The Australian tech startup scene is blossoming.
We're already seeing some big successes coming out of the region, with online collaboration platform Atlassian now turning over $200m annually at a valuation of around $3bn. Then there's email marketing company Campaign Monitor, a company we've tracked for some time, which pulled in a cool $250m for its debut funding round in April.
Over the last year we've tracked around $300m in funding in Australian tech companies. The region boasts a range of tech companies poised to disrupt everything from education to fashion and here we've picked 10 that caught our eye.
Peer-to-peer (P2P) lending is disrupting personal loans around the world and the Australian tech entry into this burgeoning field is SocietyOne. The firm develops a platform which matches borrowers with investors. SocietyOne is the first P2P platform in Australia, which is both a blessing and a curse for the company. Pioneering a new method of lending in a region means SocietyOne needs to convince people to sign up to a completely new type of service. Financial services are an extremely difficult sector to disrupt. The influence of habit and wariness of sharing sensitive accounts data with a new company is a huge hurdle for fintech companies to overcome.
“The first challenge for us is to raise more awareness about Peer-to-Peer lending in Australia, where we are the only active P2P lender,” says company CEO and co-founder Matt Symons. “While we have significant first mover advantage in the category, we also have the added task of building our brand while we create a completely new category as an alternative lender.“
If SocietyOne succeeds, its early investment in this space means it should be able to establish a dominant position in the Australian market as consumers come around to new ways of handling their finances. In this game, it's all about timing and patience, so the company will benefit from first-mover advantage. Although there are several significant players already gaining ground in this space such as Lending Club, which is now heading for an IPO, as well as Zopa and Funding Circle, their operations are, for now, focused on Europe and the US. SocietyOne says it has assessed more than $47m in loan applications to date and while that's still a long way off a player like Lending Club, which has assessed $5bn in loans, it's off to a decent start.
2. Smart Sparrow
Another industry ripe for disruption is education and Australian tech startup, Smart Sparrow is a great example of what tech companies can achieve in this space. Smart Sparrow develops software to make education interactive and is tailored to individual students. One of the tools available on its platform is a quiz that asks a harder question if the student gets the previous one right and an easier one if they get it wrong. Smart Sparrow does not offer any courses of its own, but instead develops the platform for third-party developers to build their own on.
A good example of these partnerships is HabWorlds Beyond, which Smart Sparrow launched with Arizona State University. HabWorlds Beyond uses a game-like interface to help students learn about space exploration, climate science and the search for life on other planets in an interactive manner.
“While many educators and institutions see the changes washing through the market, the biggest challenge we see is the lack of sufficient investment towards creating great online learning experiences,” says Smart Sparrow commercial director David Rowe. “Basically, it takes on average up to 50 hours of work to produce 1 hour of online learning# - and this will probably deliver an "average" experience also. We would love to see an environment where educators and institutions invest more in the online education revolution, in much the same as institutions currently invest in more traditional educational infrastructure?”
The interactive element is what is set to make Smart Sparrow successful in online education - because the technology utilises technology to improve traditional learning methods - it's not just about slapping a textbook online. By comparison the much-hyped MOOCs (massive online learning courses) continue to see pitiful completion rates as they combine the solitary experience of sitting at a computer with two-dimensional lecture-style formats. Smart Sparrow understands that for solitary learning to be engaging it makes sense to use technology to make it adaptive. Smart Sparrow’s platform is used by more than 45 educational institutions and the firm now has an office in San Francisco to support its US expansion. It looks increasingly like this end of online education is where the smart money is going.
Home improvement is a huge market in every country and Hipages is well on the way to becoming the default way Australians source trades people. Using the site to get quotes is free as Australian tech startup, Hipages makes money by charging those who list their services on the site. The company also makes money from businesses, which pay around AUD300 ($282) per year to be listed on Hipages. Based in Sydney, the home improvement site claims to attract over 1m visitors each month and connects 40,000 trades people with 500,000 consumers.
Like many of the skill-specific marketplaces we're seeing gain traction at the moment, this isn't just an online listings site. The firm seeks to engage with its community of customers and professionals with content such as articles on the cost of jobs and inspirational photos of home redesigns. Specialising in this manner is much harder for a general business site to do well, which gives Hipages a distinct advantage over marketplaces offering a variety of services like TaskRabbit. Hipages sticks to this model and now operates two other specialist sites; one for pets and one for natural therapies.
Although online marketplaces are relatively mature, investment dollars are flooding in to back a new disruptive generation that are turning the status quo on its head. According to StrategyEye data, global investment in online marketplaces hit 5.27bn across 221 deals in the past 12 months.
4. The Iconic
The Iconic has grown rapidly to become Australia’s leading online fashion retailer. It has the formidable Berlin accelerator Rocket Internet at its back and is part of the Samwer brothers' aggressive drive to control e-commerce in fast-growth economies such as Asia-Pacific. Despite its wealth as a nation, e-commerce is relatively undeveloped in Australia compared to similarly wealthy countries like the UK or US. However, e-commerce is growing fast across this entire region and The Iconic is looking to capitalise on the shift in consumer attitudes as shoppers start to head online.
The site is generous to its customers, offering free shipping for orders over $47 and giving them 100 days to return items. The Iconic also offers delivery within three hours in Melbourne and Sydney. These concessions might eat into the firm's bottom line, but frankly Rocket Internet is hardly short of cash so it's a risk it can easily afford. But, more importantly, it's a risk Rocket can't afford not to take. In regions where e-commerce is less mature, retailers need to sweeten the offering with incentives to lower the barrier and convince customers to start sharing credit card details online. With Asia-Pacific touted for major growth over the next few years, Linio is looking for an early landgrab.
As with some other online clothes retailers The Iconic has realised the limitations of not having a physical presence and opened a drop-off kiosk with changing rooms last month in Sydney - again offering a mixture of traditional and online shopping experiences. Previously The Iconic saw the UK’s ASOS, which launched in Australia in 2012, as its main competitor. However, ASOS is now struggling because it needs to keep its prices high because of the strength of the pound. As an Australian native The Iconic’s business is not at the mercy of the currency markets.
Another potential Australian tech success is DesignCrowd, which helps businesses crowd source graphic designs from its 200,000 designers. The average price is $350 and DesignCrowd aims to differentiate itself from other crowd sourced designer sites by offering a participation payout to designers. DesignCrowd itself takes 15% of any projects commissioned over its platform. It is now pushing heavily into other markets and recently snapped up Worth1000, a US site offering a similar service. Despite its move into the US market the company is still based in Australia. DesignCrowd’s competitors include 99designs, oDesk and Fiverr.
Skills crowdsourcing online is just one of the ways technology is disrupting the way we work and find work. DesignCrowd operates a crowdsourced version of a marketplace like Hipages, except it's aimed at the arts sector. We're also seeing a lot of disruption in the way people work together with online collaboration platforms such as Atlassian now making it possible for developers to work on the same project from different corners of the globe. Meanwhile, over in Mexico there's WaveStack, which has developed an online collaboration platform for musicians and producers. That's not to mention the many companies, from LinkedIn to startups like HackerRank and BirdDog.
One of the most problematic issues in technology is the digital divide between the tech-savvy youth and the less capable old who are usually simply written off by tech companies. Tapestry, however, saw a chance to bridge the digital divide by enabling everyone to connect via social networks. The firm developed its own social network, also called Tapestry, which features two types of user accounts. One called ‘sharing’ for the tech-savvy and the other dubbed ‘simplicity’ for those who are not. The two accounts have different user interfaces reflecting the respective capability of the user. The idea is to keep older people connected with their friends and family.
“The Australian tech startup scene has a lot of energy and optimism, and has made tremendous strides in the last few years. At the same time, it does face a number of challenges which make it tougher to build a startup in Australia than it does in some other places,” says Andrew Dowling founder and CEO of Tapestry. “Chief among these is access to capital -- which is why many of the best local startups end up establishing themselves offshore in order to access not just larger customer markets, but greater opportunities to access capital.”
The app is currently free to use, with only a suggested price scheme, but it does have an enterprise version with increased functionality aimed at organisations that manage the care of older people such as retirement homes. One of its main challenges it faces acquiring new users as generally older people adopt new technologies far more slowly than young people. Tapestry aims to overcome people’s reluctance to try new social networks by also integrating content from Facebook and emails. However, even for younger users the idea of having to sign up to yet another social network may put people off. Tapestry's specialised social network may be its unique selling point but it is also its biggest weakness. Over the long term, the older generation the app is aimed at will have Facebook accounts of their own reducing the digital divide Tapestry is trying to bridge. This long-term problem and the lack of a clear revenue stream shows why having premium tools is so crucial for Tapestry. Integration with health monitoring wearable tech is one direction the company could go down, with advances in this sector aimed at helping older people live more independent lives.
Taxi booking and car rental apps are popping up everywhere and Australia is no exception, with Ingogo one of the startups attempting to disrupt the taxi industry of a particular region. Unlike Uber, which is also present in Australia, Ingogo allows bookings up to 48 hours in advance and even offers AUD10 ($9) to customers when a driver cancels a booking. Ingogo hopes these sweeteners will be enough to ward off the heavily ambitious and well-funded Uber.
Unfortunately it finds, in Uber, a company currently hell-bent on an Amazon-like mission to undercut rivals and scale at speed around the world. In New York Uber is lowering its cheaper fare service UberX fares by 20%, which it boasts would make it cheaper than a regular yellow taxi in the city. In San Francisco Bay Area, it's reduced prices by 25%. It's offering customers a cheaper price, regardless of whether it loses money in the process. But that's exactly the kind of margin it can afford to operate on right now.
Still, investment in this space, coupled with the necessarily hyperlocal nature of taxi bookings means that there is space for more than one player. Ingogo also offers a payment service for taxis and says it handled 1.5m taxi trip payments last year. Ingogo is now looking to list on the Australian Stock Exchange, which would provide it with a fresh tranche of funding to fend off its competitors.
Hiring employees is usually a time consuming and costly process and RecruitLoop seeks to change that offering the benefits of a recruitment agency for a low price by offering its service online. RecruitLoop provides a marketplace to match enterprises with experienced recruiters. The experience of its recruiters is key, with RecuirtLoop guaranteeing all the recruiters on its marketplace have at least five years of experience. To ensure high standards RecruitLoop will delist a recruiter if they get more than one complaint from a client. Unlike many recruitment agencies RecruitLoop’s charges its clients an hourly rate rather than a commission.
RecruitLoop claims it can reduce recruitment costs by 90% and it takes a cut of between 15% and 30%. The undercutting of traditional recruitment agencies means the company does not have any direct competitors, yet. RecruitLoop’s success in Australian tech, including filling jobs for DesignCrowd, led the firm to set up shop in the US.
Looking to take advantage of the growing e-book market, Tablo aims to become the online publish platform for aspiring authors. Developed by 21-year-old Ash DAvies, Tablo aims to simply publishing e-books to stores like Amazon Books. The firm just picked up $400,000 in funding from Y-Combinator and aims to create a publishing process that is as simple as posting a blog.
But it's not just about getting an e-book into a store. It's also about building a following of readers online. Authors create a profile and can use Tablo’s social features to build awareness before they actually publish anything. Options include inviting readers to follow their books as they are written. Tablo’s cloud-based platform also allows authors to use multiple devices and is already used by more than 10,000 authors across 100 countries. Authors get to keep all their royalties and only users who actually publish something have to pay a subscription fee. Tablo is not the first tool trying to do this, with competitors including PressBooks, but its emphasis on a clean, well-designed user interface sets it apart from the competition and with the backing of high-profile accelerator Y-Combinator, it's off to a good start.
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