Every investor dreams of getting in on the ground floor of the next Atlassian. Invest in a few start-ups and exit with an initial public offering – it’s as easy as that, right?
The future for Australian start-ups has never looked brighter, with Prime Minister Malcolm Turnbull last month announcing a $1.1 billion innovation package, including tax breaks for start-up investors, changes to crowdfunding legislation and initiatives to turn Australia into an innovation powerhouse.
These initiatives are definitely going to help more start-ups launch and grow, and make it far more attractive for investors.
Malcolm Turnbull has made start-ups a priority. Photo: Dallas Kilponen
But investing in start-ups is still a risky proposition.
Reliable data is hard to come by for Australian-funded start-ups, due to the relatively low numbers of funded businesses and the time it takes to get a return.
In the US, Correlation Ventures released a study of 21,000 funded companies that either failed, were acquired or had an IPO during 2014-15. Sixty-four per cent of companies failed to return all the capital invested, with many of those being complete wipe-outs. The remaining 35 per cent delivered returns of five to 100 times.
Last year I reviewed hundreds of applications and pitches for some of Australia’s top incubators and accelerators, including the CSIRO Accelerator, The University of Sydney’s Incubator and Telstra’s muru-D Accelerator.
Here are 13 start-ups to watch in 2016:
Early stage start-ups
What? Platform for enabling e-commerce for small merchants across social networks without setting up sophisticated, expensive e-commerce sites.
Why? When I first saw the founders six months ago, this was little more than a business plan and they had not started building the service. Fast-forward to December and they have a slick product, have recruited hundreds of business customers in a few months, and are processing transactions. Things don’t normally happen so fast in finance and payment processing. Great team and they have been selected for Telstra’s muru-D Accelerator.
What? Simpla is a content-management platform that makes it easy for non-technical website owners to edit web-page designs, text, images and video by clicking and editing in their browser, without the requirement to understand how to code or all the tools normally needed to download, modify and upload code.
Why? Really slick solution that completely replaces the technical and antiquated tools and systems needed to modify web pages. Business web pages are still a growth area, however, web-page design and construction is overly complicated and it’s virtually impossible for most business owners and employees to modify their pages without the assistance of developers.
What? Delivery service for restaurants and fast-food businesses to outsource their delivery capability.
Why? Normally, one avoids Uber-style businesses, except Drive Yello has traction, is going after business customers and the team is led by an experienced founder with an exit under his belt already from a previous business. Our guess is that it will pick up a lot of drivers and riders who don’t qualify for Uber because they don’t have a suitable vehicle.
Asher Tan, chief executive and co-founder of CoinJar.
What? A bitcoin exchange based in Australia and now in Britain.
Why? I am a customer and it’s a pretty good experience. They have managed to combine bitcoin with local banking services, including connecting to a local bank account and a local EFTPOS card provider. Have raised significant funding and are one of the few bitcoin providers that have managed to connect bitcoin to the real banking world.
What? Invoicing app for mobile businesses, tradies.
Why? Although this business was established early last decade and probably shouldn’t be called a start-up any more, it spent many years trying to develop the right solution before it found product-market fit. It managed to get mobile invoicing right in the last two years and shot to prominence, raising $50 million in venture capital funding in the past 18 months. It now has 200,000 business customers sending 1 million invoices a month.
Founder of Invoice2Go, Chris Strode. Photo: Daniel Munoz
What? Crowdsourced security testing for business owners, application developers and corporations.
Why? Real and pressing problem for most corporations, cost of security breaches can be extreme, high-profile breaches are becoming commonplace and reputational or transactional losses can bankrupt companies. Application and security testing is very difficult, most businesses are unable to manage this on their own. No one company or consultant can handle this for them. By building a community of 22,000 security consultants, they are able to provide testing for developers.
Envato co-founder and executive director Cyan Ta’eed. Photo: Pat Scala
What? Created a marketplace for web designs, WordPress Themes, plug-ins and other digital assets.
Why? Probably one of the most successful Australian start-ups never heard of outside the web development and start-up community. Envato bootstrapped its way to $50 million a year in revenue and has more than 5.5 million customers and developers.
Straw poll from a few of my Twitter buddies
Steve Baxter: Shark Tank investor and entrepreneur @sbxr
Andrew Barnes (left) and co-founder Chris Eigeland of GO1
What? Online training platform for businesses.
Why? Great team including a Rhodes Scholar, lots of early revenue and they have been accepted into Y Combinator, which is the start-up equivalent of an Australian singer making it into the finals of American Idol.
Paul Jones (left) and Mark Fletcher’s Cohort Solutions aims to look after foreign students
What? Provides a comprehensive service for overseas students attending Australian universities, including health insurance, telecommunications and foreign exchange services.
Why? Significant traction with more than 10,000 customers, each of whom have to transfer $20,000 to $30,000 from overseas every six months as well as handle all sorts of other banking and logistical issues.
Pocketbook co-founder Bosco Tan. Photo: Louie Douvis
Mick Liubinskas, Entrepreneur in Residence at Telstra’s muru-D Accelerator @liubinskas
What? Personal finance app that brings together all of your banking, budgeting and credit cards and automatically categorises the transactions on each of them.
Why? Probably the only Australian personal finance app that has managed to get integration working with all of the major banks, very slick app and significant transaction.
What? Online legal service that provides standardised legal documents for common transactions as well as access to hundreds of lawyers for customised solutions.
Why? This model has been very successful in the US and the team has significant traction.
James Alexander, chief executive of Incubate, Sydney University @jamesasyd
What? World’s largest online basketball community
Why? A total of 850,000 Facebook followers and 20 million views a month make this one of the most popular sports sites in the world, originally founded in Australia and run by a very small team they are in the process of working out how to monetise the business but they have massive user adoption.
Nicole Williamson, country head at Lanzatech @nicolewill100
Kath Purkis co-founder of Her Fashion Box & founder of Le Black Book
What? Monthly fashion box subscription service.
Why? Very new business has managed to achieve significant traction with 30,000 boxes shipped to customers.
Mike Nicholls is responsible for developing new technologies and prototyping products from the Invention Development Fund patent portfolio at Intellectual Ventures. He is a Telstra ICT Industry advisory board member, blogger at Startup88.com, and mentor at CSIRO Accelerator, muru-D and incubate.org.au. Follow Mike on Twitter @mikenicholls88. Follow MySmallBusiness on Twitter, Facebook and LinkedIn.
This is not intended as financial advice. Mike Nicholls has no financial interest in these start-ups. Some surveyed in the straw poll may have interests in the start-ups they mentioned.
I am now of the quiet active searching mind in the twilight of my years