4 August, 2016
Our discussion began with an apology.
StartupAUS CEO Alex McCauley and I were on the Melbourne leg of our national Crossroads 2016 tour, meeting with startups, investors and community partners in the lead up to our Crossroads community event at Inspire9.
We had been enjoying our tour of York Butter Factory (YBF) and asking copious questions about its history and operations, only to discover that three CEOs of growing Melbourne startups had already arrived and were patiently waiting for us upstairs.
Fortunately, we dived straight into a fruitful discussion about their stories and the story of Australia as a startup nation.
Leigh Sherman – pantreeco
Our first participant was Leigh Sherman of pantreeco. Leigh won the 2013 Startup Weekend Melbourne event with a pitch for a business that would digitise the manual ordering process in hospitality.
“Each cafe or restaurant is looking at 10-20 relationships with all kinds of suppliers, fragmented across email, SMS and phone. We’re looking to bring these guys into a digital space.”
Leigh sees a world where this kind of ordering can become far more simple and empowering, for owners and staff alike.
“Once the orders come through, they can plug them straight into Xero and save hours of admin each day. And instead of the manager taking responsibility for all of the partnerships, you can have the barista responsible for the coffee supply, for example.’
Pantreeco have now moved out of YBF, and have grown to a team of 10. Their initially invite-only platform launch is already seeing millions of dollars worth of orders each month.
Harry Chemay – Clover
Harry Chemay was our second guest. The mild name of his business, Clover, contrasts fantastically with the description of its service – a robo-advice platform.
Clover aims to use technology to disrupt the financial planning industry. He sees a world where people can set financial goals and use an automated financial planner to do the maths and provide a series of options for reaching those goals – as simple as ordering a pizza online.
“It’s about reducing the complexity. There’s lots and lots of layers between the customer and the end product. Part of that is regulation, but part of that is self-serving from the industry, so we’re trying to cut down on that.”
Plus there are some additional benefits to a neutral advisor.
“Financial planners know what their clients say, robo-advisors know what your clients do. They can see when you’re logging in, and how often. We can send messages at times of stress, or to provide additional counsel.”
He sees a way to reach young people – a sector essentially ignoring financial planning as it exists now.
“Part of the frustration I had is that you already had to be wealthy to see a financial planner. What’s the point of that?
“If you want to travel, save for a deposit for your house, save up for a car or a marriage – we want to give you options for how you reach those goals within a certain timeframe.”
Harry’s pitch must have been persuasive – he picked up some interest from our third and final contributor, George Hartley. After Harry declared that Clover were only weeks away from launch, George was completely on board.
“Do you have a closed beta? You guys need to put the word out, I’d join it!”
George is no stranger to incorporating technology into his life. He has founded two tech companies in very different fields, and has an obvious love for both of them.
His first was Bluethumb, a marketplace for visual artists. While Etsy is a good coverall for artistic endeavours and Red Bubble does amazing things with prints, there wasn’t a good option for selling high quality original art.
“I’m friends with a whole bunch of artists, growing up in Adelaide, and it just seemed insane that they couldn’t sell their art direct online.”
The marketplace grew slowly at first, but as it started to trend up, Bluethumb attracted investment and now is on a pretty steep growth curve.
“That was December – we were able to hire a whole bunch of people and since then we’ve been growing 20% month on month. We represent 2500 artists, just about half of them have sold at least one piece through us. Some of them are now professional artists and at least a couple have sold over $200,000 in a year, which is a fantastic result for people who were essentially hobby artists.”
George moved out of the operations of Bluethumb in order to work on his new business. SmartrMail is a simple app for use on ecommerce sites that customises email marketing for their customers. It takes data that’s already collected by those platforms and edits email marketing to include products and services that it knows the customer is interested in.
“We launched the beta at the start of 2015. We’ve sent 129 million emails, and made our customers over $11 million. At least, that’s what we’ve worked out from the data we’ve got, comparing their old campaigns with ours.”
Australia as a startup nation
George kicked off the discussion on Australia’s startup platform. “It was you guys pushing for grabbing the SEIS and EIS from London and installing it here, right? That’s a really good move, I think.”
Alex McCauley, CEO of StartupAUS, couldn’t contain himself. “It’s done! Came into effect just a couple of days ago on July 1.”
George laughed. “Yes, we know! We were genuinely looking at going to the UK at the end of the last year.”
With some direct exposure to the work behind that result, I understand Alex’s enthusiasm. This policy, tax incentives for angel investors looking to invest in startups, was a lot of work in the making. It was originally laid out in the 2015 Crossroads report, along with the research backing its implementation. Then a policy hack followed to iron out the details, a letter to then Minister Christopher Pyne and, to the government’s credit, a relatively swift result saw it come into law on July 1 this year.
Since then, there’s been a frenzy of activity, with some startups like Snappr directly crediting the tax incentives as a key factor in their successful funding round.
Leigh brought up another common feature of tech startup life. “Right now we get phenomenal returns on our R&D tax incentive.”
Alex refers to the R&D tax incentive as Australia’s secret weapon. It is very powerful for allowing startups to develop their products while keeping themselves afloat. In our consultations with startups, just about all of them use it. When Alex discusses the possibility of StartupAUS taking the position that it should be paid quarterly instead of yearly, he’s interrupted by Leigh – “A quarterly refund? That would be… interesting. That would be a game changer.”
Supporting the ecosystem
Harry’s first employee was hiring an intern full time who was straight out of uni, and has recently taken on an exchange student from Melbourne Uni who is helping with algorithms for his software. “That needs to be fostered – enthusiastic young people looking to change the world, it’s a huge win-win here.” Leigh found a tech student by participating as a judge at Startup Weekend.
Accelerators and incubators are always at the top of the agenda of these discussions – we know that all of the successful startup districts globally have dense startup ecosystems, and the guys here are glowing about the effect they’ve experienced from the community.
“You lean on a place like this. I think I’m a good example of why hackathons are a good experience, why this place (YBF) is necessary, why you guys are necessary. I’ve had help from all over the startup ecosystem.”
George ended up getting a $100,000 credit for his service costs via his association with York Butter Factory. “We would have been underwater. That was an insane thing that I wouldn’t have expected.”
Technology and its effect on the future
It’s hard not to be struck by how all these businesses are united in community and technology even as their industries are so varied. Logistics, finance, art and marketing would seem to have very little crossover, yet all four are being transformed by digital automation.
That’s what the startup game is about, and why we get so many common threads – in this discussion and in our consultations with startups right across Australia. And it’s also why key policies can have such a broad effect – they all tend to have similar needs to grow and scale.
Technology will reach just about every industry there is, and help in similar ways – automation, efficiency, customisation. The story of each of these startups is exciting for Australia’s future.
Since releasing our Economy in Transition discussion paper, we’ve seen a lot of the conversation centred around disruption and change, but the wider picture is right here. These are the sorts of companies that our children will work in and work with. Building them – and keeping them – here in Australia is what will make our future strong.
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