Geeks oust miners among Australia’s new rich as boom fades | South China Morning Post
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Geeks oust miners among Australia’s new rich as boom fades

Tech start-up and biotech sectors at forefront of a push to transform Australia from exporter of iron ore to exporter of ideas

PUBLISHED : Monday, 24 June, 2013, 10:16am
UPDATED : Monday, 24 June, 2013, 10:16am

In a country synonymous with larger-than-life mining tycoons and Outback heroes, the geeks are quietly inheriting the earth.

As coal magnate Nathan Tinkler, the poster boy for Australia’s fading 10-year minerals boom, publicly battles against bankruptcy, software entrepreneurs Mike Cannon-Brookes and Scott Farquhar are riding high.

The former college buddies behind fast-growing software firm Atlassian unceremoniously bumped Tinkler off the top of Australia’s “young rich list”, leading a charge in the country’s blooming technology industries.

The tech start-up and biotech sectors are at the forefront of a push to transform Australia from an exporter of iron ore to an exporter of ideas.

“It’s a pretty primitive economy,” said internet entrepreneur Matt Barrie. “We basically dig stuff up out of the ground, put it on a boat and ship it.”

As part of ambitious plans to change that, the government has announced millions of dollars in new venture capital funding and large-scale reviews of the technology sector. An A$38 billion (HK$271.5 billion) National Broadband Network (NBN) will bring high-speed internet to almost all the 23 million population.

“As the rollout of the NBN continues, the capacity for start-up companies, particularly in the tech and digital sectors, to create game-changing businesses and applications is unprecedented,” said Communications Minister Stephen Conroy.

Online and high-tech start-ups account for just 0.1 per cent of GDP and 9,500 jobs, but the sector is growing rapidly. A recent report by PricewaterhouseCoopers (PWC) suggests it could account for 4 per cent of GDP and 540,000 jobs by 2033.

That puts Australia well behind Silicon Valley in California, the epicentre of start-ups, but growing activity in Sydney and Melbourne are putting those cities on the edge of the world top 10 that currently includes London, Tel Aviv and Singapore alongside US cities San Francisco, Seattle, Boulder and Austin.

All eyes are currently on Cannon-Brookes and Farquhar, amid expectations they will list Atlassian on Nasdaq within the next year, a plan first flagged in 2010 when US venture capital firm Accel Partners saw its potential and invested US$60 million (HK$428.7 million).

Founded by the pair straight out of university 10 years ago using an A$10,000 (HK$71,445) credit card debt, Atlassian is now a world leader in collabouration and bug tracking software, pulling in revenue of A$103 million (HK$735.9 million) in 2011 without a single salesperson.

Its products are used by 25,000 companies in 135 countries, including McDonalds, Coca-Cola Enterprises, eBay, Boeing and the US space agency NASA.

Cannon-Brookes said the company had an annual compound growth rate of 30-35 per cent, but declined to give a timeframe for listing.

“It’s a logical next step for us to take,” Cannon-Brookes said.

He said the company planned to add another 100 employees in the next quarter to its current staff of 700, based mainly in Sydney, San Francisco and Amsterdam.

The success of Atlassian propelled Farquhar and Cannon-Brookes to the top of the Business Review Weekly Young Rich List, ousting Tinkler, the former youngest billionaire in the country, whose rags-to-riches-and-back tale took another twist this month with the sale of his stake in Whitehaven Coal Ltd.

Farquhar, and Cannon-Brookes are worth A$480 million (HK$3.4 billion) combined, on last year figures, ahead of Tinkler’s A$400 million (HK$2.9 billion) fortune.

The gap has widened further since then, with Atlassian growing and Tinkler dropping off the magazine’s more recently calculated main Rich List of the country’s wealthiest 200 people.

On current form, he will also disappear from the this year Young Rich List, which ranks the 100 wealthiest people under the age of 41, when it is published later this year.

While the main Rich List is still dominated by entrenched mining tycoons such as Gina Rinehart and Fortescue Metal Group’s Andrew Forrest, the young list is notable for containing 24 people who made their fortunes in technology.

Close behind the Atlassian duo at No.4 was PC Tools founder Simon Clausen. No.8 was Ruslan Kogan, a serial entrepreneur specialising in online retail sites. At No.10 were Mitchell Harper and Eddie Machaalani, who built software-as-a-service platform Bigcommerce. Matt Barrie was at No.50 thanks to his rapidly growing recruitment site freelancer.com.

And it’s not just the tech geeks rising through the rich ranks. Their contemporaries in the biotech sector are also poised for financial windfalls.

As the Australian population ages and Asian countries grow increasingly affluent, there is potential for significant growth in the sector, which currently has 95 listed companies valued at A$49 billion, according to research group Bioshares.

Silviu Itescu, a doctor, scientist and chief executive of stem cell research firm Mesoblast, features on the main Rich List with a A$400 million fortune, as his company reportedly considers a second listing on Nasdaq.

Among the minnows tipped to be the next super-earners are neurodegenerative disorder specialist Cogstate, disinfection and sterilisation expert Nanosonics, IVF diagnostic test developer Universal Biosensors, sleep disorder appliance maker SomnoMed.

“These are all companies that we are expecting to reach profitability in the next 12 to 18 months,” said Mark Pachacz, research principle at Bioshares.

But industry experts warn the grand plans to use tech start-ups and biotech to help transform the economy could be stymied by a lack of funding for new ventures in both sectors, a brain drain overseas and a dearth of local science graduates.

Venture capital firms have been burned by some spectacular failures in recent years, such as regulatory hurdles that hit key products from drug maker Pharmaxis, while low government grants have been criticised by industry.

The government moved to address that last week by announcing a review of employee share scheme regulations, which companies such as Atlassian have argued have forced talented staff in new businesses overseas.

A group of industry leaders, including the Atlassian duo, recently formed Blackbird Ventures to invest A$20 million in Australian start-ups that have the potential to be global success stories.

Blackbird Managing Director Niki Scevak said it would address a funding gap between a raft of accelerator funds ploughing seed money of up to A$1 million into the market and “series A” funding of more than A$10 million for more established companies from US funds like Accel.

Blackbird has so far invested in online design platform Canva and Ninja Blocks, a software developer bringing the remote controlled home to the masses by connecting home devices to web and mobile apps.

“It’s a national imperative that we’ve got to build up the technology industry in this country,” said freelancer.com’s Barrie. “I can’t think of another industry could help us go into next 20, 30 years.”

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