News, Insights and Stories from the Australian and New Zealand tech ecosystem.

Australia vs. Silicon Valley: Replicating a culture of innovation

Every region dreams of becoming an innovation hub like Silicon Valley – the foundation for tomorrow’s startups. But none have been able to successfully recreate the ‘magic’ that inhabits the region.

Since the 1950s, experts have been trying to solve the Silicon Valley enigma. There was something unusual happening in the region – particularly in the field of innovation and entrepreneurship. Upon further research, they found the answer to what makes Silicon Valley tick – it’s the people.

But what kind of people?

According to CIO, Silicon Valley is home to “social outcasts, radical libertarians and nerdy geniuses who just want to be left alone.” It’s not just physical isolation they desire, they “dream of fleeing society completely and building tech-utopias.”

Apparently, this is no exaggeration.

In a less extreme description, we can say that Silicon Valley is where technology luminaries, visionaries, risk-welcoming investors, and serial acquirers co-exist. It is a place where opportunities are abundant for the entrepreneurial-minded.

Paul Graham, Co-Founder of Y-Combinator, wrote in an essay: “you could make a great city anywhere if you could get the right people to move there. So the question of how to make a Silicon Valley becomes: who are the right people, and how do you get them to move?”

That is a good question: how do you get the right people to move or to stay?

The answer is: create an attractive culture.

In Reassembling the Social (2005), French sociologist Bruno Latour offers the following account of how and where culture is made:

Culture does not act surreptitiously behind the actor’s back. This most sublime production is manufactured at specific places and institutions, be it the messy offices of the top floor of Marshal Sahlins’s house on the Chicago campus or the thick Area Files kept in the Pitts River (sic) museum in Oxford (p. 175).

The relevant argument here is that culture is not something that happens spontaneously. It is produced.

But if culture is produced, can’t it be reproduced?

Most people say no. In a study by Accenture, titled Decoding the Contradictory Culture of Silicon Valley, Steven John, Chief Information Officer of Workday is quoted saying, “Silicon Valley is like Tasmania or Madagascar. It’s developed different life forms than anywhere else.”

This may just be the case. There is something about the culture of Silicon Valley that lures people from all over the world to pack their suitcases and migrate there. In fact, two-thirds of people working in the Valley are ‘foreign workers’ who bring a diverse set of experiences on how industries in different countries work.

It’s why we’re seeing an exodus of Australian developers and tech startup founders to Silicon Valley.

Australian startups like Collusion, HappyInspector, OrionVM and RecruitLoop have all moved to the Valley for better support during their high-growth phase. Alec Lynch from DesignCrowd and Pierrick Ganon from timeBlend are also planning their move.

But what is it about the culture of Silicon Valley that makes it such a desirable place?

Many people have difficulty answering this question. They mention the high density of startups, the wealthy investors, the oversized burritos. But they haven’t been able pinpoint elements of Silicon Valley’s workplace culture.

The answer is in the aforementioned Accenture study. The study recognises five seemingly contradictory characteristics in Silicon Valley’s workplace culture that have enabled the region to flourish and produce some of the world’s most successful companies.

  1. Laid-back – yet driven for speed: While people are laid-back, they will work long hours for their companies.
    Supporting mechanism: Company policies favour taking a “done is better than perfect” attitude, taking risks and “breaking” things and then quickly “pivoting” to fix those things to move on
  2. Committed – yet independent: People are committed to their work and their colleagues. Yet they are “free agents” with no strong allegiance to one company.
    Supporting mechanism: Strong venture capital community and virtually unemployment for IT skills.
  3. Competitive – yet cooperative: Although companies and individuals can be ruthless competitors, they also cooperate toward larger goals.
    Supporting mechanism: Employee stock options; open-source projects; and personal professional networks.
  4. Pragmatic – yet optimistic: People realise that failures are inevitable, but they are also optimistic that any problem can eventually be solved.
    Supporting mechanism: Strong venture capital community; company policies that don’t punish reasonable mistakes; and fluid employment market.
  5. Extrinsically motivated – yet intrinsically fulfilled: People are motivated by money. However, their fulfllment comes from being recognised for their creativity and innovation.
    Supporting mechanism: Stock options; company awards; and work that is challenging, worthwhile and interesting.

If you look closely, these characteristics are present in Australia’s startup culture. However, we don’t have the same supporting mechanisms.

The other thing is that in Silicon Valley, you’re likely to bump into other influential people in the business scene while grabbing a coffee or a beer – something that is highly unlikely in Australia.

“When you cram tens of thousands of companies, and hundreds of thousands of people who work in the tech scene, into a relatively small geographic area, the opportunities for spontaneous interactions that might lead to valuable insights, new opportunities and new deals is greatly amplified,” says Matt Mickiewicz, Co-Founder of and 99designs.

Agreeing with the sentiment, Silicon-based Australian entrepreneur and Co-Founder of WP Curve, Alex McClafferty says, “If you go to any bar in Hollywood, you’re likely to be served by an aspiring actor who’s on the verge of the ‘next big thing’ … This applies to Silicon Valley as well. There are a lot of people who are working on their next big thing, so you can expect to learn about 5 or 10 new apps and startups at each event you attend.”

We can’t replicate Silicon Valley

Mickiewicz makes an interesting analogy, saying “Silicon Valley is to Engineers, like Hollywood is to Actors. A magnet for the best of the best to compete on the world stage, show off their talent, make the biggest impact, and access the types of opportunities that they might not have locally.”

There is something disheartening about this statement.

If all our home-grown talent moved abroad, then how would we to thrive as a nation?

It would certainly be nice if we didn’t feel the need to take our skills overseas – given our skills and work ethic are our best assets.

To have our talent flourish on our soil, we need to have the same appeal that Silicon Valley does.

While we can try to copy Silicon Valley, it’s very unlikely that we will be able to successfully replicate the culture – because there’s at least half a century’s worth of effort that makes the Valley what it is today.

We would need to have the same series of events occur in the same chronological order with the same people for us to be anything like the region. We would need history to repeat itself in an entirely different location.

Mark Zawacki, Founder of Silicon Valley-based consulting firm 650 Labs, believes the reason why no region can replicate Silicon Valley is because its ecosystem is more sophisticated than just having a high-density of startups.

In his article, ‘Why the “Next Silicon Valley” doesn’t really exist’, Zawacki points out that Silicon Valley has a “critical mass of serial acquirers”. Indeed, Silicon Valley is home to high-tech luminaries – including Apple, Cisco Systems, eBay, Google, Hewlett-Packard Co., Intuit, LinkedIn, Oracle, Sun Microsystems and Yahoo.

“There is a sizable cluster of Silicon Valley companies with the balance sheets and foresight to make very large acquisitions,” he writes.

Also, these large companies can execute an industry disruption in their sleep – figuratively speaking. At the very least, they’re accustomed to disrupting things.

“Apple and Google have disrupted the mobile industry, Google and Facebook have disrupted the advertising industry. Apple has disrupted the music industry. Square, Netflix, Airbnb, Uber, and dozens of others are beginning to siphon off billions of dollars in other industries,” Zawacki writes.

Ease of capital raising – the biggest appeal

While it may be a geographical area of just a few hundred square kilometres, Silicon Valley boasts achievements (and revenue) that are far larger.

“The pace of innovation and growth in Silicon Valley so far hasn’t been matched anywhere else in the world … Thousands of new startups spring into existence every year, backed by a huge network of seed funds, incubators, accelerators and venture capital firms,” says Mickiewicz.

He adds that Australia does not yet have a large group of active seed investors or proven incubators – like Techstars and Y-Combinator.

“Even successful Australian companies are often looking to the US for capital, where investors can offer better valuations, make faster decisions, and get comfortable with a level of risk that many Aussie investors would shy away from,” says Mickiewicz.

No one can contend with this fact. Fei Yao, Co-Founder of Couchelo, says “Being a small fish in the big pond means that you will meet a lot more people to motivate you and provide the right mentorship.”

Australian tech entrepreneur Murray Hurps, who launched Ad Muncher, Startup Muster, and Leap Touch out of Sydney’s Fishburners, agrees that Silicon Valley offers easier access to investors, but has a slightly different way of looking at it.

How much investment do you really need to launch your idea?  And how hard do you think it will be to make someone realise it’s worth investing in?

Do you honestly have an exciting new idea with a clear path to a worthwhile market?

Do you need a few developers, a designer and some marketing help for a year to see if it’s actually possible?

Then you can do it from Australia.

Founder of Pollenizer and a respected personality in Australia’s startup scene, Mick Liubinskas, believes that most companies can be based in Australia and have global sales with an office in the US.

“My view is that some companies should be there based on partnerships and business development … If you can get global sales without raising capital, then do it and stay in Australia. If you are a consumer business or need a lot of capital before you get sales, then you will probably have to go to the Valley,” he says.

Liubinskas adds, however, that keeping more companies based in Australia while having global sales is “critical to building the compound interest for our ecosystem.”

“We need to put more focus on sales and drop the focus on capital-raising.”

So, move or stay?

Some Australian founders cross the border of optimism and fall into idealism – thinking that as soon as they set foot in Silicon Valley, they will be greeted with a cheque.

Unfortunately, the chances of closing a business deal or establishing a strategic partnership with a major company while collecting baggage at the airport is slim.

As McClafferty says, “even though there’s a ton of talent – just being here won’t get you a big payday. You have to be really smart, driven, motivated, a hard worker and a little lucky to make it big time.”

Meanwhile, Australia’s startup scene is growing rapidly year-upon-year; and many founders agree that we are at the cusp of something massive.

“Exciting times are ahead and I’d like to see Australia climb even further up the startup genome and compass rankings from the 12th and into the top 10 [best places to launch a startup],” says Peter Cooper, Founder of Cooper Investors and SydStart.

Echoing the sentiment, Hurps presents a rhetorical question, “Do you want to go to the open treasure chest and pull out whatever jewel is left at the bottom, or do you want to try unlocking a new treasure chest that other people haven’t discovered yet?”

If innovation is, as the Australian Bureau of Statistics defines it, the introduction of any new or significantly improved goods or services, new operational or managerial processes, or the implementation of new organisational processes, then we are not falling behind.

“While we’ve had less ‘startup generations’ where entrepreneurs build, exit and reinvest in another company, we are certainly closing the information gap. Some of our local communities are no longer two years behind Europe and the US,” says Cooper.

“It is often hours or days before we are on top of the latest trends; and in some areas, we are influencing globally – for example, the Freelancer IPO and the two acquisitions by Apple that had Australian roots (SnappyLabs and Nest Labs).”

Admittedly, Australia is still a work in progress when it comes to building the infrastructure and having the right mechanisms in place to support the startup community. But we are certainly building a culture that stimulates entrepreneurial minds and companies in ways that lead to innovative businesses.

As McClafferty points out, “while Silicon Valley is where it’s at in terms of funding and startup action, the Australian tech scene is moving in the right direction.”

“Consider homegrown heroes like James Martin from Oneflare and Bosco Tan from Pocketbook. These guys are kicking goals and focusing on what matters – getting users and customers. They’re leading the way for Australian founders in the Australian market and I’m proud of them.”

The talent is there. The potential is there. The only way we can improve our ecosystem is by talking to startups about their past achievements, current needs and future plans. That data can be then be used to implement the right initiatives for our startups.

Startup Muster is already onto this. Launched two weeks ago, they’ll be surveying Australia’s startups every year and putting that data together to into a Deloitte-esque report.

Still call Australia home?

It would be unfair to ignore, as Cooper says, the “boomerang trend”. Many startup founders move to Silicon Valley, absorb new knowledge, and bring it back to Australia to grow the country’s tech skills base or reinvest in local startups.

As previously quoted, Mickiewicz says, “Hollywood is to actors, like Silicon Valley is to engineers.”

But as Hurps points out, people don’t go to Hollywood to start their acting careers. They start their acting careers locally with the goal of being wanted in Hollywood.

There are a number of benefits in finding your feet locally. Firstly, the competition is less intense – leaving more room to pursue ideas that haven’t yet been explored.

Yao points out that we have an “awesome collaborative community, and we’ve seen an exciting growth in incubator and accelerator programmes nationwide.”

“We’re also uniquely positioned to be able to tap into the exploding Asian markets,” she adds.

PwC report from April 2013 reveals tech startups have the potential to produce four percent of Australia’s GDP (Gross Domestic Product) by 2033.

Commissioned by Google Australia, the report estimates that in ten years, tech startups could contribute AUD$109 billion and 540,000 jobs to the Australian economy.

“The growth of the Australian technology sector is essential to the future success of the economy” (PwC: The Startup Economy, April 2013, p. 9).

Evidence from the Comprehensive Australian Study of Entrepreneurial Emergence (CAUSEE) suggests that even though the proportion of the population actively engaged in business creation is higher in the US (4.9 percent) compared with 3.4 percent in Australia, Australian startups compare well on indicators of quality.

The study finds that Australian startups are:

  • less likely to be motivated by necessity or lack of alternatives;
  • more likely to be growth oriented;
  • more likely to emphasise research and development; and
  • more likely to be based on young and/or sophisticated technologies.

Similarly, the Global Entrepreneurship Monitor (GEM) reveals that Australia has the highest proportion of startups motivated by “improvement driven opportunity”.

With over half a million Australians involved in early stage entrepreneurial activity at any point in time, it is safe to say we’re a serious contender on the global stage of innovation.

But the best part about staying in Australia is our lifestyle.

Mickiewicz agrees that Australia is one of the best places in the world to work and live, and that “not every person will want to trade quality of life or lifestyle for a fast-track career, higher salary or new business opportunity.”

Perhaps, we’re too quick to forget why we’re called the Lucky Country.

Hurps, who has founded numerous startups locally, says Australia has never held him back.

In fact, he says, “being able to celebrate a hard-earned victory down at the Opera Bar, watching the sun set behind the harbour bridge, really makes it all the sweeter.”

So, as Yao asks, “If you’re busting out the trusty laptop, why not do it in front of a golden beach?”

Indeed, we’ve got some impressive scenery. May as well enjoy it while disrupting an industry.

Startup Daily