Tuesday, 11 December 2018 13:42

Tips for start-ups from a Silicon Valley CEO

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Instaclustr CEO Peter Nichol (right) with CTO Ben Bromhead Instaclustr CEO Peter Nichol (right) with CTO Ben Bromhead

Managed data platform provider Instaclustr's chief executive Peter Nichol has some advice for Australian tech start-ups.

Established in Canberra in 2013, Instaclustr now also has offices in Silicon Valley (where Nichol is based) and the UK (serving the EMEA region). The Canberra office is still the home of the development and support teams.

Being based in Australia "is a strategic advantage for us", he said. Canberra is "a great source of talent", and is a more cost effective location that Silicon Valley, partly because staff retention is less of a problem.

Furthermore, the company can take advantage of government R&D grants, and delivering support from Australia is very effective for cultural and language reasons.

Early investors in Instaclustr were Australian (ANU Connect Ventures, Bailador, and Our Innovation Fund), but when the company raised $15 million from New York-based Level Equity it had to set up a US holding company.

That said, Nichol says "the common wisdom [about moving to the US] is wrong" in that technology companies don't have to move to the US at an early stage. Instead, they can scale and build their reputations within their home countries, whether that's Australia, Israel, or the UK.

Some aspects of day-to-day business are easier in Australia than they are in the US, he said, and Australia has a great talent pool and a spirit of entrepreneurship.

Perhaps surprisingly, "we found it a lot easier to raise money in Australia in the early stages", he said, partly because Australian investors have a more reasonable view of success and are more prepared to put money into early-stage companies.

It is sometimes suggested that Australians who have made their fortunes from building and then selling technology companies are inclined to re-invest the proceeds in relatively safe areas such as real estate. But Our Innovation Fund's line is "founders backing founders", and its founding partners include David Shein (founder of Com Tech Communications, which was acquired by Dimension Data) and Jerry Stesel (founder of international student payment service NexPay).

You can attract initial investments on the basis of an idea in Australia, said Nichol, although in Silicon Valley a big idea can attract big investment.

But as a business grows, it becomes increasingly important to find an investor that matches its profile, and that narrows the field, he said. Consequently, Instaclustr's second and third funding rounds were harder than the company expected.

"Bigger customers tend to be stickier" (less inclined to churn to other providers), so that's where Instaclustr focusses its efforts.

Its 120-odd customers include two leading Wall Street banks, and major games companies such as Epic Games (Fortnite) and Electronic Arts. Other examples can be found in the IoT, social media, security and AdTech sectors, Nichol said. Those in Australia include Atlassian, BlackBerry, IBM and Philip Morris.

The writer attended AWS re:Invent as a guest of AWS, and interviewed Peter Nichol during the event.

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Stephen Withers

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Stephen Withers is one of Australia¹s most experienced IT journalists, having begun his career in the days of 8-bit 'microcomputers'. He covers the gamut from gadgets to enterprise systems. In previous lives he has been an academic, a systems programmer, an IT support manager, and an online services manager. Stephen holds an honours degree in Management Sciences and a PhD in Industrial and Business Studies.

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