How will Australian start-ups weather 2009?

How will Australian start-ups weather 2009?

Summary: Opinions are mixed as to how Australia's start-up community will weather 2009 as the global financial crisis continues to make its presence felt.

TOPICS: Start-Ups

Opinions are mixed as to how Australia's start-up community will weather 2009 as the global financial crisis continues to make its presence felt.

According to some local start-up luminaries, such as RedBubble executive chairman Martin Hosking, the community has lost some of its momentum.

"What's happened is that there was this (relatively brief, in retrospect) period where people were talking about 'freakonomics', or free economics," he told bootstrappr in an interview last week. "You'd just launch something without any economic model at all, and there was a lot of hype and a lot of noise about this, trying to get to a million members, and worrying about the economics later."

That period, according to Hosking, is over.

"There is just far less appetite for that these days, and I think that means that few things will be launched," he said of the freakonomics model. This, taken with the fact that it was hard to attract venture capital for consumer-focused internet ventures in Australia, meant start-ups would have to think closely about their business model.

"That's not a bad thing at any stage of a business," said Hosking.

Despite these issues, Mick Liubinskas, co-founder of Australian start-up consultancy Pollenizer, is optimistic about 2009, believing the global financial crisis will stimulate new businesses being formed due to redundancies and a general lack of opportunities for expansion in existing businesses.

People are going to have to stay lean for longer, stay focused.

Pollenizer co-founder Mick Liubinskas

"What we'll see this year is a lot of people starting slimline businesses; there won't be as much news of companies getting serious funding, or getting huge, but there will be a lot of companies being started," he said in an interview. "People are going to have to stay lean for longer, stay focused. Probably a good thing anyway."

Despite such issues, however, Liubinskas said the local start-up community was still vibrant. "If anything, in a difficult time, the community comes closer together," he said. Pollenizer is planning to launch a co-working space for start-ups in March, and events such as the Silicon Beach Australia Friday night drinks in Sydney's Grace Hotel were proving popular, he said.

Many start-ups are using micro-blogging service Twitter, which recently hit an all-time high in terms of Australian usage.

One likelihood this year is that some Australian start-ups will close their doors. "People are dropping out, I'm certainly seeing that," said Hosking. Liubinskas said he hasn't seen any close yet, with most still having capital reserves, but it could change towards the end of 2009.

"That's the natural way of high-risk businesses," he said. "You give it a strong go for nine months and then you have to pack it up and try something else."

"One positive thing that will come out of it this year is that the Australian start-up scene will become less worried about failure. Failure is really just a part of being in this business. We should start respecting it and even cherishing it."

Topic: Start-Ups

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  • I agree with both

    As a 2008 start up I expect 2009 to be tough. We have a tough economic climate and it'll be tough to raise money. However there is good news, there are a lot of people around who realise they need to buy a job and this might mean taking a risk on a start-up. I have two of these people working with me now.
  • Interesting

    Thanks for your comments Simon. I too expect 2009 to be tough -- however I think it will also have opportunities. It's said that most entrepreneurs fail a number of times before succeeding -- on a personal level I certainly found this when I was starting off as a journalist.

    Good luck with everything!


    Renai LeMay
    News Editor
  • Some models actually benefit from the downturn

    Whilst the downturn dramatically reduces certain kinds of behaviours, it also causes other quite astonishing increases in activity. For example, we've been running for about 12 months and have found that, with everyone currently reconsidering their financial committments and looking for better deals, our word-of-mouth traffic is rising weekly - we've hosted well over 100k users and just keep growing traffic. Similarly our customers - banks and the like - are now more desperate than ever for highly qualified leads. For us, there could be no better time to be growing the business, but obviously part of this is due to the fact that we don't require additional funding.
  • Start ups in 2009

    In the last few months of 2008 I saw a major increase in high potential start ups looking for their next funding tranche and finding their incumbent investors very hesitant. With asset prices across all categories falling not many of the High Net Worth investors were too keen to throw more at start ups.

    I agree with Simon we will see a lot of start up activity in 2009 with people unable to find a job and having a go. If you have a big cash burn requirement for an unproven concept it wont get funded.

    I am on the board of a start up that is getting strong traction in Europe but we have been very tight in terms of our spending and need for capital so funding requirements haven't been a big issue. The basic message is innovate on the cheap, outthink not outspend.

    It feels a bit like the dot com crash days except it is not just our industry thankfully. I have seen a couple of highly innovative IT start ups get funding in recent months but only the very best stuff is getting funding.