Australian digital entrepreneurs are alive… But are they well?

At the end of 2013 I was lucky enough to attend an ‘Angel Dinner’ put on by Innovation Bay at a restaurant in Sydney’s inner-city ‘heart of hip’, Surry Hills. The premise of the event is that entrepreneurs, young and old, have a chance to pitch to a ‘community’ of investors and interested types (TMT strategy consultants included) in a Dragon’s Den format. Innovation Bay supports the pitch night by providing a platform where 10+ entrepreneurs can spruik their ideas with a short video. Attendees vote for their favorite and four entrepreneurs attend the dinner.

The crowd mingled over cocktails and nibbles then sat down to a communal (social?) meal to hear the pitches one after another and vote with Monopoly money on which they would place their bets. Whilst Monopoly money was used as a proxy on the night, there were legitimate angels in the crowd who no doubt had their eye on a potential investment. The four on show were:

Drawboard started by an ex-Deloitte consultant Alister Michener who had identified with his co-founder Mat Barnes a growing need for annotating PDFs in the engineering industry. He confessed he actually used it on an engagement with a client who was so impressed they bought licenses from him. This spurred him into commericalising the product further.

Vinus whose founder, Alex Martel an ex-Deloitte consultant, implored the group to take a photo of the wine and watch his wine identifier app match the wine and suggest new wines to try and buy. A great concept except that the operating model requires manual matching performed offshore of labels to wines. He may have required extra staff to cope with the volume of match requests at the dinner.

Expert360 which excited me the most in terms of its applicability to the open talent economy and disruption in the consulting/expert advice services industry. Started by two Bain alum Emily Yue and Bridgette Loudon the company aims to be a digital funnel for demand in higher value technical expertise. I caught up with Emily earlier this year who said expansion plans were underway after the start up received a nice $1m injection for their round. Definitely one to watch.

Lawpath a new attorney-matching service which uses a matching algorithm to take a legal question and match it to an appropriate attorney. A client then has a 30 min conversation with the attorney. If the question is not solved users get 10 to 20% off the legal fees of the attorney. The model then charges $29 per contact – the attraction for the attorney is a potential client lead. The model, like expert360 and other service platforms, relies on the ability to match demand to supply providing unique customer experience and integration into supplier channels. Talking to a few of the angels at my dinner table, the feeling was that Lawpath CEO Paul Lupson had a winner with his concept – in so much that it had the potential to disrupt the legal market with the matching algorithm a key differentiator.

I left the night with a sense of excitement that this community is still thriving in Sydney only to be further reminded of this ground swell as I walked past Telstra’s Muru-D complex on Oxford St on my way home. Whilst each of the four entrepreneurs expressed desire for local funding and support they all professed plans to seek offshore funding and scale in overseas markets, namely the US or Asia.

It seems that the number of start ups has grown but capital investment has not kept pace. I believe a number of factors play into this including the risk appetite of investors, Australian property prices absorbing consumer capital, few tax breaks for start-ups, share option tax rules, investment in property seen as a no-brainer and ‘living the Australian Dream’, general lack of understanding of digital business in Australia (how does Facebook make money?) and no public champion or major public agenda for digital business by the Australian government.

Talk to almost anyone in the digital entreprenurial or high-tech community about models for Australia to follow and Israel is invariably the first example brought up. In 1993 the Israeli government set up the Yozma venture capital fund which has managed $220m since inception. The country has the highest spend on R&D than any other OECD nation. Israel’s success can be mirrored in Australia. What is required here like ‘Silicon Israel’ is a combination of factors including investment in education on digital/technological business, access to engineers of high-tech, an adjustment of risk appetite (failure is as likely as success) and a public political agenda.

The latter in the form of the creation of a ministerial portfolio of Digital/High Tech would be a significant step forward, providing public emphasis and amplification to an under served industry. In the meantime the community will no doubt continue to thrive in the grass roots pockets of inner-city centres only to flee Australian shores for greener capital pastures.

 

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