The pros and cons of being a startup in Australia: Macropod

When the founders of Macropod -- the firm behind tools including Bugherd, Stack, and Brief -- Alan Downie and Matt Milosavljevic first started the business more than four years ago, they were eager to move to the US in search of greater support for the company, but that quickly faded.

In a blog post, Downie wrote that for the first six months of starting out, the pair travelled back and forth from the US in the hopes of securing capital, but said that while there was "lukewarm interest", for the most part, investors were more interested in whether the company was going to permanently move to the US.

Speaking to ZDNet, Downie said he suspected there were two main reasons why there was so much interest about their possible relocation.

"For an angel, they want to add value as well as add money; if you're in a different country, that can be a challenge for them. A cynic might say that they just want to keep an eye on their investment, but even if that's the case, I suppose you can hardly blame them," he said.

"For most investors we spoke to in 2011, investing in Australian companies was just something they hadn't been exposed to or even considered. If you have a bunch of unknowns involved in investing in an Australian entity, and you can make them all disappear by simply having the company move to the US, then that's what your natural inclination will be ... it's in the too hard basket; invest in a US entity instead."

Aside from the company's positive experience with 500 Startups, an early stage seed fund and accelerator program founded by PayPal and Google alumni that offered them access to mentors and potential investors, Downie said that being in the US was difficult. It was nonetheless a "tough call" for the company to remain based in Melbourne.

"For us to go to 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," Downie wrote.

He acknowledged that while the US opened their eyes to so much information, the environment is not for everyone, noting that the same experiences can be somewhat re-created in Australia -- it's just a lot more difficult.

"The thing is, there's a bunch of really smart people here in Australia, but they're very hard to find. In the US, it's much easier to have a chance meeting with someone who can help you. That won't happen here," he said.

Downie said this is mainly because the local startup community is "quite insular" compared to the US.

"It's spread across three states instead of along one 80-kilometre stretch of highway. There's no central mass where you can throw yourself into, and just get immersed in that culture. That can be good and bad: It's less distracting, but it's also much less welcoming."

Dowie added that despite the difficultly of finding support in Australia, improvements are being made, starting with meetups such as Lean Startup, Silicon Beach, and StartupVic in Melbourne, as well as co-working spaces including Fishburners and York Butter Factory. He also added that there are a number of government grants that are "great supplements, which go some way towards making up for the lack of funding options" in Australia.

"There are only a few startup accelerators that take in maybe seven to eight companies each per year here, compared to dozens of incubators taking in hundreds of startups annually in the US. In the same time that Startmate here have incubated 40 companies, 500 Startups have incubated over 1,000.

"The discrepancy in angel and venture capital funding is similarly huge. If you're looking for funding, Australia honestly isn't a great place to do it. It's definitely improving, though. In any case, good companies will find money no matter where they are founded," he said.

Downie listed the likes of Atlassian, BigCommerce, Campaign Monitor, 99 Designs, Envato, Scriptrock, CultureAmp, Bugcrowd, and Buildkite as proof that Australian startups can be successful.

Downie noted that given the lack of capital funding in Australia, it forces Australian startups to generate new and creative ways to achieve growth.

"It also means that founders here are very much focused on becoming sustainable businesses far earlier than our US brethren. You know you can't just go out and raise another round to get you through, you have to grow a genuinely profitable business if you want to be successful. In a strange kind of way, our lack of resources is actually our biggest strength," he said.

Downie reiterated that the decision to stay in Australia was the best the company made, but hopes to be able to look overseas for expansion opportunities later down the track.

"For us, when the need arises, we'll certainly open offices in the US, and probably also in Europe and Asia; that's something that will very much be driven by customer need, though," he said.

"For now, at least, there's nothing that we can't do from here in Australia, and for most of our customers, they have no way of even knowing we're sitting in Melbourne right now."