Opinion: Australian startups turn modest venture capital funding into global companies more efficiently than anywhere on earth. The reasons are in the dirt and distance, argues partner at Side Stage Ventures, Elli Hanson
The cellar door at Hentley Farm is an 1840s stone cottage on the banks of Greenock Creek, in the western Barossa. It has the mudstone walls of a French farmhouse and the ceiling of a shearing shed: corrugated iron, painted green. When I visited in high summer, the famous creek was bone dry under the red gums.
I was raised on Californian wine, which is another way of saying I was trained on abundance. Big, loud, and grown with the tap on. It took me longer than I would like to admit to understand what Barossa was handing me: concentration through restraint. The valley’s oldest Shiraz vines are dry-grown. Nobody waters them. A stressed vine puts everything it has into less fruit, and what ends up in the glass is scarcity, converted.
Startups work the same way.
The difference Down Under
I moved to Australia from the United States in late 2020, and here’s my unflattering admission: it took me embarrassingly long to register that Canva, Atlassian and Afterpay were Australian. The US market is so certain it sits at the centre of software that the question of where a company comes from is rarely asked. Here, they’re the names our ecosystem hangs its hat on. Over there, they were simply weather.
As I filled in the context, the anomaly surfaced: enormous global companies emerging from a small, distant market with a venture industry a fraction of the size you’d expect. What’s in the water here? Or more aptly – the lack thereof?
Last month our fund published the second Australia Venture & Startup Report with Dealroom — its numbers are the map of our ecosystem.
Since 2016, Australia has been the fastest-growing venture ecosystem of any major hub: first for decacorns created per venture dollar, third for unicorns. Seven decacorns have been built here from startups on less than US$40 billion of venture capital deployed since 2000.
The report tells you Australia turns venture dollars into decacorns more efficiently than anywhere else on earth, but it cannot tell you why. The things producing these outcomes run deeper than capital.
Why Australia punches above its VC weight
The first is geography. An Australian founder has to sell globally from day one. The domestic market alone cannot carry venture scale, and most customers run on the opposite clock. The founder in Surry Hills cannot take the 3am call with New York night after night, so her product has to close the deal without her.
Australian founders built self-serve software out of necessity decades before the industry gave it the acronym PLG (product-led growth). We have Asia on the doorstep, Commonwealth ties to the UK, and deep networks across the US. Australia is a long flight from everywhere, but unusually close to everything.
The second is competition – or lack thereof. It’s simply cheaper to find product-market fit. Less early-stage noise means learning what to build, for whom, at what price, costs less than it does in San Francisco. And because Australian customers look and buy like American ones, it’s the perfect training-wheels market for a young company to gain velocity before tackling the US.
The nature of competition is different, too. American competition is dog-eat-dog: you win by beating your neighbour. Australian competition is underdog: you win by beating the odds. The difference sounds small but changes everything. A fight against the odds is noble, and noble fights come with social permission to cheer for each other. An ecosystem fighting the odds together behaves very differently from one fighting for air.
The third is a deep pool of technical talent, priced right. More than half Australia’s working-age adults hold tertiary qualifications , and the decacorns have doubled as finishing schools in global scale. These are training operators who are now founding, joining and funding what comes next. The density of these newly minted operators in a small ecosystem creates manufactured momentum. Alumni back alumni, teams spin out of teams, and the attempt rate climbs. Outliers are a numbers game.
Finally, the core is cultural – it’s the reason more capital won’t dilute our success. Australians have a phrase for the weekend athlete who buys the professional kit before learning to play: all the gear and no idea. It’s a warning about mistaking equipment for ability, and it maps straight onto capital.
The megaround here is less a status symbol, and potentially even a hazard sign. The social contract in Australia is to show, then tell. Build the thing, then talk about it. When the abundance of 2021 washed through, Australian founders raised like everyone else, yet the efficiency numbers covering that period held. Australian capital discipline isn’t a budgeting response to scarcity. Doing a lot with a little is core to Australian culture, and founders here have this ethos in spades.
Building the Australian way
At first glance, each of these conditions appears a detriment. A small domestic market, the opposite time zone, a long flight from everywhere, a fraction of the capital. In practice, every one converts. The small market provides training-wheels luxury. The opposite clock problem built software that sells itself. Everywhere is equally far, so relationships and history carry further than proximity. And scarcity hardened into an efficiency ethos that capital doesn’t dissolve. The detriments are the drought that creates the terroir.
Meanwhile, the rest of the world has only just started building the Australian way: the metric of the moment is revenue per employee — build the biggest company on the fewest resources. Australian founders don’t need to change a thing. They’ve been training for this event for twenty years.
Heading out the cellar door that day, I listen to one more story. In the early 1990s, a retired German border guard named Otto Kasper arrived in the Barossa. He was 65, with little English, and not a day of winemaking behind him. Otto bought a small block beside Greenock Creek, hand-planted an old Shiraz clone and worked the rows alone without irrigation, before moving away. He returned a decade later, to find his neighbour had turned those dry-grown rows into the estate’s icon wine and put his name on the label: Clos Otto. Only a dozen Barossa Shirazes have ever out-scored it. Five were vintages of Grange.
Clos Otto is an outlier for the same reason our Australian decacorns are. Scarcity, converted. Our report tells us the ground here is rich. Now we need to plant more vines, and make more wine.
Elli Hanson is a Partner at Side Stage Ventures, a founder-led seed fund and community backing the top 1 per cent of founders in Australia.
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