Read here for our interview with the founders of Bigcommerce after their first round of funding.

“E-commerce is already booming and we’re really focusing on how to help our clients sell more while leveraging affordable online channels that drive qualified traffic,” said Eddie Machaalani, co-founder of Bigcommerce. “Small and medium businesses shouldn’t need a degree in design and web development to run a successful online store. They want it to be easy and intuitive. We’re radically simplifying the e-commerce experience, enabling the small business not just to compete with larger competitors, but win.”

Maples, an early investor of Twitter, has a large array of investments under his FLOODGATE company. “E-commerce is a $400 billion market growing at massive rates,” said Mike Maples. “Bigcommerce has the team and the platform to take a leadership position in a big way and we are very excited to be involved at this stage.”

The Series B round will fund accelerated product development for Bigcommerce as well as significant expansion of the sales and marketing teams. Bigcommerce has already doubled its global employee base in 2012 and plans to increase headcount by 70 percent over the next two years.

Bigcommerce  is fuelling the online shopping boom, and now power nearly 30,000 stores. Previously it could cost an entrepreneur hundreds of thousands of dollars to set up an e-commerce store. With Bigcommerce it’s just $24.95 a month.

To expand globally will require more capital, if only for localised codes. However with a strong financial base, the founders Mitchell Harper and Eddie Machaalani should be able to expand with greater confidence.

Brian told me that unlike others, he is quite happy working at home. Brian has a plethora of technology at his fingertips and actually has dedicated space at his home for his work. However Brian does make an effort to come to Fishburners, especially on Fridays, for the social and collegial experience.

longscale is a “distributed” workplace with a mix of employees and contractors in Sydney, San Francisco and Viet Nam. Using Skype he is able to maintain contact this his colleagues in real time, even if the people are in the same city or different contenant .

The major architecture for the OzoneCenteral and OzoneCore is Windows Azure, however Brian is finding that some customers would prefer to have the products run on their own Microsoft servers. This requires some changes, with the main challenge of choosing the best Azure (or other Microsoft) features that do not require cloud components or services but still provides the required functionality.

Being a white label service, longscale can provide a market backend for his customers that can be customised for their needs. This can also include sharing data with legacy platforms. It allows banks and telcocomunication companies (who have their own flavour of the OzoneCenteral) to create an application and cloud services marketplace that “enterprises and service providers can quickly take to market under their own brand to address the growing opportunity for cloud-based business applications” (from the press release that announced OzoneCentral in 2011)

I was interested in his view of the change in Microsoft. As a consultant, Brian felt his was his job to know the products in order to give his clients the best products for their needs, without burdening them with weaker products. While Brian still feels that there is a core of people in North Ryde HQ who are still technology focused, he feels as being further away from the “mothership” in Redmond, much of the focus with Microsoft AU is the sales element to the detriment of providing the best tools to the client. There is an element of reputation in providing a good service that is being wasted by Microsoft.

Like BigCommerce, longscale is proving that you can create white label marketplaces, and given the public’s and technologists  mania on cloud services, longscale is well positioned to take advantage of this new market environment.

Normally I shy away from news like this. However, we have covered BIG Commerce in the past, and it allows iTechReport to review the growth of this Aussie company.

From the PR release:

BigCommerce, the world’s fastest growing ecommerce platform has named Steven Power as the new Chief Revenue Officer of its global operations.

Formally from ReachLocal, Powers will be based in Austin, Texas.

Again from the PR release:

“BigCommerce is transforming the way that businesses conduct e-commerce and I’m genuinely excited to be part of it. It’s not only brimming with exceptional talent, but it is one of those amazing companies in which everyone is excited to be on board.”

Big Commerce has been advertising, and I personally heard a BigCommerce ad on the TWIT network.

Given that the VC funding of $15m allowed two offices to be created, one in Australia and one in the US, it makes sense to focus on the US market, if only because of the population size and the better acceptance of catalogue/internet shopping. It also shows that there is still a large untapped market for the BC e-commerce platform globally.

And people are noticing too, with an intriguing write up in the New York Times, showing that there is an upside to using the BC platform for retail. And as Aussie retailers struggle(like Video Game retailer GAME) companies that retail on-line with tools like Big Commerce will be able to compete on an equal basis to large retail. And given that the base price of $25 that includes Credit Card processing and SSL security, it makes financial sense too.

The issue will be if the financial slowdown post Global Financial Crisis will hinder expansion for services like Big Commerce. I do not think so, short term, as in the US the tech sector has been running stronger than the average US economy. And given both the traditional entrepreneurial spirit in the US and the cost saving using BC’s platform for traditional retailers will allow BC to expand further.

The blog has some examples on how people use BC for their retail site, and there are some impressive sites on display.

After seeing companies like Altassian and BigCommerce securing US venture capital and creation of VC Companies like Startmate and Future Capital , what is all this talk of Venture funding, and what is the Aussie VC scene like?

Part 1: What is Venture Capital?

According to a Treasury report, “Venture capital is an important vehicle for financing new and innovative high risk ventures.”

In a nutshell, is generally a high risk, high reward investment, and generally occurs in the start up period while the company is unlisted on the stock market. Companies starting out will often seek venture capital, sacrificing a portion of control of a company in exchange for an injection of capital.

Venture capitalists can be 2 types, a professional firm managing a fund, and “Angel Investors”, high wealth individuals who invest their own money (generally into areas where the Angel has a vested interest). VC funding can be attractive when traditional funding (share issue, bank loans) cannot be sourced.

The pay off for the VC fund can be when

• A company goes public and issue shares
• A company is sold to another company
• A VC can sell its stake in the company to another company.

The advantage to the company is:

• Unlike a listed company, there is no expectation for an immediate dividend or return to investment.
• No set repayments, realising profits from investment happens in when a company reaches certain goals or objectives.
• The company often gets a “knowledge injection” in the form of new board members and mentors from the VC companies
• VC investors often expect that some investments will fail, due to the high risk in VC in general

According to Treasury, Australia was in the median range of OECD nations utilising venture capital (as at 2006), with about $11billion committed to VC to venture capital. But a large percentage of this funding was not committed and there appeared to be an “under-investment” as there were not a suitable number of projects that met the VC criteria.

The Australian Government is a major player with Venture Capital, with a series of schemes like the Innovation Investment Fund and Venture Capital Limited Partnerships.

Some of the notable Venture Capitalists in Australia include Startmate (startrmate.com.au) Krestal Capital (krestalcapital.com.au) and Champ Ventures Au (ChampVentures.com.au).

BigCommerce capitalises on Internet shopping craze (Credit: Auswandern Malaysia/Flickr - http://bit.ly/oAmIHR)

BigCommerce announced recently that it had secured US$15 million in funding, and now has offices in both Australia and the US. Darryl Adams asked co-founders Mitchell Harper and Eddie Machaalani some questions about the organisation.

1. Can you tell me about the history of BigCommerce?

Eddie Machaalani:

Mitch and I met online in a chat room – we were both building content management system software, realised we didn’t live too far from each other in the suburbs of Sydney – and that’s how we initially connected.

I have got a bachelor of science and computing from UTS, Mitch is a genius programmer who was coding since he was 12. We built our first piece of software and the next day we literally had our first sale.

Our first project was a content management system similar to WordPress that we licensed to businesses and individuals looking to create a website. It was launched in January 2004 and we followed up with other products targeting small businesses, including email marketing software and knowledge management software to enable businesses to run an internal intranet and share documents.

Our big break came when we created the shopping cart software and e-commerce platform, which debuted in 2009 under the name BigCommerce.

We quickly signed up our first 1000 customers within three months, within 12 months of launching we signed up 10,000 customers and now we’re about to hit 20,000 customers after just 17 months.

2. What is the market like for e-commerce, and what does BigCommerce see is its best avenue for growing its user base?

Eddie Machaalani:

“The e-commerce industry is rapidly expanding all around the world. It is already a very mature market in the US, UK, and other parts of the world, while Australia is experiencing a massive boom in online retail. The Internet has torn down pre-conceived notions of where and how to shop, and software like BigCommerce is enabling this massive shift.

Mitchell Harper:

“We’re growing so quickly because we’ve made it really easy to sell online with BigCommerce. You can setup your own online store in a few clicks but you can also setup shop on Facebook and mobile devices like iPhones and iPads. You can also push your products out for listing on eBay and shopping comparison sites, and rank in search engines like Google without being a ‘techy’. We’ve built all the marketing tools in so all you have to do is point-and-click and you’re 90% of the way there.”

3. What made the company choose venture funding in the US, and what was the pros and cons in choosing General Catalyst as the series A funding over other options?

Mitchell Harper:

There were a few different reasons. First, US venture capitalists understand how to adequately value a recurring revenue business like ours which is playing in a hot space (e-commerce). They understood our business model, our growth projections and the market and they know what it takes to win in a competitive space like e-commerce.

Second, we have 70% of our staff in the US and while we’re also growing our Sydney team significantly, the majority of the growth on the sales and marketing side is occurring in the US, so it made sense for us to work with US-based VCs who could put us in touch with other entrepreneurs who have done what we’re looking to do. This helps us build a support network of like-minded people and achieve our goals faster.

Eddie Machaalani:

We were talking to different venture capital firms for at least a year before making a decision on General Catalyst. Most of the contacts we had with VCs over that year came from their associates reaching out to us so we didn’t have to do a lot of leg work early on. When we made the decision to raise capital and did our U.S tour to pitch different VC firms, General Catalyst had already done a ton of due diligence on the market opportunity, our company and our competitors. They were very eager to invest in the company.

General Catalyst also had very strong experience working with fast growing SaaS companies such as HubSpot and e-commerce companies such as DemandWare, both very fast growing start-ups with great technology, similar customer acquisition models and strong leadership. We quickly felt comfortable with the team, their alignment with our vision and the the strong network that we could leverage working with them.

We also found General Catalyst to be a lot more people oriented and less spreadsheet driven then some of the other firms we met with. This resonated with our philosophy of how to build and run a great company.

4. Did you consider local funding?

Mitchell Harper:

We did, but we felt the US venture capitalists understood our business model better. We’re also more like a Series B company as opposed to a traditional startup – we have almost 100 employees and have been profitable for a while now – so we felt we were outside the typical comfort range of most Australian venture capitalists who like to focus on the seed and early stage startups.

5. With the funding, will there be a flow on effect for the local IT scene for both workers and companies? WIll companies like BigCommerce be an inspiration to other startups in Australia? (looking at seeing if more companies will seek US venture funding)

Mitchell Harper:

Yes. We’re ramping our head count in Sydney so we can double the size of the team here within the next 12 months. We’re hoping to inspire the next generation of startups and are hoping to show the world that you don’t have to be purely in the US to create a great software company – you can also do it from Australia if you plan things properly.

6.   Does BigCommerce benefit from local incentives like R&D and export support from the government. Is this something organisations like Austrade and Dept of FAT do well or needs to improve on?

Eddie Machaalani:

We do get R&D concessions and grants, but there’s a lot the government could do to encourage and foster technical innovation in Australia. We bootstrapped our business from day one and were working 18 hours a day to build the best products we possible could, but if there were more opportunities for funding back then we might have accelerated our growth even faster.

From what we’ve seen of the government grants here, they’re helping very early stage startups and anything that’s done to continually stimulate and enable entrepreneurs like that is great in our books.