Smaller than its counterpart Sydney, Melbourne, Australia has a thriving and growing entrepreneurial community that has a huge impact on the nation’s startup market. While they are ranked near the bottom of most startup market lists, they are actively working to improve their standing and attract both entrepreneurs and investors.

Startup Hubs Around the World: Melbourne

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As we discover what advantages Melbourne has over other startup cities, we’ll explore 1) the location, 2) the tax incentives, 3) legal incentives, 4) investors, 5) local resources, 6) specialization of the area, and 7) startups to watch.

LOCATION

Geographical Benefits

Tucked along the southeast coast of Australia, Melbourne is Victoria’s capital city. Its location on the mouth of the bay provides a unique mix of geography and offers residents a range of activities.  As a port city, Melbourne has access to the world through the ocean, while the four airports connect the country to the rest of the world quickly and easily.

Perhaps in part due to the remote nature of the city, Melbourne has been a little-known secret on the continent of Australia. Its geography has helped to shelter the city’s inhabitants from the steady onslaught of foreign visitors – Melbourne tends to look inward for strength and resolve. This characteristic, while difficult to understand at first, is one of the most useful benefits the city possesses. Self-resilience and determination can both be an important trait for a company to establish.

The central business district of the city is home to startup incubators and co-sharing spaces that help to bolster the startup market in the city. With dedicated workspace and living space, entrepreneurs are free to innovate and design without having to worry about finding safe and appropriate facilities.

A beach town, Melbourne offers sweeping coastlines for the entrepreneur to enjoy and appreciate, providing startups with a place to unwind and relax after a long day of coding or developing. The business district has skyscrapers and office buildings that house thousands of companies in the economic hub, acting as a reminder of the potential for growth.

Advantages of choosing the city

Compared to startup markets around the world, Melbourne is a relatively small city. With a population of about 4 million people, the city is large enough to provide a range of resources, yet small enough to feel manageable. A high standard of living makes the Melbourne scene attractive to entrepreneurs – there are a range of amenities to take advantage of and the environment of the city is lively and welcoming.

With four airports spread through the city, and a network of highways and roads that connects Melbourne to other cities, the infrastructure of the city is solid and useable. Public transportation is available through taxis, water taxis, trams and buses. The entrepreneur who wishes to give their pitch to others will have ample methods of transport to choose from.

Cultural opportunities abound, as well as a wealth of outdoor activities. Green spaces (parks and gardens) are scattered throughout the city. There is no shortage of things to do in Melbourne, and the temperate climate makes it possible to use the outdoors on a regular basis.

TAX INCENTIVES

The Australian government has developed a series of tax incentives that provide entrepreneurs with a number of R&D tax credits as assistance. Eligible projects are able to apply annually for the credits, and the Australian government business website has information regarding the various credits that a company may be eligible for.

Considered a broad based entitlement program, the R&D tax credits can be used by innovators in any industry, and by companies of any size. Innovation eligible for the tax credits includes the creation of new products, as well as creating new processes or services. Consulting with a tax professional will enable a company to determine if their company’s products or services are eligible to take advantage of this tax credit.

Recent changes to the tax laws have made it difficult to use share options as a ‘lure’ to attract new talent to a company. Without the ability to effectively use these lures, it is cost prohibitive for a company to offer share options to new employees. These lures are an important method of offering future growth and potential profit sharing by a cash strapped company. Without the use of these, companies cannot compete with other cities and companies around the world in their effort to attract top talent.

LEGAL INCENTIVES

The Australian government has established a website to streamline the process of opening a business in Australia. Startups in Melbourne have taken it a step further by establishing themselves as authorities in the legalities of entrepreneurship. With the establishment of Startup:Melbourne, students are given the opportunity to apply for initial funding or continue working through the stages of growth until they have mastered their products.

Putting the mentoring programs already established in Melbourne to work is a smart and effective method of finding out the legal incentives to starting a company. By using another’s experience as a guide, entrepreneurs can navigate the waters of the unknown safely. To ensure that the legal ramifications of establishing a business in Melbourne are properly taken care of, entrepreneurs should seek the advice of legal counsel. The legal system in Melbourne is relatively easy to navigate, so startups can save money by only using legal counsel for ensuring paperwork is filed correctly, etc.

The creation of further legal incentives would add additional reasons for startups to select Melbourne as their hub.

INVESTORS

Melbourne faces a disadvantage over Sydney in size as well as the number of available investors. Recent years have seen an influx in investors and venture capital firms that are willing to take a chance on the startups. Some of the new investment opportunities include:

Rampersand: Backed with a $6 million investment fund, Rampersand is geared towards the early stage entrepreneurs who desire to have funds. Specializing in Australian based startups.

Adventure Capital: Focusing on the digital and online systems, Adventure Capital is an early stage funding group that has recently begun to specialize in the startup marketplace.

Scale Scale: An entrepreneurship that focuses on women, Scale Scale is an angel investor network that is inspired by the US startup, Golden Seeds.

Once a company has moved beyond the angel investor stage, incubator firms are available for additional funding.

Angel Cube: $20,000 seed funding available for startup teams that are moving the company to the next level. In addition to funding, mentoring is available by some of Melbourne’s leading entrepreneurs.

While this list of investors is far from exhaustive, these are some of the top investors in the city. The lack of available funding is one of the disadvantages to Melbourne’s startup marketplace. Startup leaders in Melbourne’s startup ecosystem are actively pursuing investors and encouraging other cities to follow suit.

LOCAL RESOURCES

Melbourne is the cultural, arts and fashion capital of Australia. This vibrant city is bursting with creativity – an environment that breeds success in entrepreneurship and innovation. Home to a collection of great colleges and universities, the city attracts creative individuals and is primed to capitalize on this artistic bent.

With just over 4 million people in the city, Melbourne is a big city that likes to act like a small town. Relationships are a high priority and there needs to be trust between individuals before any type of dealing can be accomplished. This small town ideal of doing business over a cup of coffee is a strength that is not easily found in other cities. Startups are typically relational in the beginning – with limited experience and history; entrepreneurs are often banking on the strength of a personal relationship to start a business relationship with a customer. Establishing in a city that values that type of interpersonal dealing predisposes the company to be able to ‘fit’ into the city’s mold.

Startup hubs within the city are already in place, making it easy for entrepreneurs to find co-sharing space. Convenient and accessible health care and other services that are important to employees and their families are all fully established and maintained, providing the additional resources that make an area attractive to new residents.

A diverse marketplace offers opportunity for creativity and cooperation – whether it is in co-sharing a space or in working towards a new and innovative solution – that is rarely found in the world. The strong business community would benefit from the forward thinking of innovative individuals or teams, and would encourage the conservative businesses to focus on branding. By focusing on building a relationship, businesses are taking their networking abilities to a whole new level. When entrepreneurs take the time to develop strong relationships before establishing a business connection, the business in Melbourne understands that it is as much about the relationship as the presentation. This can be a weakness in the startup marketplace where the presentation is often the only opportunity potential customers and investors can find out about the company. Finding a balance between the relationship and the business brand can be challenging, but must be mastered if the company is to succeed.

SPECIALIZATION

Traditionally the manufacturing and innovation center of the country, Melbourne is accustomed to leading the way in the race to success. One area where they can continue to shine is the development of new and improved systems for manufacturing.

An example of this type of specialization is the Axiflux company. Axiflux is an engineering, research and development company that re-designed the small motor. With improved speed controls and more cost effective technology, the company has improved the product and adapted it to better suit the needs of the modern day. In addition, improved processing and manufacturing helps Melbourne maintain its position as a development hub. By continuing to promote this type of innovation and problem solving, Melbourne has the opportunity to develop their niche in the startup marketplace.

Another key specialization area is the development of service assistance. Whether it is simply to gather emails together in an easy to read format, or offering users an easy to navigate tool for finding the right repairman, the growing market for innovative apps and tools is an important specialization area.

There is no clear indication the direction the startup markets in Melbourne will take. At this stage in the city’s development, there isn’t a specific leader who has a taken charge of the startup ecosystem, and it may cause the latter stages to progress more slowly

Innovative solutions that relate to the already existing markets in Melbourne should be some of the first areas that develop startups. Pushing the envelope of what is possible and probable, technology-wise, is part of the creative and innovative efforts that the city already embraces. Extending this philosophy into the startup market not only shows a commitment to innovation but also to the city itself.

STARTUPS TO WATCH

The Fetch: Designed to be a source of news and information for local companies, The Fetch allows users to sign up for weekly digest emails. The weekly e-blast informs the users of events and business news taking place within the specified city. Posts include upcoming local events, startup and entrepreneur workshops, local job postings and conferences. In addition, the weekly email includes a list of entrepreneurship articles that will help the business owner grow and develop. With new cities being added all the time, The Fetch is quickly becoming one of business owner’s ‘go-to’ sources for news and information.

99 Designs: The easiest way to generate graphic design work, 99designs harnesses the power of the internet and allows you to request samples of a logo, based on the information given to the designers. Whether a company needs a logo for web pages, business cards, book covers, or t-shirt covers, the team at The Fetch will provide you with a selection of logos to try out the one that best suits the company’s need. Companies try out the logos for a week and select the best one. Once the logo has been selected, the company can continue to work with the same designer, allowing for continuity of style.

Whispir: Despite living in the digital age, companies are still scrambling to find the best ways to communicate with their customers. For many, Whispir answers the multi-faceted question about which method is most effective: all of them. In simple steps, users create interactive messages that reach their customers via email, text messages, appointment reminders and more. The communication methods allow for customers to interact or respond to the customer, based on the chosen tool. Reports provide insight into the most effective methods of communicating, allowing for the customer to adjust the company’s marketing strategy.

Native Tongue: With the increasing globalization of the world, learning a second (or third) language is an effective means of not only making yourself more attractive to potential employers, but it also creates a connection between yourself and the country you are visiting. Native Tongue is an effective teaching app to quickly learn conversational language.

SitePoint: A web developer’s secret weapon, SitePoint is a publisher of books, articles and other resources for every topic a web designer could possibly want. Video learning courses, online coursework and ‘how-to’ posts walk a web develop through every stage of design in an easy to understand format.

The city of Melbourne shows great promise as a startup hub in Australia. Attempting to compete with larger, more organized and more financially stable markets around the world can prove difficult as a city has to prove its worthiness to entrepreneurs. A startup city comparison chart listed Melbourne at 24th overall, right behind their neighbor, Sydney. To remain competitive on the global scale, Melbourne needs to address the growing need for funding in the later stages, establish better legal incentives and improve the benefits to both entrepreneurs and investors.

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