Dan Krasnostein on going global & the Australian startup ecosystem

Dan provides his insights for the path to international growth and how the core to success all boils down to the people.
Hugo Bieber
,
October 20, 2021

Dan Krasnostein is a highlight of the Think & Grow network and he recently caught up with Think & Grow Partner Hugo Bieber. Dan has spent the past nine years as a partner at SquarePeg and recently returned to Melbourne from Israel.  SquarePeg is a global investment firm on a mission to empower exceptional founders, so, naturally, he’s a good friend with so many shared values. 

This really is a showstopper of a conversation with Hugo due to the amount of ground it covers; from how to practically expand globally from day one to talent and funds available in the Australian ecosystem, and what SquarePeg looks for in a potential portfolio opportunity. With so many nuggets of information in here, this is not one to be skipped. 

Hugo: We’re seeing more Australian companies grow, raise money and expand. Are you seeing a path of international growth for them? 

Dan: There are very few industries in Australia where the local market is large enough to sustain a business that's going to scale into a really large organisation; Financial services is one of them. But, most of the Australian businesses we're looking at are attacking global markets, starting domestically, but with their eyes on the international prize. 

That hasn’t changed dramatically since we started, in terms of types of companies and the mindset of entrepreneurs. The one thing that has changed is the entrepreneur's intention to go international from day one, as opposed to owning the Australian market then going international. As we know, this is the case in Israel and New Zealand just because the domestic markets are so small. 

The challenge is turning the ship once you’ve started to build out the product and go-to-market function. Think about the following points to earn yourself quicker success when expanding internationally: 

  1. How you build your sales and marketing function, not just where they are, but also the organisational structure and the type of people required. 
  2. What your international go-to-market will look like. 
  3. How to structure the whole organisation to be thinking global from day one. 


Hugo: What do start-ups need to structurally act global from day one rather than just think about it? 

Dan: There's a lot of elements to this, but one is the type of people that you're going to have in your sales team. This is dependent on the type of business, whether it’s B2B or B2C and industry, but what the team looks like in terms of roles, people and regional heads. For example, selling into the Australian market with someone who is knowledgeable about this market is going to be a different type of person that needs to sell into the UK or US market. 


Hugo: From your perspective, what are some of the mistakes you’ve seen companies make as they go international? 

Dan: I would say timing - knowing the right time to pull the trigger. Going too slowly and going too fast are both common issues. 

Going too slow is not taking advantage of a position you're in and being able to execute in a market fast enough. The going too fast part is often building out a go-to-market team before you've identified either product-market fit or getting your sales process in motion. 

Entrepreneurs will often want to go faster and so put more into the go-to-market function including adding a marketing and sales team, building more leads. But, until that machine is really working with the right processes in place and you understand exactly what it is you’re selling, more heads are not necessarily the answer. 


Hugo: What’s your advice for adopting to different countries and cultures? Australia has a slower sales cycle compared to the US, for example.  

Dan: I would say that again, it’s dependent on industry. Australian corporations are good in terms of being early adopters of technology. They’re prepared to adopt new technology and take bigger or more risks with startups than some other markets. Let’s exclude San Francisco from the US because it lives and breathes technology. Where Australians do move slower than other parts of the world, especially at the enterprise level, negotiations etc, they make up for that in their appetite for startups. I think it’s higher. 

Very generally speaking, there are differences in terms of people, Australians tend to be a little more quietly spoken and more reserved, whereas people from the US are typically high bravado and they're excellent at sales and messaging, they’re not afraid to put themselves out there. More of the cultural differences tend to happen in parts of Europe, certainly into parts of Asia. 


Hugo: From a SquarePeg perspective, you’re probably the only Australian-based VC fund with offices outside of Australia. How does that change your portfolio? 

Dan: Being international is something we live and breathe. For those that don't know, we have offices in Singapore, Melbourne, Sydney and Tel Aviv. So, if you take the Australian and Israeli offices, the local markets are so small that you do think international from day one. Almost every single one of our companies, with very few exceptions, are playing in multiple markets. 

To come back to your question, that mindset of thinking internationally from day one is something that is just core to all of our companies, and therefore core to us. The fact that we are international and we’re dealing with some of those complexities, helps us think through some of the common challenges. 

Just being able to create networks of entrepreneurs that are operating in just about every core market in the world today for the rest of our portfolio CEOs, management teams and founders to lean on is something that they find really valuable. 


Hugo: We’ve recently seen more large international VC funds join investment rounds in Australian start-ups. What impact will this have on the Australian ecosystem? 

Dan: SquarePeg has been on the record many times saying that we believe all these things are a net benefit for the market. Does it make the market more competitive? Absolutely. We don’t see that as a bad thing for individual funds like us. 

Creating an environment that is more entrepreneur friendly, where they have more options to raise capital, more talent available and more mentors that are helping them along the way will do wonders for attracting the best and brightest to this market. 

In addition, having other funds offshore to bring different sets of skills to the table and create partnerships with local funds, we think is a really good marriage. You’ll really have the best of both worlds, which can be really powerful for entrepreneurs.


Hugo: How do you think we can encourage the talent that’s locked up in the corporate world to go outside their comfort zone and take a risk joining a startup? 

Dan: I think it’s going to happen naturally. It used to be hard to paint that picture of a successful career path with just one or two successful Australian companies. The number of unicorns is going through the roof now, the quality is high and they have the potential to be world-class companies. That in itself will attract more people to the industry. 

A secondary piece about talent that really excites me is around what’s changed in Australia. These companies are getting larger and larger, meaning you're exposing more and more talent inside these organisations that are understanding and learning what it takes to build a really big business. They are then either starting their own companies or joining the next wave of companies. We are now developing an alumni network that we haven’t had before - the Atlassian alumni and the Canva alumni coming out and starting their own businesses. The networks we're getting from them are just so powerful. 


Hugo: When you're meeting new prospective portfolio companies, what is it to you that makes a really exceptional team?

Dan: There's no one approach. When we think about types of founders and companies we want to back people that are doing their life's work, people that have amazing visions.  We think about: 

  • An all-star team that’s resilient and can go and execute on their vision. 
  • Whether they have the desire and capability to surround themselves with exceptional talent. 
  • A drive to change industries, but also being humble and eager to learn. 
  • A deep curiosity and ultimately understanding what is the right mix of people for their industry, for their business and their model to pull together a team. 

There are some exceptional leaders and CEOs in the world and they are not creating the entire organisation on their own. Fitting together the pieces that make that a complementary set is what's critical. It’s all about the people at the end of the day.


Hugo Bieber

Partner
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