Summary: Why I moved from Sydney to San Francisco with my startup (RecruitLoop), and how we’re pursuing a ‘dual-base’ strategy.
We decided in late January to relocate from Sydney to San Francisco. It had been bubbling for a while. But then things moved quickly.
Within 4 weeks of pulling the trigger, we had a US company setup. Passports back in our hands with visas approved. Flights booked, bags packed, and most possessions sold. A removalist van left with the remaining few boxes at midday on a Sunday. 30 minutes later we were on our way to the airport. Literally.
Why the rush? We’d been offered a demo spot at Launch Festival, one of the biggest startup events in the US. It seemed a pretty solid entry point. The biggest names in tech along with 5,000 attendees. We arrived in country with 12 hours to spare. In reality, it was helpful just to have a deadline of any sort, to force the decision.
The logistics of getting into the US, as an Australian founder, couldn’t have been easier. I’ve said to a few people it felt like cheating. The visa process was remarkably simple (thanks Geoff!), which I’ll write about separately. As it stands, I (and my wife) can live and work in the US for the next 2 years, extendible almost indefinitely. It cost less than $3,000 upfront to ‘flip up’ to a US company. Which I’ll also write about separately. I believe this will become an increasingly common path for Australian startups. More also later.
The more important factor is why we made the move.
Every situation is different, so I’m reluctant to generalise (something we do all too often in the startup world). I’ll describe the *why* for our situation, then you can draw your own conclusions. I’ll detail the *how* in future posts, to help other founders who land in a similar position.
We started our company in Australia, because that’s where our founders and initial funding came from. It seemed the only real option at the time. Now, more and more ‘Australian’ startups (including all from Startmate) are first incorporated in Delaware. A useful choice in hindsight, with more options for online payments, and better access to capital.
So we launched in Australia. Earned our first customers and revenue there. In startup language, we had ‘validated’ demand, and achieved a measure of product-market fit. Our focus shifted towards scalable growth.
The US was always on our radar, since before we launched. It’s a strategic market for obvious reasons. Size, access to capital, partners and potential acquirers. But it was in the distant future. While developing our initial concept, it made no sense to be there.
Our networks were in Australia – both professional and personal. This is hugely important, in a situation where you need all the support you can get. The startup community in Sydney is awesome and growing. We were one of the first dozen companies in Fishburners, which I believe is the epicentre of the ecosystem there.
I moved in with a single desk, when Fishburners was only a single floor. As the community grew – now occupying the entire building in downtown Sydney – so did we. We added desks, made friends, learnt and (hopefully) gave back. I can’t begin to quantify the value from being in the Fishburners community. From random conversations on strategy, content marketing and growth hacks. To structured lunchtime learning sessions and great events. We’re lucky to be involved, and will be always indebted.
My biggest hesitation about ‘leaving’, was the perception of turning away from all the great work the community is doing to make it easier to start a tech company in Australia. But then, we haven’t really ‘left’…
Sydney vs Silicon Valley for ‘Australian’ startups
There’s debate amongst the technorati about whether Australia can support high growth tech startups. Talk of ‘brain drain’ to Silicon Valley, and complaints about the lack of venture funding.
These discussions miss the point. We have *some* unfair advantages launching a company in Australia: world-class talent, a developed economy, high technology adoption, generous government grants, proximity to Asia and (relatively) good infrastructure. A smaller market can make it easier to test and validate many ideas.
On the flipside, startups in the US have *many* other unfair advantages: market size, funding, a truly global economy, a culture of innovation and acceptance of failure. Did I mention funding?
But framing it as an either/or decision felt like a false choice. Why not chase both? If we can achieve benefits from both sides of the Pacific, isn’t that the biggest unfair advantage we can get?
The biggest and best ‘Australian’ tech companies have done exactly this. Atlassian is the textbook example. Based in Darling Harbour, they raised $60M (US) venture capital and are taking the enterprise software world by storm. But they just opened a mind-blowing office in SOMA (San Francisco) to house a few hundred employees. When they IPO this year or next, it will be on the Nasdaq, not the ASX (ie, access to capital is still a major factor, regardless of the stage).
BigCommerce (Surry Hills) has raised over $30M from US VCs. I understand their office in Texas holds +50% of their employees. In a similar position: 99Designs, NitroPDF, and others I look forward to meeting.
But we’re much earlier stage. A seed stage company, not yet VC funded. Why are we pursuing a dual-base strategy?
Why I made the move
As a startup founder fighting for survival, I don’t have time for hand-wringing about what’s best at a macro level. We need to do what’s best for our company, right now.
In our situation, it boiled down to two things: opportunity and paranoia.
The opportunity presented from being in the US seemed too big to ignore. A huge component of this is funding. I spent nearly 2 months exploring the Bay Area last year; and a chunk of this meeting with investors. We have a bunch of positive interest, but a standard response was ‘we only invest in US companies; get setup here, with local traction, then we’ll talk’. While I think this investor attitude is slowly changing (seen in a small number of examples), we didn’t have time to sit around and wait.
The second obvious opportunity relates to customers. We’re building a 2-sided marketplace, and need to attract both independent recruiters and employers. After some initial testing, it became clear that a physical presence would make a huge difference in our speed and ability to acquire these users.
These were not opportunities we could easily capture remotely. The story for other startups may be different, but it seemed we had the best chance from being on the ground.
Our paranoia is driven by the fact we couldn’t see anyone else tackling the recruiting problem in quite the same way as us. I think (hope?) it’s a healthy paranoia, as it keeps us moving quickly and always looking for new ways to innovate. That’s not saying we don’t have competition – there’s plenty. But we do think we’re seeing the problem in a unique way, which is driving our product and strategy.
Ultimately, we decided the risk of not being ‘in market’ seemed higher than the risk of taking the plunge. There’s no right answer (is there ever?), we just took a calculated, thoughtful risk.
Making the case for a dual-base strategy
We haven’t ‘left’ Australia for the US: Three of our cofounders are still in Sydney. We’re deliberately chasing a ‘dual-base’ strategy, which we think can be a strong competitive advantage for Australian startups.
For example, some of the biggest advantages we see (relative to a single base in either Sydney or SF):
- Genuine flexibility about where and how we grow the team. We can avoid hiring developers in the Bay Area (the biggest struggle for companies here); but can build a sales and BD presence in the US.
- Stronger value proposition when hiring in Australia. A US presence is a huge attraction for Australian talent, with the prospect of trips to the Bay Area, and potential relocation (sound like fun? I’d love to talk!).
- Funding: Stronger prospects with US-based investors, while maintaining (legitimate) access to Australian government grants.
- Close proximity to customers and partners in both the US and Asia-Pacific.
There are obvious downsides. Splitting the team was the biggest factor, and will be an ongoing challenge. We’ve adapted well so far, with a strong rhythm of communication. Others will emerge as we grow, but we’re constantly learning from people/companies who’ve made it work.
It won’t be easy, but nothing is in a startup. I’d love to hear from others who have made the tradeoff, and we’ll do our best to share our experiences as we go.