Start-ups from Down Under storm the valley

Everyone knows breaking into Silicon Valley’s snug
business network can be tough. It’s even harder if you’re
coming from two islands a big ocean away: Australia and
New Zealand.

By Matt Marshall
Mercury News

Yet 75 start-ups arrived here from Down Under last week
for a conference designed to help them break in. There’s a
reason for urgency: Their governments are investing more
employee pensions into venture capital. That has spurred a
proliferation of tech start-ups, but there’s nobody for them
to sell products to. The United States boasts about 60
percent of the world’s high-tech market.

“The U.S. is the largest market,” says New Zealander Guy Manson, director of Anza Tech Net, which sponsored the conference
and is partly backed by the two Down Under governments. “But it’s also the hardest market to break into. . . . It lets in who it wants
to let in.”

They’re fewer in number and are relative newcomers, but Aussies and Kiwis are known for ingenuity. They’ve got some
cutting-edge technologies that might sell here, and they’re going to some lengths to get a foot in the door.

Take Kiwi Henry Bettle, 21, who came to Chico State in January on a scholarship. He attends school full-time and represents a New
Zealand company, Aquacheck, from his dorm room on his off-hours. His salary: 25 percent of Aquacheck’s shares.

The company has developed a prototype for a hand-held device that detects the moisture content of fuels, oils or gases —
something that industrial companies such as Caterpillar or John Deere might need.

So Bettle makes the four-hour drive down to Silicon Valley whenever he can to attend cocktail events. He doesn’t own a car and
can’t afford rental car bills either. But this week he stumbled on a $300 van for sale, which he hopes will make hanging out in the
valley more affordable. Meanwhile, he’s collecting business cards from VCs and has already taken a few calls.

Steve Hess, an angel investor with iStrategies, was one of them. Hess bumped into Bettle at a San Francisco conference last
week, and he was impressed at Bettle’s chutzpah. “He’s a networking fool,” he said. “He’s bound to get somewhere.”

Aussies and Kiwis are considered world-class in agriculture-related biotech, but they also are strong in multimedia and software.

They’re not the only countries with high-tech talent. Among other expat groups, Israelis and Indians have had success in organizing
themselves and opening doors to elite angel investors and venture capitalists.

The Irish, who also are innovative in software, are trying to do the same. They arrived in Silicon Valley five years ago, with
government-backed Enterprise Ireland, which spends $300,000 a year helping Irish companies break in.

The government feared that the Irish weren’t as good at networking as their U.S. counterparts, said Diane Roberts, the local EI
representative. So it offers office space and other leads to start-ups. One success story was Dublin’s Parthus Technologies, an
integrated circuit design company that set up offices in San Francisco and went public on the Nasdaq in 2000.

So why don’t the Kiwis and Aussies join forces with the Irish? No way, say the Irish: “They have some companies in the Web
services sector that we’re trying to attack,” Roberts said. “There could be a lot of competition.”

These might seem like bad times to arrive. Skeptical VCs have closed their wallets. But Manson says VCs have more time and are
looking for fresh opportunities. The costs of doing business — from renting offices to paying salaries — are down.

“Now’s the best time to get in and catch the next wave,” he says. “Two or three years ago, you practically had to be married to
someone before you could talk business with them.”

Linda Jenkinson, a New Zealander and CEO of LesConcierges, learned what it takes to get funding here. Looking for VC contacts,
she bumped into a friend, Tom Miller, who impressed her with his wide network. He said his trick was to obtain two contact names
from everyone he came in touch with.

When she asked him for a name of a VC, he suggested Lisa Suennen, of Psilos Group, whose children attend the same exclusive
school in Mill Valley as his own. He helped set up a lunch with Suennen, and they hit it off. Soon Suennen faxed her a termsheet for
$5 million.

“It’s that six degrees of separation,” Jenkinson said. “I’m going to kiss a lot of frogs.”

Still, others warn that some introductions can be hazardous. Evan Thornley, CEO of San Francisco’s marketing company
LookSmart, prowled Sand Hill Road for money when he started out. A contact introduced Thornley to prestigious venture firm
Kleiner Perkins Caufield & Byers. But it didn’t work.

Thornley said he then realized the person doing the introduction wasn’t respected. “Our brand name was damaged,” he said.

Sometimes the only way is to hit the pavement. Paul Matesic, CEO of Web design company Arazu, arrived from Australia in 1999
with his brother and sister. They were so desperate for clients, they walked across their Emeryville street to pitch to an Internet
service provider based there. It led to their first deal.

Things might get easier. There are so many start-ups seeking to get here from Down Under that Simon Arkell, a former Australian
record-holder in pole-vaulting, has decided to set up at $100 million fund to help them.

He knows first hand what it means to get here. After arriving in the United States, he improved his jump from 16.9 feet to 19.1 feet,
which he attributes to the “positive, aggressive energy” he felt when he arrived.

He says, “I wouldn’t have made it to the Olympics had I not come to America.”

Term Sheet — a name drawn from the formal proposal that a venture capitalist offers to an entrepreneur — is a biweekly column
published on Thursday. Contact Matt Marshall at [email protected] or (415)477-2518.

http://www.siliconvalley.com/mld/siliconvalley/3457540.htm