Australia: The Australian Financial Review : Nick Abrahams - Australian technology sector

Partner Nick Abrahams discusses the attractiveness of the Australian technology sector to US Venture Capital in an opinion piece published by The Australian Financial Review.

This article was originally published by The Australian Financial Review and is reproduced with permission.

The $1billion love affair with Aussie tech

The call started normally enough. "Hi, my name is Chris and I need a lawyer to help me sell my technology company." So far so good.

The next line caught me a little off guard. "I am on the Central Coast."

What tech companies are there on the Central Coast, I wondered. Little did I realise I was just about to hear one of the great Australian tech stories.

Chris Strode went on to describe Invoice2go. It sounded interesting but I was still dubious about the scale of a business neither I nor hardly anyone in the Australian tech sector had ever heard of. I asked him who he thought would be interested in investing in the company. With his trademark casualness, he said a number of American venture capitalists had expressed interest but he had a term sheet from Accel Partners and thought they were the right fit.

I thought, "Accel. This is big – from the Central Coast and big!"

Over the past few years, the US VC community has pored over hundreds of Australian tech companies and have made more than 10 major investments, worth almost $1 billion.

Accel are the leaders of this wave, putting Australia on the map with their big plays into Atlassian, OzForex and 99designs. Their $35 million investment valued Strode's Invoice2go at more than $100 million, rivalling Erina Fair as one of the biggest businesses north of Newcastle.

Not bad for a guy who started the company with his wife Michelle nine years ago.

Atlassian has been the poster child for how a bootstrapped tech company can grow a global customer base from Australia. Accel found Atlassian because so many of their investees used the software that they invested in it, and a global tech superstar was born. It has been a sensational investment for Accel and its halo effect has brought many other US VCs to Australia's shores.

There are at least six US venture funds making regular trips here, scouring our tech successes such as Campaign Monitor ($266 million from Insight Venture Partners) and our unsung heroes like SiteMinder ($30 million from Technology Crossover Ventures).

Why Australia?

One US VC told me he loves Australian tech companies because in Silicon Valley entrepreneurs expect huge valuations based on little more than a fancy PowerPoint deck but Australians can bootstrap ourselves to $10 million of earnings before interest and tax.

I did not think it necessary to disabuse him of this notion. While I am not sure we have a lot of companies that fall into this category because of the lack of early stage venture capital, our entrepreneurs are more likely to build businesses with prospects of early revenue than taking a "build it and they will come" approach.

It's hard to pay off a Sydney mortgage with "eyeballs".

The US experience with our entrepreneurs has been positive.

According to regular visitor to Australia, Alok Pandey of Vector Capital, "I have met many Australian technology entrepreneurs over the last few years and I am very impressed by their intelligence and work ethic."

The sheer weight of venture capital in Silicon Valley has caused valuation inflation in the US early stage tech world.

Simply put, US VCs can get better priced investments in Australia than at home.

Silicon Valley's emperor of early-stage investment Dave McClure says, "Australia has a lot of smart people, you speak English and the prices are good."

He should know. McClure runs the incubator 500 Startups and has invested in over 20 Australian companies. He says his success rate with Australian investees is higher than his average.

It used to be that to break a business in a new territory you needed heavy marketing and physical presence. Not the case online – virality (or what we used to call "word of mouth") is the order of the day.

Invoice2go built a massive global ­customer base with almost no marketing – just a great application that people loved to use.

Campaign Monitor built a $600 million global business from Cronulla.

So Australian tech companies can build global markets without the need to open offices (or even do marketing) overseas.

Betting on Australia

US venture capital: Large deals (valued at over AU$10m)

Year Target Investor Sector Value Details
2014 Atlassian T. Rowe Price Software/IT AU$150M Software
2014 Invoice2Go* Accel Partners Software/IT AU$35M Mobile invoicing
2014 LIFX Sequoia Capital Software/IT AU$12M LED smartbulbs
2014 Campaign Monitor Pty Ltd Insight Venture Partners Software/IT AU$266M Email campaign management
2014 Siteminder* Technology Crossover Ventures Internet AU$30M Online hotel booking
2013 Bigcommerce Revolution Growth Software/IT AU$40M  eCommerce enabler
2012 Bigcommerce Mike Maples and General Catalyst Partners Internet AU$20M eCommerce enabler
2011 99designs Accel Partners Internet AU$35M Crowdsouring
2010 Atlassian Accel Partners Software/IT AU$60M Software
2010 OzForex Group Accel Partners Internet AU$70M Payments

* Transactions worked on by the author and team at Norton Rose Fulbright

US venture capital: Small deals (valued at or under AU$10m)

Year Target Investor Sector Value Details
2014 BugHerd Australian based Tank Stream Ventures and Starfish Ventures and US based 500 Startups Software/IT AUD$1M Software
2014 Canva Shasta Ventures and Founders Fund Internet US$3.6M Online
2014 Yuruware Pty Limited Unitrends, Inc and Insight Venture Partners Software/IT AU$10M Cloud
2013 Bubble Gum Interactive Bill Tai and various other investors Software/IT AU$2.5M Games
2013 Quest Venture Partners Software/IT US$1M Applications
2013 BuyReply Valar Ventures, Square Peg Ventures and Adrian MacKenzie Internet AU$1M eCommerce
2012 Happy Inspector US investors Internet AU$1M Property

Australia: easy-access Asia

Until the past three years or so, all Silicon Valley venture capitalists wanted to talk about in the Asia region was China. However, the bloom has come off that rose.

Many VCs have discovered that China is a tough market to crack, business practices are not familiar and, frankly, China doesn't need their capital.

The VCs see Australia as an easy-to-access proxy for Asian growth. Pandey says "The Australian technology industry is ripe for significant growth in the years to come because of the talent and drive of Australian entrepreneurs and sheer size of the APAC market."

There is no doubt the success of Accel's Atlassian investment has attracted other venture capitalists and it has also given them comfort about deal risk. It used to be if an American VC invested in an Australian company, the investment had to be made via a "flip-up" into a more familiar US structure like a Delaware corporation – an expensive and time-consuming effort.

These days American VCs are generally happy to invest directly into Australian proprietary limited companies and are comfortable with our IP protection regime. They still regard our employee share options tax regime with incredulity but thankfully the federal government is fixing that.

For the most part the big VCs want to go big. Their preferred cheque size is minimum $30 to $40 million for 20 to 30 per cent of the company. One VC I spoke to, reckons there are over 30 unlisted fast-growth Australian tech businesses which would command valuations in excess of $100 million.

Potential investees need to solve a problem for a global market. The VCs are not interested in Australia-only businesses. Their preference is for a proven track record with global expansion.

They are heavily focused on the big picture. They may well look for an ­investee which can be bolted on to one or more of their other investees to create a global powerhouse in the relevant vertical.

In the future smart money, like the US venture community, will gravitate to successful businesses. Australian tech companies are getting more successful offshore and success will breed further success.

We can build great global businesses from our distant island.

To borrow from the old New Yorker cartoon with the dog in front of the computer:

"On the internet, nobody knows you're Australian."

Nick Abrahams is partner and leader of the APAC technology practice for global legal practice Norton Rose Fulbright and is also a director of Integrated Research Ltd. Follow Nick on Twitter @NickAbrahams

The Australian Financial Review

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions