23rd February, 2017
While there’s a growing source of capital available to new businesses in Australia and New Zealand, a lot of startups head to Silicon Valley to chase investors and advice – and why not?
Silicon Valley is where potential unicorns are born virtually every day, and they’ve seen everything.
But it turns out that Americans are just a bit different to Australians and New Zealanders.
What are those differences and what lessons can Aussie and NZ startups heading to Silicon Valley learn?
When plane travel subscription service Airly headed to the US, co-founder Alexander Robinson said it was to access new capital.
“We wanted to stay in Australia…so we looked at Australian VCs and funding options first, but the appetite here isn’t what it is in the US,” he told PauseFest.
As he and Airly talked to different investors, he found that the US could be a double-edged sword.
“The first question US funds asked was ‘are you a US registered company?’” he told PauseFest recently.
“We said we weren’t, but we could be – but that brings a whole host of governance and regulatory issues around basing yourself over there and launching in the US.”
Learning another set of rules and regulations and then basing yourself on the other side of the world proved a bridge too far for Airly, leading them to set up down under.
While there may be a lot of cash floating around the US and appetite to use it, there may be conditions attached.
When Elevio co-founder Chris Duell headed stateside to talk to potential investors and other founders for research purposes (it already had funding commitments from Australian investors) , he found Americans had a certain…swagger about them.
“Americans being Americans and the way they carry themselves…they’re not full of themselves, but by nature they’re more confident with everything,” said Duell.
“When we walk in we’ll say something’s ‘pretty good’, and they read that as ‘it’s s**t’. It’s a totally different way of speaking.
“While we were there [it sounded like] we were talking ourselves down, even though we weren’t.”
He said part of it was a natural American confidence, but part of it was down to the expectations of funders.
“We learnt really quickly that they’re expecting so much more,” said Duell.
“We went over there and we said ‘here are our goals and what we want to do – and this is where we think we could be’. They said ‘who cares?’.
“They don’t have the time because they’ve got a thousand other companies that can come in.”
The default position of startup hopefuls in the US is ‘we’re going to disrupt a billion-dollar industry’ rather than ‘I think we’ve got a pretty good trajectory on our hands’.
It’s a subtle difference, but one that threw Duell and Elevio through a loop.
“We ended up stopping speaking to investors because we weren’t ready to speak that way. We couldn’t bring ourselves to talk ourselves up that much – it was unnatural,” Duell said.
When Australian and New Zealand companies fail, they tend to want to save face.
In America and particularly Silicon Valley however, it’s not seen as a big deal.
Kalin Kelly, partner at 357 Investments, started out in San Francisco as a fund manager with $400 million under management by the time she was 24.
“To me that was crazy and way over my head,” Kelly told PauseFest. However, she knew that if she failed, she would fail on her feet.
“In San Francisco we have this mentality where it’s easier to be [accepting of failure] because so many other people are failing with us,” said Kelly.
“Everyone’s trying to start something and it’s hard, and we have this community of support so people don’t look down on it.”
She said a culture of failure and re-birth had wound its way through the startup community in the US, and while there’s a gradual acceptance of failure as a natural part of success in Australia, we aren’t there yet.
“It’s failing together,” said Kelly. “[And] knowing when you fail … someone’s going to help you back up.”