Startup Hubs Around the World: Sydney
The City of Lights. The Land Down Under. The Outback. Sydney, Australia is located on a continent of intrigue and wonder. For over two hundred years, the city has been establishing itself as a leader in culture and diversity, and has aspirations of becoming one of the world’s top startup hubs. There is a long history of entrepreneurship in Sydney; from its earliest beginnings it has been the home of individuals who seek to change the way things are done. This tradition has continued into today and can be seen in the listing of companies who call Sydney home.
To discover what makes Sydney attractive to entrepreneurs, 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.
As one of the world’s premier tourist destinations, Sydney has a rich and varied culture that appeals to entrepreneurs.
Located on the south-eastern side of Australia, Sydney surrounds one of the world’s largest natural harbors. The natural beauty of the city, along with its historical and cultural attractions, has drawn people to the city since the late 1800’s, and the metropolis continues to thrive.
For the entrepreneur who is concerned about transportation, Sydney has amassed a system of transport that is one of the world’s most efficient and useful. With its coastal location, the city is a port city with several shipping ports and cruise terminals along the city’s edge. However, the main form of transportation within the city is the motor vehicle. Extensive highways and roads allow for access to all parts of the city, and major highways serve to connect Sydney with the rest of Australia. Public transportation services are provided through trains, ferries and bus transits, efficiently covering Sydney with Australia’s largest public transportation system. There is one international airport that services the city, although plans are underway to add an additional airport in the future.
Advantages of choosing the city
Sydney is one of the most multicultural cities in the world: with a population of over 4 million people, the city is a cross-section of nationalities, representing over a dozen countries and over 200 different languages. Visitors to the city are often amazed at the diversity encountered in the city. For the entrepreneur, this diversity means a broader scope of perspective that enhances the work of the startup. The attractiveness of Sydney to a variety of cultures ensures that skilled workers in a broad range of fields will be comfortable living and working in the city.
The city is home an impressive number of cultural offerings including the Sydney Opera House, the Botanical Gardens, the Sydney Tower and a host of sporting teams. Extra-curricular activities are an essential part of the livability of a city, and Sydney is rich with opportunities for rest and relaxation. Nestled among the homes and businesses are an array of green spaces: several national parks (including the second oldest park in the world), gardens, local parks and open spaces. The city is full of opportunities to enjoy the natural beauty of the area.
When establishing a startup, one of the important features to consider is the financial and legal ramifications and incentives. Can Sydney support the economic needs of an entrepreneur and create a locale where innovation and design are championed?
There are several incentives that the government can offer to increase the attraction of a city. One such incentive is in the area of employee payroll and benefits. For an entrepreneur, there is often a limited amount of funding, but high hopes for future success. Traditionally, then, the startup offers ‘employee shares’ in the company. Consider a company that needs highly technical employees. They offer their employees an annual salary of $50,000, in conjunction with $50,000 in employee shares. These shares are an attractive lure to designers and developers, and help to encourage longevity and loyalty to the startup. However, recent regulations in Australia have changed the way employee shares are taxed, creating a situation where the employee share has become virtually unusable.
At present, employee shares are taxed immediately, creating an expensive and lackluster incentive to the startup that needs employees. Many countries tax shares when there is a financial benefit; for the startup this could be five to ten years down the road. Instead, Australia places the tax at the moment that startups are most in need of funds and employees – making it less likely that the company will seek personnel in Sydney.
New research and development tax incentives are helping to generate a growing tech market in Sydney. The guidelines for this tax incentive provides for substantial tax relief for companies in the research and development sector – which can cover anything from gaming solutions to preschool development software. Providing these incentives can help to level the playing field for the startup just venturing into their first few years of business, and can be a large motivating tool for entrepreneurs considering working in this market.
By continuing to increase the number of tax incentives for startups, Sydney’s appeal to entrepreneurs will continue to grow. In recent years, the number of Sydney entrepreneurs who are leaving Australia for other, more welcoming startup markets has become large enough to cause concern. This ‘brain drain’ should be alarming to the government of Australia who claims to be interested in the growth of startups. Finding ways to encourage young startup entrepreneurs to stay in Sydney is imperative if the country wishes to continue to develop innovative design and economic growth.
A recent upgrade to the Australian Department of Industry has streamlined the process of opening a business in Australia. The new method allows for a consolidated and convenient network that eliminates red tape and makes the startup process easier.
The noticeable absence of a startup hub zone is a disadvantage to the city of Sydney – the startups are scattered abroad through the city, with no unifying space. The creation of a centralized zone would improve the attraction of the city, in addition to providing for the resources and support that entrepreneurs need to flourish. The addition of legal incentives such as relaxed zoning requirements, improved filing processes and assistance in gaining investors would all help to establish Sydney as a startup leader.
Perhaps one of the most notable reasons entrepreneurs in Sydney give for establishing their company elsewhere is the availability of funding. Startups seeking funding within Sydney may obtain funding from four to five investors, and still not match the amount of funding they’d receive in Silicon Valley from one investor. By sheer size alone, the country is at a relative disadvantage over larger countries that have numbers on their side: a larger population provides a greater number of potential investors. This does not mean that funds are not available, nor does it mean that investors are unavailable in Sydney. It simply means that the entrepreneur who wishes to establish in Sydney must know where to look for the funding they need.
In 2012, Australia’s investor opportunities were made up of twelve incubators, 500 angel investors and ten angel groups. With a limited amount of funding available for the early stages of a startup lifestyle, there is a high amount of competition. The most common funding is done through angel investors or Micro-Venture Capital funds. While there is no direct correlation between the amount of funding available and the success of startup companies, there is a relationship between the continued growth of an area’s entrepreneurship and the number of potential investors. As more investors fund successful ventures, it attracts the attention of other investors, which attracts other entrepreneurs, and the cycle of growth continues. The relatively low number of investors in Sydney, while not responsible for the startup culture, does contribute to the lower level of enthusiasm and involvement of entrepreneurs.
In addition to seeking investors, there are a number of grants available to entrepreneurs, especially in the early, startup phase. The downside to grant funding is the immense amount of paperwork, qualifications and logistics involved in obtaining (and keeping) the money. Startups are generally hampered by limited employees who are focused on developing their product and do not have the time or experience to wade through the necessary paperwork. Streamlining the process or creating a class of grants specifically that takes into account the early stages of startups is another area that the government of Sydney could improve upon. Recent budget cuts have reduced the number of grants available, making this funding opportunity even more difficult to obtain and frustrating entrepreneurs who most need the assistance.
What Is Life Like As An Internet Entrepreneur In Sydney With Aurelius And Justin
Within the city of Sydney is a network of resources that can assist the entrepreneur in their reach for startup success.
SydStart is one of Sydney’s premier startup organizations, offering support, resources and community for local entrepreneurs. Hosting an annual startup conference in Sydney, SydStart’s recent gathering brought together 1,000 entrepreneurs, developers and innovators to collaborate and learn. Specialized meetups, workshops and coworking opportunities can offer the startup entrepreneur valuable support at every stage of growth.
Startup Smart is a resource specifically designed for the startup community. It offers news, resources and advice for the entrepreneur based in Australia. A valuable tool for the startup company, it can provide connections through meetups, trainings and networks that the startup community needs to remain innovative and relevant.
Innovation Bay, Aurelius Digital and Blackbird Ventures are all investment funds based out of Australia. These firms, mostly managed by home-grown entrepreneurs, understand the Australia market and have reached success in their own companies. In an effort to bolster the growing startup culture, they have begun to invest into the companies in the Australian markets – many of whom are based in Sydney.
Entrepreneurs who are looking to hire trained developers and designers benefit from the number of colleges and universities in Sydney. Engineers, developers and coders are in short supply, so the startup firms in the city are looking towards the universities to provide the necessary manpower. Specialized training, business classes that are geared towards entrepreneurs and other educational resources are all imperative for the startup market in Sydney.
The startup market in Sydney is wide, with little specialization. Primarily due to the recent surge of entrepreneurship, there is no clear leader among the types of startups; popular meetups vary from agricultural to fashion.
The tech market is continuing to grow as the global marketplace changes. The explosive growth of the internet has allowed for immense growth in the area of ecommerce. With mobile development growing at an astronomical rate, entrepreneurs are taking advantage of the challenges the world faces and developing new technologies.
Startups that focus on technologies such as e-commerce payment options, personal finance applications, security and mobile applications are all areas that entrepreneurs can hone in on.
A concern about the startup market in Sydney is the lack of influence the startups have on the market outside of Australia. Essentially surrounded by water, Sydney is at heart a beach town. The laidback, relaxed attitude and atmosphere that a beach town generally possess is evident in the Sydney lifestyle. Many people attribute the lack of scaled startups coming out of Sydney to this mentality.
A relatively recent approach to entrepreneurship in Sydney is the dual-location headquarters. Frequently you will find that entrepreneurs are maintaining offices in Sydney, as well as another startup location around the world. Typically, the secondary location is Silicon Valley, but there are other locations that have shared headquarter locations. The purpose of the dual office is two-fold: location and money. Beginning a new corporation can be overwhelming. Trying to manage a new company while adjusting to a new location can be excruciatingly difficult.
By maintain their main headquarters in Sydney, entrepreneurs can take advantage of the benefits of location: easy accessibility to family and friends for funding, support and assistance as needed and a known environment is easier to navigate. Establishing a secondary office in a different location provides the access to funding and outside perspective that the entrepreneur can also use.
Kinderloop is an example of this type of startup strategy. Kinderwood offers parents and daycare providers with a secure method of communicating via the internet. The simplified Instagram-like program gives teachers and caregivers the ability to post pictures, videos and class information on a secured network. Parents receive instant notification; schools have a detailed history of parent communication. With an office in Sydney, Kinderloop sought seed funding, and acquired angel investor funding to propel them to the next startup level. The company then established offices in Silicon Valley to seed additional funding and developers. This global approach to startups allows the entrepreneur to avoid the heavy taxes associated with hiring employees in Sydney, and gives access to the wider funding range of Silicon Valley. So far, this approach has been working – more and more companies are beginning to maximize the benefit of holding dual entrepreneurship citizenship.
STARTUPS TO WATCH
BigCommerce: An e-commerce platform, BigCommerce creates online stores, helps companies build their brand and market their services for a flat $25 monthly fee. Remarkably, they will have a company ready for their first e-commerce sale within 48 hours – and have done so for over 40,000 customers since they began.
Atlassian: Designed for software designers, Atlassian offers innovators the tools they need to design, build and launch software. Specifically geared towards the teams that develop software, they have provided their services for companies such as Facebook, NASA, Netflix and eBay.
FoodOrbit: Enabling chefs and restaurants to buy and sell locally sourced food, Food Orbit helps provide fresher, environmentally friendly food sources.
BubbleGum Interactive: An independent game developer, BubbleGum Interactive provides mobile and gaming solutions across multiple platforms.
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