Given the unprecedented nature of the pandemic, Australian start-ups are innovating in all aspects of the business as they find new - and different ways - to respond to the changing markets.
The current crisis has exposed the fragility and resilience of the Australian start-up landscape. On one hand, start-ups are sliding down the barrel of 2020, and on the other, new digital opportunities are emerging.
“In Australia, companies that service small businesses have felt a greater impact to their business because the small-to-medium businesses [SMB] industry has been hit particularly hard,” says Tushar Roy, a partner at Australian venture capital firm Square Peg Capital.
The silver lining is that the rapid migration to digital technologies accelerated by the pandemic has opened up new growth opportunities for some start-ups.
“With a few exceptions, the greatest beneficiaries of the pandemic have been technology companies,” says Roy.
“There are the obvious examples of companies that operate in e-commerce, health and education, and then there are the second-order beneficiaries that help people take their business online, like Shopify, or procure services digitally, like Fiverr, whose sales have accelerated in the second quarter of 2020.”
In fact, it has been shown by McKinsey global surveys, that we have taken a five-year leap forward in both consumer and business digital adoption in about eight weeks.
For Australian start-ups, this digital transformation means rethinking their business strategies and who they are selling to.
“We have seen our portfolio start-ups embrace innovation, spin up new products and services, and identify new customer segments — all in a matter of a few weeks,” says Roy.
Singapore-based wealth management company StashAway, which raised US$16 million from a group of investors led by Square Peg, has seen growth faster than before.
“There are a lot of counterintuitive things happening right now,” says Roy. “You’d think in times of crisis, people would be pulling money out of the bank and stashing it under their mattresses, but we have seen the opposite happen where people are looking to save money by investing in long-term opportunities.”
In the high stakes world of venture-backed start-ups, companies which are “resilient, have fundamentally sound business models and adaptive teams, have pivoted fairly quickly”, says Roy.
“Being agile and responsive to changing consumer behaviours and markets will be critical for a successful recovery of start-ups in 2021,” he adds.
As the economy lurches into a new normal, consumer behaviour and recovery will be unpredictable. However, three Australian start-ups are taking digital innovation in their stride and inventing new ways to work with the new normal.
Free-flowing improvisation: Airwallex
Australian unicorn Airwallex is among the few fintech firms that have accelerated their growth due to sudden shifts towards automation and digitisation.
Neil Luo, head of growth at Airwallex, says: “It has certainly been a different start to the year than what I was anticipating.”
“We definitely soaked up quite a lot of impact in Q1 when our clients in overseas education and travel were severely affected,” says Luo. “But our business has weathered the storm.”
The increasing use of digital services has powered the explosive growth of the company. “We are seeing more and more businesses adopting digital solutions to banking as people can’t [physically] go to the bank.”
The global fintech sector has been hurt by a sharp decline in the overall transaction and payment volumes. Despite this, Airwallex raised a Series D round of US$160 million, which is round four of the seed financing cycle. This figure represents the largest to date, at the peak of COVID-19 in Australia in April.
“We see digital as being the future of business,” says Luo. “In the past few months, we have focused on hiring new talent to help us achieve our mission to provide an end-to-end payment solution to digital businesses.”
In response to COVID-19, the financial services platform has focused on expanding product capabilities including the launch of virtual cards and “a payment gateway where you can price your product in multiple currencies, and also receive payments in those currencies,” says Luo.
Airwallex continues to work on its global expansion plans for the rest of this year and 2021 to “expand into the European and US markets”.
High distinction: A Cloud Guru
The economic crisis triggered by the pandemic has done little to dim the growth trajectory of A Cloud Guru (ACG), a technology skills development platform.
“In the first five months of 2020, we saw a 30 per cent uptick in business customers compared to the last five months of 2019,” says Sam Kroonenburg, CEO and founder of ACG, which has helped more than two million people learn to manage cloud transformation.
Even before the current crisis, changing technologies and new ways of working were disrupting job skill requirements. In a recent McKinsey global survey, 87 per cent of executives said they were experiencing skills gaps in the workforce or expected them within a few years.
“COVID-19 repercussions have only sped up the major market trends towards online learning and cloud computing that were already happening. It has forced companies which were behind the curve to adopt more flexible technologies,” says Kroonenburg.
In just one year, ACG has grown from a team of 100 to 400. “It is a dose of luck and foresight,” says Kroonenburg about the growth in business in a COVID-19-affected world. “We feel lucky and humbled that we are in a space that is growing.”
“Tech innovation is changing every industry,” says Kroonenburg. “People are going to have many careers and fields in which they work, and they will need to learn new digital skills.”
He imagines a world where continuous learning is integrated into our work lives. “Everybody hates training, but learning can be exciting,” says Kroonenburg. “Our idea is to make training more exciting, quirky, fun and a great user experience.”
Following the December 2019 acquisition of Linux Academy, ACG has recently launched its new flagship platform to provide a “comprehensive, hands-on and effective skills development platform for cloud learning in the world”.
Leader at work: Deputy
Deputy, a workforce management software company, felt the impact of COVID-19 early on through its clients in the retail, hospitality and tourism industries.
“In the early days of the pandemic, we faced two challenges, the challenge of the world we serve, and the internal challenge of how we work as a company,” says Ashik Ahmed, co-founder and CEO of Deputy.
“We have been able to cope very well with the internal challenges because of the strong sense of community within our teams,” says Ahmed.
In terms of impact on their business, Deputy saw a “significant drop in the number of shifts and hours people were doing as the whole world went into lockdown in the last two weeks of March and early April,” says Ahmed.
“Our team has been resilient and quick in responding to the changing needs of our customers,” says Ahmed. The company has adapted to the changes through business restructuring and developing contingency plans for unfamiliar scenarios.
“Innovation is embedded in all of the decisions that we make across operations, product and marketing,” says Ahmed. “We have rolled out several new product features for customers affected by COVID-19 — all while the team adapted to new ways of working remotely.”
Deputy released Touchless Clock-In, a market-first feature that allows employees to use biometric facial recognition and voice commands to clock in and out of work without having to touch any surfaces to ensure good hygiene and health safety.
Ahmed says the pandemic has opened new customer segments for the company. Sectors such as healthcare and call centres that have set up COVID-19 related hotlines have taken advantage of Deputy to manage increasing shift hours.