Australia’s burgeoning tech scene seems to be leaving its mark on the world stage
When Melanie Perkins pitched her idea to build a graphic design platform for casual users to investors, she was rejected more than 100 times and told it couldn’t be done in Australia.
But the 34-year-old entrepreneur persevered, and a decade later Canva is worth $15 billion and is part of a new wave of tech companies in the country with global ambitions.
“At the time, people thought you could just build businesses in Silicon Valley and not invest in anyone they couldn’t go and visit regularly,” said Perkins, who grew up in Perth, Western Australia.
“Things have changed drastically. We are really fortunate now to have a thriving tech ecosystem and so many amazing venture capitalists thinking about how Australian companies can succeed on the global stage.”
Australia’s growing stature as a tech hub received a boost in August when Square, the US payments group led by Twitter founder Jack Dorsey, agreed to buy the Melbourne-based “buy now, pay later” service provider for $29 billion. The deal, if approved by shareholders and regulators, would be the largest acquisition in Australian history and raise the profile of local startups among global investors.
As part of the deal, Square will maintain a secondary float on the Australian Securities Exchange (ASX), which markets itself as an international hub for technology listings.
“We will have a global technology company in our benchmarks. This will make a lot of people sit back and take notice and look at ASX as a technology site,” said Max Cunningham, CEO of the exchange’s listing group.
The S&P/ASX All-Technology Index has grown to 79 companies — 17 of which are based outside Australia — since its launch in February 2020.
Optimism surrounding Australia’s tech sector has been fueled by the Covid-19 pandemic, which has driven more companies online, and by very low borrowing costs.
Atlassian, a Sydney-based software company that makes products for other programmers, helped put Australian technology on the global map when it listed on the Nasdaq in New York in 2015. It has doubled its valuation and is now worth $83 billion.
Atlassian founders Mike Cannon-Brooks and Scott Farquhar are leading the development of a technology group in Sydney. In August, planning approval was given for Atlassian’s new A$1.4 billion, 40-story timber tower headquarters, which will anchor the new Tech Central district centered around the city’s main train station.
Cannon-Brookes and Farquhar have created venture capital funds to support Australian startups.
Australia-focused venture capital fund managers have secured A$1.3 billion in new commitments for 2020, nearly double the value of the previous year, according to the Australian Investment Council. This has enabled local tech groups such as Airwallex, Rokt, Safety Culture, Culture Amp and Canva to raise funds with high ratings.
Rick Baker, co-founder of Blackbird Ventures, added that investment from the A$3.1 trillion Australian pension sector and from abroad is also revitalizing the sector. “American venture companies really care about Australia and have learned how to make investments via Zoom,” he said.
Blackbird was an early investor in Canva and Zoox, a self-driving startup that Amazon bought last year for more than $1.2 billion. Last year it raised a fund of A$500 million.
The drive to transform Australia into one of the region’s leading technology hubs has attracted some strong backers. Groups including Google, Atlassian and Afterpay in August formed the Australian Technical Council to lobby the government.
“Our focus will be on policies and actions that will support growth and domestic and global investment in the Australian technology sector,” said Robin Denholm, Chairman of the Board and Tesla Group of American Electric Vehicles.
Not everyone is convinced that Australia’s tech boom will continue, which points to massive valuations of companies, many of which never turned a profit.
Some point to the inclusion of Nuix, an Australian data analytics firm, on ASX in December. Its shares have since fallen by nearly half after it cut its revenue forecast for 2021.
There are also doubts about whether Australia, a country known for its massive mining industry rather than fostering innovation, can attract global talent.
A Singapore venture capital executive said the country is struggling with a small domestic market and intense competition, which has been exacerbated by the coronavirus restrictions on international and domestic travel.
Australia’s promotion of first-world laws aimed at breaking encryption and regulating social media has raised concerns that the government is indifferent to the tech sector.
Atlassian co-founder Farquhar warned in January when Canberra published a bill that would force Google and Facebook to pay news publishers for their content, “The technology industry and its broad benefits to society are hampered by bad government regulation.”
Baker, of Blackbird Ventures, also highlights the cultural differences between startup founders in Australia and the US, saying the former need to raise the bar for their ambition. Australians tend to be “quite laid-back and shy”.
However, Canva is proving that it is possible to go global from Australia with its web-based platform that attracts 60 million monthly users. While the vast majority sign up for its free service, it’s still on track to generate $1 billion in revenue this calendar year. The company has grown to 2000 employees.
“The great thing about rejection[for funding]. . . “It was really helpful to improve our strategy and refine the way we formulated the idea and vision,” Perkins said.
“The success of Australian companies on the global stage helps people think about the possibilities and start their own businesses,” she added.
Additional reporting by Mercedes Roel in Singapore