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By KIRSTY NEEDHAM

A Sydney software company has survived Silicon Valley's tough initiation to emerge with a foothold in the niche market of retail property software.

Mr Greg Macpherson, co-founder of Eastcoast Property Software and the Silicon Valley-based president of its US subsidiary, EPRS, was warned newly arrived Australian companies would be seen as having a "bone through your nose".

EPRS set up office in the Valley in January 1998 to research opportunities. It began actively marketing at the year's end, and made its first sale in April 1999.

"The future for many Australian software companies is here in Silicon Valley," says Mr Macpherson.

"The opportunities are larger, the risks are larger and the rewards are larger."

But it is difficult for companies thinking of making the plunge to understand the dynamics before they have worked there, he says.

Australian managing director Ms Elisa House said EPS dominated the niche of software developed for retailers to manage their property leasing.

"In Australia our market is potentially 350 clients. California alone has 3,000 potential clients," says Ms House.

Australia's lower cost of developing software means EPRS can undercut its American competitors. But the company faced huge hurdles to sign its first US client.

Ms House says: "Constantly we heard retailers saying we had the best product but you're an Australian company - will you be here next month?"

Mr Macpherson adds: "The level of interest in non USA-sourced software is small. Even though we have current customers Coles Myer, David Jones and many other leading Australian retailers, it counted for very little here."

In April, the breakthrough came with three clients: a health food chain, a fashion retailer and a paint company.

"Our initial target was California-based retailers in the $US100-$US500 million sales range, where we are achieving good success rates. This year we are setting up sales offices in Chicago and Reston, Virginia, to target East Coast opportunities," says Macpherson.

EPRS's next problem is attracting staff: Silicon Valley has a 2 per cent unemployment rate.

The high cost of living also means that funding a staff member is double the cost in Australia.

With distribution agreements critical, EPS is negotiating with retail associations to supply the software to its members.

It plans to broaden its customer-base by renting its software over the Internet to smaller retailers.

FAI took a 30 per cent stake in the company in 1997. A second round of private funding is about to be finalised, and EPS is considering going public on the Australian Stock Exchange.

Mr John Allen, executive director of Technology Transactions, a Sydney company which advised EPRS on its expansion, also counts the ASX-listed digital photography company IXLA as a client.

"If you go into the US market the NASDAQ listings as a ballpark require market capitalisation of $US300 million, or $US50 million equity raising, for people to start talking to you. It is too big for start-up companies from Australia," Mr Allen says.

He says the alternative of venture capital "comes at a cost". Instead, he said Australian technology start-ups - even those operating in the US - should look to raise $5 million to $25 million with an IPO on the local market.

For further information, please contact:

Adam Ramshaw Managing Director Tel: (61 2) 9419 8356 Mob: 0416 040 566 aramshaw@eps.net.au

Ben Jarvis Financial & Corporate Relations Pty Ltd Tel: (61 2) 9235 1666 b.jarvis@fcr.com.au