Google has kicked off its first in a series of "Google Sudo" events, aimed at helping Australian entrepreneurs kick start their own businesses by getting the opinions from a venture capitalist (VC), a start-up and an angel investor on what Aussie start-ups should be doing.
Google Australia and New Zealand engineering director Alan Noble chaired the panel, which, including himself, consisted of Southern Cross Venture Partners VC Bill Bartee, Sydney Angels angel investor Vivian Stewart and two entrepreneurs from Shoes of Prey: Michael Fox and Mike Knapp.
One of the first questions that Noble asked was whether the Australian start-up scene could hold its own ground against powerful competitors, like Silicon Valley.
Bartee said that even though many look to the Australian-gone-US success stories like Atlassian for inspiration, entrepreneurs should remember that while Atlassian does have a large presence in the US, it also has one in Australia. He said that times have changed in the past five years, and physical location, while still important, is not essential for success.
"Because of the ability to sell online, and a lot of the online acquisition models these days ... you don't have to physically be in these places. Make no doubt about it that Silicon Valley is a phenomenal place, and you learn a lot, and there's a lot of energy, and it's a much bigger ecosystem, but people are just as smart here, so you don't have to move overseas," Bartee said, adding that there are plenty of ways to develop of start-up on a shoestring budget or even credit cards.
"The cost of starting something is a lot lower. You can prove the lean start-up business model pretty quickly now on a relatively small amount of capital, and because everything is connected, you don't have to be exactly where your customer is."
From the investor's perspective, Stewart said that Aussie start-ups are more likely to be taken seriously if they do their ground work here first.
"Before anyone jumps to the US, I highly recommend getting your business going here, finding a market here, proving the product, getting some funding and some support and systems in place and you'll be much better received over in the US," said Stewart.
While that might seem like a catch-22 situation, due to the perceived lack of funding available here, Fox argued that there are so many more government grants available today than there used to be.
"It's fantastic. There's actually a lot of support from government grants. There's an export market-development grant that we get. Two thirds of our sales are customers that are outside of Australia ... which basically gives us back 50 cents in the dollar for all of our overseas marketing spend, which is amazing. We spend $50,000 on Adwords advertising targeting US consumers, and the government gives us $25,000 of that back," Fox said.
"There's R&D [research and development] grants, and they've just changed and improved. We now get back 45 cents in the dollar for all of our R&D spent, so our whole tech team are doing R&D. At the end of the financial year, we'll have spent a couple of hundred thousand dollars on software engineering salaries. We'll get 45 cents in the dollar of that back."
Fox said that his company is also looking into Commercialisation Australia's assistance for even further funding and resources.
"We're exploring that at the moment, but you can get early stage commercialisation grants from them of up to $2 million."
Combined with grants, he said that an angel investor's $500,000 could go an extremely long way.
But his business partner Knapp also warned potential start-ups not to sell themselves short, or to corner themselves into a bad deal with an investor that doesn't suit the direction of the company.
"It's difficult, when you've got a terms sheet in front of you, to walk away. We've done that in the past. That's a really big moment, when you walk away from a deal, and it takes a lot of guts. You don't want to get too blown away by someone that wants to give you money. You've really got to evaluate that. We would really look at as if we're hiring them to come on to the team, and we'd try to understand their motivations. It's the single most important [decision] you can make," Knapp said.
Stewart agreed, stating that although an investor is fronting up the money, it shouldn't own the business.
"Sometimes, investors think they can do all manner of things just because they've put money into the business, but you need to keep control of your business, especially if it's young and fast growing. You can't let their ideas swamp your entrepreneurial vision," Stewart said.
"If the investors are running the business, then something's really screwy," Bartee said.