The future makers

Published 31 March 2011 05:02, Updated 05 April 2011 10:21

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It’s 6pm on Friday night and a small group has already started to gather at a smart art deco bar on the first floor of the Grace Hotel in the Sydney CBD. The vibe is friendly and welcoming and the room is quickly filling with the excited conversation of entrepreneurs, electrical engineers and a smattering of IT autodidacts, for a gathering that is rapidly becoming one of Australia’s most vibrant, and profitable, technology networking events.

In one corner a recent graduate waves his hands in the air as he discusses his latest business idea with an entrepreneur who’s just attracted funding for his third start-up.

In another corner is an angel investor whose dotcom exit has left him wealthy enough to spend the rest of his life fishing, except that he’s caught the start-up bug and wants to do it all again.

The dress is tidy but casual – jeans rather than pants, runners outnumbering brogues. The odd suit turns up from the office but the tie is soon loosened as the real work begins.

Welcome to Silicon Beach – Australia’s answer to the Silicon Valley ecosystem that supports a thriving technology industry and its innovation.

As the evening progresses, the group swells to roughly 50 people – among them the event’s founders, who are doing more than just talking about the next generation of web-based businesses, they’re actively involved in founding them. They include serial entrepreneurs Bart Jellema and Kim Chen; co-founder of the web company incubator Pollenizer, Mick Liubinskas; entrepreneur Lachlan Hardy (see story, right); and Elias Bizannes, who is now driving the StartupBus across the US with 25 Australian web “wantrepreneurs” (wannabe entrepreneurs) intent on seeing in a new era of online business.

“We started meeting in 2007 and for three or four weeks it was just the five of us staring at each other but now there’s always someone here, it’s got a momentum of its own,” says Hardy of Silicon Beach. “It’s a community of people who are interested in starting IT companies, who like ideas and technology, and its smallness is a real advantage because someone with a great idea can just come in and get access to an entrepreneur who’s been through it all before and learn from their ideas.”

A week earlier, Spreets chief executive Dean McEvoy was working the room, fresh from the news that his group-buying website had been picked up by Yahoo!7 for a neat $40 million less than 12 months after its launch.

Other regulars include Atlassian founders Mike Cannon-Brookes and Scott Farquhar, who last year raised a $60 million investment from US-based Accel Partners – the largest single investment of venture capital ever for a dotcom.

Among the established success stories there is also the coterie of entrepreneurs and wantrepreneurs, angel investors and software coding enthusiasts who come along for the conversation as much as they do for the business opportunities.

In March 2010, Jellema sold his web-based discount coupon service called Tjoos to US company Internet Brands just three years after he’d started the service and in true Silicon Beach style, he’s already launched himself into a whole new project.

“We’re going to fix email,” says Jellema. “It’s broken and my company ZEROmail is going to fix it.”

This gathering is at the centre of dotcom 2.0 as the IT world booms again. There are ample similarities between the current levels of enthusiasm in the room and the vibe that existed in the late 1990s as the first dotcom boom began to take off.

But this time, dotcom 2.0 proponents say it’s different; that there’s less hot air and more commonsense in the room.

“Last time around there were angel investors around but none that had any understanding of the business model, or of how to measure the risks involved,” says Liubinskas. “Now we have a generation of people who were involved in businesses last time around and have the skills and the money to invest in emerging businesses.”

The result is a business development pipeline – formed through a mixture of accident and design – of tech incubators and networking groups that is already producing some interesting results.

Silicon Beach provides the meet and greet, the social side of the community.

From here, wantrepreneurs can graduate to Smartmates – a tech start-up mentoring scheme that runs weekend events and workshops where attendees can create business plans in groups alongside business angels and mentors who have done it all before.

For those looking for backing, venture capital provider Pollenizer will take ideas from the back- of-napkin stage and push them through rapid business development to test their viability.

At the other end of the line is Innovation Bay, a group that regularly brings together venture capitalists for pitch dinners where the entrepreneurs take five minutes each to pitch their ideas to angel investors with funds and skills to share.

“There are whole ecosystems of groups that have come together to create a pipeline of really innovative, exciting companies that are not just viable but profitable by the time they are looking for venture capital,” says Ian Gardiner, chief executive of web-based TV business Viocorp and founder of Innovation Bay.

Underpinning all this activity is a profound change in the way tech start-ups manage risk and business development.

On the one hand, the emergence of open-source development tools and the third party data hosting and processing known as cloud computing has provided tech start-ups with access to the IT infrastructure and tools they need to develop their ideas at a fraction of what it cost in the late 1990s.

On the other, the traditional waterfall approach to business development, which would see software fully developed and tested before it would be delivered, has been replaced by an iterative approach that focuses on delivering technology solutions rapidly and constantly tweaking or updating them according to the customer response.

The attraction for investors is that the iterative development model allows the entrepreneur to take many small risks and evolve the technology according to the response rather than one or two large risks when technology is launched.

“In the old days, getting into business was all about who you knew and which school you went to but now it’s about your ability to innovate and how prepared you are to let your ideas evolve,” says Gardiner.

“We’re creating the businesses which will lead to a more flexible economy, which will ultimately be better for everyone.”