disappointing that Silicon Valley doesn’t think more globally, maybe in time that will change as more non US companies obtain success.

  • Lance Wiggs says:

    It’s a very similar situation here in NZ – if not even more so. We have a lot of companies building global businesses from here, but without a lot of the hype we see from the Valley. We’ve also seen successful investments from large US players into our local companies – most notably with Xero.
    Of course we also see a continuous stream of people back and forth to both the Bay Area and to their customers around the world. These are, after all, emerging global companies, that just happen to be headquartered downunder.

    • Gerald W says:

      As an Australian who has lived in Silicon Valley for 20+ years it’s good to hear the perspective from home. I co-founded, bootstrapped and sold my first startup to a public company. There is room to not “pursue” the unicorn model in Silicon Valley – but you need confidence in your approach. Needless to say, I am on my third startup now – and having done it “my way” I intend to continue doing it my way. Good on you and good luck — I think you’ll enjoy your life alot more doing it the way that feels right to you.

  • Mario Gonzalez says:

    I can strongly relate to your experience too. As the founder of Ortask, my company is not successful by Silicon Valley measures, but it is successful in my terms because it makes me very happy.

    For example, I’ve learned so much by deploying my two products, doing marketing myself, and am currently developing a new breed of test management tool that integrates other of my own technologies that actually help with managing testing (IMO, current test management tools are simply glorified DBs with dashboards) — something I have been very passionate about for years.

    Also, I have never identified (or agreed) with the new mentaily in the US for creating companies a-la Amy Hoy. At the worst case, such “strategies” teach you how to steal someone’s idea and build something for which you feel no passion, just to become rich.

    I wish you and your company the best and hope it grows in a way that keeps making you happy.

    Thanks for writing this article!

  • suresh sood says:

    Thank you for such an awesome, heartfelt and truthful piece. This helps others starting up in Australia understand the value of remaining in Australia for family happiness and cultural reasons. Good luck and here’s hoping many others are inspired by your writing to follow a path less trodden.

  • Deryk Wenaus says:

    It is so refreshing to read your article. Honestly the word unicorn has begun to irritate me for all that it represents – which you expressed clearly. I am a cofounder of a Canadian startup – Retreat Guru. We are based in a tiny, magical town of Nelson, BC. Yes it’s harder to hire but we are putting quality of life first. And that helps us stay true to our vision of benefiting the world. We may have a few dozen or a few hundred employees – but we are staying here.

    • Yelena Jetpyspayeva says:

      Thank you so much for writing such a solid piece! It is worth reading and worth sharing so I shared it with my friends who are now into startuping too!

      Would be cool if next time you write about startups in Australia in general and how it is going. I think it will be great and interesting and complementing too

  • Daniel Tillett says:

    Hi Alan

    After all the discussion on HN I thought I should write a response to your great post – my perspective is bit different to yours, but you might enjoy reading it.

    Why I kept my startup in Australia and why it was crazy

  • Mark Smith says:

    HI,

    This is a fantastic article, and thanks for writing it. I’m a Saffa, consiering emigrating to Aus, and pursuing some startup ideas ( I currently own a digital marketing agency). It’s awesome to get some insight on how things run, and what makes them tick.

    Really appreciate it.

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