Tech Leaders Thoughts: 'Is the Sydney startup scene 10 years behind state of the art?'

Following recent comments from ex-Google and Airtasker’s current VP of Engineering Yaniv Berstein on product and engineering at Australian tech startups being 10 years behind state of the art, TechLifeSydney sat down to talk to him and explore the context behind his thoughts.

At a high level, Yaniv believes the Sydney tech scene is facing these common issues;

• A shortage of product and tech co-founders is creating an imbalance at the top of startups
• Equity is not being valued highly enough by tech professionals locally
• Where are the innovators and entrepreneurs freed of a mortgage by liquidity events?
• Are we doing enough to entice the Boomerangs back to Sydney?

The core problem according to Yaniv

One of the strongest observations made by Yaniv through his network is a clear shortage of technical and product-led co-founders, which in turn is creating an imbalance in the Sydney tech ecosystem.

Those founders who identified a problem (and opportunity) in their industry, then adopted technology to solve it without any prior experience of operating within a software company, far outweigh those coming out of existing tech businesses with ideas of their own. In global tech hubs like Silicon Valley, London, Tel Aviv, there is a greater balance between the origination of founders and the numbers of tech startups increasingly seeing success and scalability.

So why is this happening?

One hypothesis Yaniv speculates on is that there has been no evidence of a wave of cashed up early employees from any of the liquidity events that have taken place. In other tech hubs, this has been a key driver for the creation of new tech companies by engineers and product talent with financial freedom thanks to cashing in their share options.

It is almost four years to the day since Atlassian IPO’d on the Nasdaq where an unknown number of employees would have cashed in their options - but where are they now? There have been some early stage startups created, but as Yaniv states it’s not quite been the ‘PayPal Mafia’! While, the cost of living is high in Sydney - and maybe there is a tendency to be risk averse - we’re going to struggle to catch up on those 10 years.  

Our industry knows there are some serial entrepreneurs; Sam Zheng following on from founding Hyper Anna is now on a charge with Curious Thing.Tim Power on a second e-learning platform with Inquisitive following the success of 3P learning. nd Adam Jacobs co-founder of the Iconic is now making traction with Hatch. These are just a few but the vast majority of the successful established tech companies are by first-time founders. This means ounders are often learning as they go on key areas like managing technical debt, effectively using funds from a capital raise, when and how to scale into overseas markets.

So what needs to happen?

There certainly isn’t a lack of funding given local VCs and the increasing interest from US VCs - but how do we increase the number of product and engineering founder lead companies?

Creating a startup is stressful -mentally demanding and very costly -however, there are some great incubators out there including  Antler which supports founders with a wage during its12-week program.But as Yaniv highlights, without those liquidity events where the financial shackles are removed there will be too many smart people happy to be paid a great wage and enjoying a wonderful lifestyle in this amazing country.

The answers for Sydney tech?

Yaniv believes that while tech founders have become more generous with equity, this trend needs to ramp upwards if the Sydney tech scene is to  increase its chances of success stories. The more engineers, product managers, designers gaining financial freedom through share options with tech startups, the more inspired others will be to take the leap.

Yaniv has seen first hand that, while competing with the likes of Google, Facebook, and the finance sector locally on salary is possible, it is a shame that too many people don’t value equity. He believes a reduction in salaries (offset by equity) for startups would decrease the cost base and therefore make them more likely to succeed.

When startups struggle to compete for talent it leads to more outsourcing which can hurt the technical quality of the products they build. The more success stories however the more top tech talent will opt for a lower salary and share options, if you can see people winning the lottery you are more inclined to buy a ticket, if there are no stories, celebrations, champagne popping then why be attracted by share options?

Tempting Aussies back home. Yaniv feels it is hugely important to attract ‘the Boomerangs’ from overseas tech hubs back home, bringing with them a wealth of experience to share with local companies.

So should we be encouraging Aussies to explore moves over to the likes of San Fran, New York, London? We face a shortage of talent in the Sydney market, so having more people leave will put a further strain on local companies, but is it shortsighted given the upsides those Aussies have when (and if) they return?

Encouraging Aussies to explore overseas is a long-term benefit for the Sydney tech scene, the short-term solution could be to welcome overseas tech talent who can bring in their experience. And just like Aussies, some will stay and some will return home.