When Melanie Perkins pitched her idea to build a graphic design platform for everyday users to investors she was rejected more than 100 times and told it could not be done in Australia.
But the 34-year-old entrepreneur persevered and a decade later Canva is valued at $15bn and part of a new wave of technology companies in the country with global ambitions.
“At that point in time, people thought you could only build companies in Silicon Valley and wouldn’t invest in anyone who they couldn’t go and visit regularly,” said Perkins, who grew up in Perth, Western Australia.
“Things have changed radically. We are really fortunate now to have a thriving tech ecosystem and lots of amazing venture capitalists who are thinking about how Australian companies can succeed on a world stage.”
Australia’s growing status as a technology hub received a boost in August when Square, the US payments group led by Twitter founder Jack Dorsey, agreed to buy Melbourne-based “buy now, pay later” provider Afterpay for $29bn. The deal, if approved by shareholders and regulators, would be the largest takeover in Australian history and raise the profile of local start-ups among global investors.
As part of the deal, Square will hold a secondary float on the Australian Securities Exchange (ASX), which is marketing itself as an international hub for technology listings.
“We will have a global technology company in our benchmark indices. That will make a lot of people sit up and take notice and look at ASX as a tech venue,” said Max Cunningham, group executive for listings at the bourse.
The S&P/ASX All-Technology Index has grown to 79 companies – 17 of which were founded outside Australia – since it launched in February 2020.
The optimism surrounding Australia’s technology sector has been catalyzed by the Covid-19 pandemic, which has pushed more businesses online, and ultra-low borrowing costs.
Atlassian, a Sydney-based software company that makes products for other programmers, helped put Australian tech on the map when it listed on New York’s Nasdaq in 2015. It has doubled in valuation and is now worth $83bn.
Atlassian founders Mike Cannon – Brookes and Scott Farquhar are spearheading development of a tech cluster in Sydney. In August, planning approval was granted for Atlassian’s new A$1.4bn, 40-storey timber tower headquarters, which will anchor a new Tech Central precinct centred around the city’s main train station.
Cannon-Brookes and Farquhar have both set up venture capital funds to support Australian start-ups.
Australian-focused venture capital fund managers secured a record A $1.3bn in new commitments for 2020, almost double the value a year earlier, according to the Australian Investment Council. That has enabled homegrown tech groups such as Airwallex, Rokt, Safety Culture, Culture Amp and Canva to raise money at high valuations.
Rick Baker, co-founder of Blackbird Ventures, added that investment from Australia’s A$3.1tn superannuation sector and from overseas was also energising the sector. “US venture firms are really taking an interest in Australia and have learnt how to do investments over Zoom,” he said.
Blackbird was an early investor in Canva and Zoox, a self-driving start-up that was bought by Amazon last year for more than $1.2bn. Last year it raised a A$500m fund.
The drive to transform Australia into one of the region’s leading tech hubs has attracted powerful backers. Groups including Google, Atlassian and Afterpay in August formed the Tech Council of Australia to lobby government.
“Our focus will be on policies and actions that will support growth and local and global investment in the Australian tech sector,” said Robyn Denholm, who chairs the council and US electric vehicle group Tesla.
Not everyone is convinced Australia’s tech boom will continue, pointing to hefty valuations on companies, many of which have never turned a profit.
Some point to the listing of Nuix, a data analytics company, on the ASX in December. Its shares have since plunged by about half after it downgraded its revenue expectations for 2021.
There are also doubts about whether Australia, better known for its huge mining industry than fostering innovation, can attract global talent.
The country suffers from a small domestic market and intense competition, which have been worsened by Covid-enforced restrictions on international and internal travel, said one Singapore-based venture capital executive.
Australia’s promotion of world-first laws aimed at cracking encryption and regulating social media have also prompted concerns that the government is indifferent to the tech sector.
“The tech industry and its wide benefit to society are being hampered by poor government regulation,” Farquhar, the Atlassian co-founder, warned in January when Canberra published a draft law forcing Google and Facebook to pay news publishers for their content.
Baker, of Blackbird Ventures, also highlights cultural differences between start-up founders in Australia and the US, saying the former need to up their level of ambition. Australians tend to be “quite laid back and self-conscious”.
However, Canva is proving that it is possible to go global from Australia with its web-based platform attracting 60m monthly users. While the vast majority log on for its free service, it is still on course to generate $1bn in revenue this calendar year.
“The great thing about being rejected [for funding] . . . was it was really helpful to refine our strategy and refine the way we articulated idea and vision,” said Perkins.
“Having Australian companies succeed on the world stage helps people to think about possibilities and starting their own companies,” she added.