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  • Featured, News - Written by on Thursday, August 19, 2010 15:10 - 9 Comments

    Australia gets its own Y Combinator-type fund

    A close-knit group of Australia’s technology startup elite has formed a new seed fund that will offer small investment rounds and up-close mentoring to local technology startups, in a similar model to famed US incubator Y Combinator.

    Dubbed Startmate, the fund has been created by Homethinking founder Niki Scevak — who has also been involved in a number of other startups such as the BookmarkBox. The fund surfaced today at the Tech23 event held in Sydney, which highlights 23 up and coming companies and connects them with investors, mentors and the press.

    The list of those involved in the fund — contributing money and advice — reads like a who’s who of Australia’s startup sector. Former Realestate.com.au chief Simon Baker is also involved, as well as the two founders of local firm Atlassian, which recently took $60 million in funding from US VC firm Accel Partners – Mike Cannon-Brookes and Scott Farquhar.

    Bart Jellema, who recently sold his company Tjoos, is involved, as well as Ryan Junee, whose company Omnisio was bought by YouTube. Mick Liubinskas, the co-founder of local startup consultancy Pollenizer, is involved as well as Phaedon Stough, the managing partner of recruiter MitchelLake. And there’s one venture capitalist — Bill Bartee, a general partner at Southern Cross Venture Partners.

    And that’s not the whole list — there are many more entrepreneurs involved.

    According to one – Alan Jones, the founder of Doing Words, who is also involved with Pollenizer and has worked for a host of other online companies, Startmate will invest $25,000 each in local startup companies that it approves, with the process to kick off in January.

    “It’s a Y Combinator model – very early stage – for people whose credit card is about to max out,” Jones said in an interview today from the sidelines of Tech23.

    Successful applicants will gain access to the extensive experience of the fund’s mentors, and will go through a development process. And there are demonstration days being planned both in Sydney and in San Francisco – with the fund to fly its companies to the US to present.

    The fund will take an equity stake in the companies it invests in, but not a set amount, with Jones noting it was difficult to speculate on what it could be for each company, although it wouldn’t be a controlling stake.

    Y Combinator similarly makes small investments in companies – rarely more than $20,000, and takes small stakes of between 2-10 percent. Applications for the first round will open in October this year and close in mid-November, with five initial startups to make the grade.

    “We’re not looking to make this a massively profitable enterprise for us,” said Jones. “It’s just something we’re going to do that we think the industry needs.”

    The fine details of how the fund will be structured are still being worked though – with Jones joking that Startmate’s web site doesn’t even have a logo yet. But like the startups it will foster, it will seek to operate on a “lean” model, which Jones said was probably the way forward for the majority of local startups.

    “The biggest risk in a startup is not whether someone will steal your idea or if you can build a product but rather that no one will care,” states the site. “Startmate is designed to help you win your first customers and work through the initial stages of customer discovery.”

    Image credit: Nathan Sudds, royalty free

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    1. Kim
      Posted 19/08/2010 at 3:33 pm | Permalink |

      Im 19 and have been following the tech scene for 3 years. I’ve always wanted to start something and but have had the opportunity to do something as there aren’t knowledgable, experienced people to help. This is what i’ve been waiting for!!!

    2. Posted 19/08/2010 at 4:12 pm | Permalink |

      @Kim – I’m excited that this is happening and think its a positive step for the innovation and startup industry in Australia, but I disagree that to date there were no other resources.

      There are heaps of people out there if you know where to look. You need to hustle and network. There are a number of networks, such as The Hive (http://thehive.org.au/), and many entrepreneurs who are a bit further along in the curve who are more than willing to give advice etc. Most people (from my experience) who have come up and are now ‘doing it’ are very generous with their time, and want to help others who are trying to start something.

      Sure – we’re not the Valley, but we’re definitely not devoid of any resources.

    3. Posted 19/08/2010 at 5:39 pm | Permalink |

      Not being the valley is a terrible excuse and doesn’t wash with me. We’ve got plenty of great people here. It just takes tenacity to find them.

      Also, to clarify, my involvement is to represent Pollenizer.

    4. Posted 19/08/2010 at 10:30 pm | Permalink |

      This news is really exciting. I’m quite glad that I’ve finally found and stumbled onto the Australian startup scene. Quite a dynamic community and lots of enthusiastic people!

      The Tech 23 event held today was great. Some interesting internet startups included ReadCloud, Portable, SolveXia, Taggle and Brain Gauge… out of the many…

    5. Jason F
      Posted 20/08/2010 at 12:08 am | Permalink |

      [edited -- note, I have edited part of this comment as it may have been defamatory. I will re-insert the text if I can verify its accuracy -- Renai LeMay]

      Meanwhile, I think this is great for Australia, but worry about the guy running it. He seems to have no experience raising VC capital, and missing the big factors that make YComb a success, a set of investment docs and experience. So many of those involved have never raised any VC funds. Scott F for instance has just now taken funds after years and years of speaking at local gatherings about how CRAP everyone that takes VC is. Seems really silly.

      No one seems to have paid to get local investment docs drafted – how can such small investments be justified otherwise?

      • Posted 20/08/2010 at 7:12 am | Permalink |

        Jason, there are bigger things to be worried about than investment docs. For the record, we have DLA Piper/DLA Phillips Fox who are a legal sponsor of the program. They have agreed to create a seed agreement (which we will likely make completely public) and offer free legal advice for the initial three months. A partner in the valley, Richard Horton, is moving back to Sydney and will directly counsel the startups.

        Also, to be clear, this isn’t VC money by any stretch: It’s a mentor-driven seed fund. That means that we know that people can probably russle up $25k from an uncle and the cash provided is not what we are competing with. Rather we have more than 20 people who have created and operated startup businesses and that can help companies win their first customers. Because of that we believe we can increase a startup’s chance of success.

        Finally, if the businesses choose to raise angel financing every one of the mentors will help with that and most of the mentors are active angel investors themselves.

        Over time, as the program scales up the startups will also have the benefit of being apart of the alumni network that we hope will become an ever bigger help to those getting started.

      • Bryce
        Posted 20/08/2010 at 3:16 pm | Permalink |

        I think you’re missing the point here. This sort of thing is great for the young (in age or experience) startup community and is exactly the formalised system people are looking for. Right now it takes a lot of networking and tenacity to meet the right people that are kind enough to give their time and knowledge as generously as they do. This business will serve as a stepping stone for those who wish to move beyond learning through the good will of others to take their business to the next level.

        Your cynicism feels unecessarily negative, but that’s the tragedy of written text. You’re comment may well have been well intended criticism, but I feel it has fallen well short of that.

        I really look forward to seeing what grows from this fund and will be recommending it to people who it would be of benefit, should I come across any.

    6. Posted 20/08/2010 at 9:27 am | Permalink |

      Excellent news, great to see the right people getting behind something like this.

    7. Posted 01/12/2010 at 1:19 pm | Permalink |

      How does this relate to the Playford Capital organisation in South Australia? They’ve been running (with significant state government funding) for a number of years now providing some VC-style cash and business training and support to startups.

      Anyhoo, glad to see there’s more support for entrepreneurs out there.

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