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The Energy to Fight Injustice
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| “The Energy to Fight Injustice”, based on a longer draft op-ed written while I was in China, has been published in Chemistry World, but is also available here, on my web page, or on our blog.
~Jim Like my Facebook page |
I’ve wanted to write this piece for a while now, after bootstrapping in Australia for over 5 years we’re finally getting traction. It’s been a long hard slog, we’ve failed at almost 8 ideas & taken absolutely no funding.
Maybe that’s another story – for now though I want to talk about how growing a Startup or idea in Australia is terribly difficult.
This isn’t a rant; instead I’m trying to highlight some of the current challenges I see in the Australian startup scene – which could be a reason why we don’t see more successful startups or investments in our lovely country.
Just to paint some perspective, here’s just some of the recent acquisitions in the Australian online space:
The first thing we notice is that the majority of acquisitions involve a partner that is located outside Australia.
There’s obviously a few potential reasons for this:
Just look at what WhaleShark media have done with RetailMeNot in 4 years. They’ve scaled the business to $78.5M in revenue per quarter. To do this they’ve needed to get closer to the clients (who are mostly US based businesses) & also the customers. Something that Bevan & Guy would have struggled to do with a team here in Australia.
What’s also interesting to note is that quite a few of the companies above actually left Australia completely to setup base in the USA.
We hear so often in the media about founders like Josh Reich from BankSimple who was recently acquired for $117M, it’s like our media like to hold onto the fact that someone from this country is doing something great, even though they had to leave Australia to do it in the first place. Even Atlassian left Australia to register itself as a UK business:
Basically, for startups it’s super expensive to do business in Australia compared to other big cities—wages, compliance, tax and even software costs are high, and to make it even more tough, there’s typically less funding available to meet these costs.
An article surfaced recently from 99dresses founder Nikki Durkin who talks at length about braving visa issues to join Y Combinator in the USA at the hope of really making an impact with her Australian born startup.
There’s almost no benefits given to startup founders in Australia that actually help us accelerate our business.
In fact our government recently announced a new budget designed to reduce our $49.9Bn deficit, which involves big changes to how they support startups (even though Tony Abbott is quite happy to spend $12Bn on 58 F-35 Fighter Jets).
The Government has cut funding to over 8 innovation & research programs. One of the first areas to be completely cut was Commercialisation Australia, an organisation that was there to help startups from early stage right through to acquisition – they had roughly $88M per year to help Australian products & services. They also cut the Innovation Investment Fund & 6 others to give combined budget savings of $845M.
In a recent interview after winning a Pearcy award, Guy King the Co-founder of RetailMeNot mentioned how Commercialisation Australia was instrumental in helping them with the growth of their business.
Singapore is kicking our arse in the battle to become Asia’s tech hub and to secure the initial public offerings that would come with it.
The Government has however pledged $ 484M in a new Entrepreneurs’ Infrastructure Program, which we still have little to no information on.
The amount of money invested by Australian VCs was at its lowest level in 2013 with just $111.44M invested, with the average investment around the $1M. Compare that to $1.71Bn in Singapore (which is a 600% increase since 2009).
There’s no sugarcoating the fact that the local VC environment is struggling; investors here are less experienced, they have to be pickier with the startups they back, there’s absolutely no support from the government & we have corporate VC like ANZ, Optus & that are more interested in funding startups that can benefit their own business.
To this end many Australian businesses continue to look for overseas investment:
It is well known that the Australian VC scene needs a few large homeruns to see money be invested back into the ecosystem, but right now our banks view tech startups as high risk & not many are willing to take the calculated risks we see elsewhere in the world. After all, when you invest money in equipment & infrastructure – if it all goes bellyup you still have some assets to sell right? Australia still has some way to go (as with a lot of things) for this to change.
Even though we are a large country, our population is still relatively small – only 22.68M people. When you compare this to 314M in the USA or 63M in the UK our possible customer penetration is small unless you plan to target your product globally (a pattern that you’ll see ring true in many of the investments above).
There have been plenty of companies that have made an impact locally when you consider industries like Travel or E-Commerce. But to attract the right kind of funding that will drive growth you need to be in an industry or have a concept that you can scale globally.
Australia is struggling to provide enough market competitiveness due to rising costs, just look at the the E-Commerce space – many international companies ( ASOS, Eastbay & Amazon) are cleaning up due to cheaper shipping costs & lower product prices. And even many of our own iconic brands like Myer or David Jones are just being left behind due to lack of innovation or just being too late to the party.
Take our business Gleam for example, our potential customer base increases by 1500% or more just by selling into the USA market alone. We’re lucky that most of our sales & growth don’t require physical sales people.
An effective employee share scheme should help Australian startups attract the right talent (I mean who wouldn’t want to come live in our country?), foster innovation & in the end help us see more success on the global playing field.
The current regulations & treatment of tax towards employee share schemes in Australia makes them downright useless.
In a nutshell start-up employees are liable for the tax charge on shares when they vest (not when sold), even though the value can’t be realised properly yet. This means that employees have additional tax charges without any additional income to cover them – even if the startup is destined to fail 6 months into the future.
I know, total bullshit.
Just so you know, it is possible to get around these tax liabilities – but it’s extremely expensive. Which most startups don’t have the time, money or resources to cover.
Tax breaks are hugely important to help startups get through those tough first few years where cashflow is tight.
Take Singapore for example (again), if you incorporate your Startup there they will allow your first $ 100k of income to be completely tax free for 3 years, there’s even more benefits if you earn up to $300k they cap your tax at just 8.5% – plus it’s even allowed on dividends & foreign income! Not only that, Singapore provides 50% deduction on taxes relating to Angel investing, no wonder Singapore has seen a massive investment & startup boom – the government understands the value.
There’s a few grants in Australia, the first major one is the R&D offset. If you can prove that your startup is conducting research & development you can claim back up to 38.5% of your development costs – however the payment is extremely lagged & can take more than a year after the actual activities for you to be able to claim (which doesn’t really help startups).
Export market development grants can help you reduce the cost of exporting any products overseas, for example advertising your business in other countries, travel, marketing & communications. You can reimburse up to 50% of these costs, again this rebate comes almost a year after the actual activity has taken place. What about incentives to grow my business locally?
Problem I have here is none of these grants do much to help me as a startup scale my business, the grants & tax breaks you see in Singapore actually align with how someone grows a business – those guys have their shit together.
Australia is fast becoming one of the most expensive countries in the world to live in, this means that good talent is very expensive, cost of living is expensive & wages are generally in line with that trend. Australia has the 3rd highest average wage in the world (behind Luxembourg & Switzerland).
Consider myself & John. We’re both in our early 30′s, with a family & mortgages. We need roughly a MMR (monthly recurring revenue) of $25k AUD just to cover ourselves in Australia (fully loaded, including 9.5% Superannuation). John is a fairly competent developer who could easily get a lucrative corporate contract paying crazy daily rates.
This hurts two-fold, it makes it expensive to hire & retain good people – as they can command extremely high rates by default. And we all know that startups generally can’t match those rates without some other incentives (*cough* share options *cough*).
Secondly, if your company is currency agnostic (i.e. could potentially exist anywhere in the world) you end up paying much much more to run your business. I could go on about this point forever but you just have the look at the price of a Macbook side by side:
Heck, we can’t even get Game of Thrones in Australia without pirating it, apparently.
If you’re pure play Australian then GST is fine, but when trying to compete globally it just adds pricing complexities (Especially for SaaS). If your business earns more than $75,000 per year you must register for GST. This ends up screwing over people that want to buy your product in Australia.
For example, consider our $39 plan. If someone in the USA wants to purchase it, we charge them $39 AUD, however if someone in Australia wants to buy it we charge them $39 + 10%, or $42.90 – if we were a USA company Australians wouldn’t have to pay an extra.
You either take the GST hit, or hit the customer with it.
To make matters worse, we end up just collecting this 10% for the government & paying it back to them minus credits every quarter which is an admin nightmare (businesses can choose to claim back their GST credits).
The majority of our business comes from the USA, which means they are awake mostly whilst we are asleep. This makes having meetings & communicating with customers very difficult – normally giving you at least a 24 lag on anything that crops up.
This lag definitely works against us in Australia in terms of the amount of business & efficiency of business we can do in the rest of the world. I’m guessing this is a big reason many startups move to the USA.
Online payment options have been archaic to say the least for many years, here’s a good example of what a startup might have to go through.
We would have to get a merchant account with the bank, then find a payment processor, then do all the integrations.
Finally thanks to Stripe we were able to charge Australians in AUD from launch (as part of the beta), and only now they are rolling out the BETA of allowing Australian companies to charge in USD or GBP. It’s taken a long time, but finally there are solutions for Australian companies to play on a global field – without having to worry about the bureaucracy of banking.
Even though all this stuff makes Australia seem bad, there’s still thousands of entrepreneurs out there making it work day in day out – I’ve witnessed a huge explosion of enthusiasm in Australia, we’ve got more incubators than ever before, we got lots of amazing co-working spaces & everyone is really just trying to find their product market fit in the big bad world.
So here’s to all the Australian startups – maybe we’re all waiting for the next big thing to come along, will it be Australian? Who knows, but we’ll bloody well keep trying.
– – –
Stuart McKeown is a co-founder of Gleam, one of the fastest growing startups in Australia. He’s passionate about growing businesses, whether it’s his own or yours – that’s exactly why he built Gleam. Check it out here https://gleam.io
Queensland Performing Arts Centre (QPAC) has been recognised in two Helpmann Award wins at a ceremony in Sydney last Monday.
Along with its presenting partners Arts Centre Melbourne, Perth Concert Hall and Sydney Opera House, QPAC was awarded for the presentation of Amsterdam’s Royal Concertgebouw Orchestra (RCO), which was awarded Best Symphony Orchestra Concert.
The RCO made its Queensland debut at QPAC with two concerts in November 2013, in the final leg of the orchestra’s 125th anniversary world tour.
QPAC’s support for local productions also received recognition for When Time Stops, which was co-produced by QPAC and EDC, in association with Brisbane Festival, with its Composer Iain Grandage taking the Helpmann award for Best Original Score.
In 2013, QPAC received two Helpmann Awards for performances within its 2012 Hamburg Season, the first in its International Series presented with the support of Tourism and Events Queensland.
The August edition of Westender is now online. The community voice of West End is now almost 22 years old and is fresher and newer than ever.
Over the next couple of days you can pick up the print edition on Boundary St, Montague Rd, Hampstead Rd, Melbourne St, Grey St, Stanley St and Gladstone Rd, or you can simply click here to download the e-mag.
Subscribers copies will arrive by mail early next week, free deliveries start after that.
You can become a subscriber at westender.com.au/subscribe
Earth’s magnetic field, a familiar directional indicator over long distances, is routinely probed in applications ranging from geology to archaeology. Now it has provided the basis for a technique which might, one day, be used to characterize the chemical composition of fluid mixtures in their native environments.
Researchers from the U.S. Department of Energy (DOE)’s Lawrence Berkeley National Laboratory (Berkeley Lab) conducted a proof-of-concept NMR experiment in which a mixture of hydrocarbons and water was analyzed using a high-sensitivity magnetometer and a magnetic field comparable to that of Earth.
The work was conducted in the NMR laboratory of Alexander Pines, one of the world’s foremost NMR authorities, as part of a long-standing collaboration with physicist Dmitry Budker at the University of California, Berkeley, along with colleagues at the National Institute of Standards and Technology (NIST). The work will be featured on the cover of Angewandte Chemie and is published in a paper titled “Ultra-Low-Field NMR Relaxation and Diffusion Measurements Using an Optical Magnetometer.” The corresponding author is Paul Ganssle, who was a PhD student in Pines’ lab at the time of the work.
“This fundamental research program seeks to answer a broad question: how can we sense the interior chemical and physical attributes of an object at a distance, without sampling it or encapsulating it?” says Vikram Bajaj, a principal investigator in Pines’ group. “A particularly beautiful aspect of magnetic resonance is its ability to gently peer within intact objects, but it’s tough to do that from far away.”
High-field and low-field NMR
The exquisite sensitivity of NMR for detecting chemical composition, and the spatial resolution which it can provide in medical applications, requires large and precise superconducting magnets. These magnets are expensive and immobile. Further, the sample of interest must be placed inside the magnet, such that the entire sample is exposed to a homogeneous magnetic field. This well-developed method is called high-field NMR. The sensitivity of high-field NMR is proportional to magnetic field strength.
But chemical characterization of objects that cannot be placed inside a magnet requires a different approach. In ex situ NMR measurements, the geometry of a typical high-field experiment is reversed such that the detector probes the sample surface, and the magnetic field is projected into the object. A main challenge with this situation is generating a homogeneous magnetic field over a sufficiently large sample area: it is not feasible to generate field strengths necessary to make conventional high-resolution NMR measurements.
Instead of a superconducting magnet, low-field NMR measurements may rely on Earth’s magnetic field, given a sufficiently sensitive magnetometer.
“One nice thing about Earth’s magnetic field is that it’s very homogeneous,” explains Ganssle. “The problem with its use in inductively-detected MRI [MRI — magnetic resonance imaging — is NMR’s technological sibling] is that you need a magnetic field that’s both strong and homogeneous, so you need to surround the whole subject with superconducting coils, which is not something that’s possible in an application like oil-well logging.”
“Sensitivity of magnetic resonance depends profoundly on the magnetic field, because the field causes the detected spins to align slightly,” adds Bajaj. “The stronger the applied field, the stronger the signal, and the higher its frequency, which also contributes to the detection sensitivity.”
Paul Ganssle is the corresponding author of a paper in Angewandte Chemie describing ultra-low-field NMR using an optical magnetometer. (Photo by Roy Kaltschmidt)
Earth’s magnetic field is indeed very weak, but optical magnetometers can serve as detectors for ultra-low-field NMR measurements in the ambient field alone without any permanent magnets. This means that ex-situ measurements lose chemical sensitivity due to field strength alone. But this method offers other advantages.
Relaxation and diffusion
In high-field NMR, the chemical properties of a sample are determined from their resonance spectrum, but this is not possible without either extremely high fields or extremely long-lived coherent signals (neither of which are possible with permanent magnets). In contrast, relaxation and diffusion measurements in low-field NMR are more than sufficient to determine bulk materials properties.
“The approach at low-field, which you can achieve using permanent magnets or Earth’s magnetic field, is to measure spin relaxation,” explains Ganssle. Relaxation refers to the rate at which polarized spin returns to equilibrium, based on chemical and physical characteristics of the system. Additionally, NMR experiments resolve chemical compounds based on their different diffusion coefficients, which depend on the size and shape of the molecule.
A key difference between this and conventional experiments is that the relaxation and diffusion properties are resolved through optically-detected NMR, which operates sensitively even in low magnetic fields.
“A previous achievement of our collaboration has been the development of magnetometers for the detection of NMR,” says Bajaj. “This experiment represents the first time magnetometers have been used to make combined relaxation and diffusion measurements of multicomponent mixtures.”
Relaxation and/or diffusion measurements are already commonly used in the oil industry for underground NMR measurements, though conventional probes use a permanent magnet to increase the local magnetic field. There were attempts to perform oil well logging starting in the 1950s using the Earth’s ambient field, but insufficient detection sensitivity led to the introduction of magnets, which are now ubiquitous in logging tools.
“What’s novel here is that using magnetometers, we finally have technology that might be sensitive enough for efficient detection in the Earth’s field, perhaps ultimately enabling detection at longer distances,” explains Scott Seltzer, a co-author on the study.
The design was tested in the lab by measuring relaxation coefficients first for various hydrocarbons and water by themselves, then for a heterogeneous mixture, as well as in two-dimensional correlation experiments, using a magnetometer and an applied magnetic field representative of Earth’s.
“This proof of concept might be productively applied in the oil industry,” says Ganssle. “We mixed hydrocarbons and water, pre-polarized them with a magnet, and applied a magnetic field the same as the Earth’s. Then we made measurements with our magnetometer and determined that we had easily enough sensitivity to separate components of oil and water based on their relaxation spectra.”
This technology could help the oil industry to characterize fluids in rocks, because water relaxes at a different rate from oil. Other applications include measuring the content of water and oil flowing in a pipeline by measuring chemical composition with time, and inspecting the quality of foods and any kind of polymer curing process such as cement curing and drying.
The next step involves understanding the depth in a geological formation that could be imaged with this technology.
“Our next study will be tailored to that question,” says Bajaj. “We hope that this technology will eventually peer a meter or more into the formation and elucidate the chemistry within.”
Eventually, probes could be used to characterize entire borehole environments in this way, while current devices can only image inches deep. The combination of terrestrial magnetism and versatile sensing technology again offers an elegant solution.
Other authors on the Angewandte Chemie paper include Hyun Doug Shin, Micah Ledbetter, Dmitry Budker, Svenja Knappe, John Kitching, and Alexander Pines. The current publication presents some of the work for which Berkeley Lab won an R&D 100 award earlierthis year on optically-detected oil well logging by MRI.
This research was supported by the U.S. Department of Energy’s Office of Science.
Story Source:
The above story is based on materials provided by DOE/Lawrence Berkeley National Laboratory. The original article was written by Rachel Berkowitz. Note: Materials may be edited for content and length.
Journal Reference:
