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The Documentary: Part 2

Nov 27, 2022 | Australian Startup History, Documentary

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35 min read

Summary

Episode 2 begins in the aftermath of the dot com bust. We explore the story of LookSmart through the lens of its co-founder, Evan Thornley and the tough choices he had to make. Up until this point, founders largely worked in isolation, however, they began to meet up more frequently after the bust, often in pubs or cafes, thanks to community groups like Innovation Bay. Conferences such as TinSHED and Web Directions would shine a spotlight on the fledgling startup ecosystem. We tell the story of some of Australia’s first high growth startups in the early 2000s. The likes of Atlassian in 2003, Campaign Monitor in 2004, Red Bubble in 2006 and many more. Startup infrastructure followed shortly after and we saw the country’s first incubators, accelerators and co-working spaces emerge. 

Just as things were finally looking up, another economic crisis had gripped the world once again. The Global Financial Crisis in 2008 undoubtedly caused a lot of grief, however, Australia was spared the worst of it. We highlight how the GFC held some unexpected benefits for Australian startups. As the end of the decade approached, new inventions like smartphones and social media and the mainstream adoption of Wi-Fi would come to touch every aspect of our lives, laying the foundation for a new wave of Australian startups – some of the most disruptive that Australia and the world would come to see.

Transcript

Evan Thornley:

I think I referred to Silicon Valley at the time as the wealthiest insane asylum on earth. There was just money sloshing around in the streets. I thought it was nuts at the time, and it was.

Adam Spencer:

That’s Evan Thornley, co-founder of LookSmart.

More

Evan Thornley:

When we took the company public, when we took LookSmart public in August ’99, that was really the first NASDAQ listing of an Australian tech company. Just before the crash in March 2000, we had a market cap of $14 billion. That was real money in those days. I think we were number six on the Australian stock exchange on market value.

Adam Spencer:

LookSmart was one of the many companies that had grown incredibly fast during the dot-com boom of the late ’90s, but in April 2000 the bubble was about to burst.

Evan Thornley:

We sacked 162 people in one day. That wasn’t the happiest day of my life, but as I said to the team at the time, we either lose 162 jobs now, or we lose 600 jobs a few months from now. So those are our choices. And what was astounding to me was that some of the bigger and best financed and allegedly best run companies didn’t take any corrective action in light of what had happened.

And so some of companies you’ve never heard of now, like Excite@Home or Webvan, I think in both cases they had $1.25 billion of capital in the bank, but they were burning it at a quarter of a billion a quarter. So they had five quarters of burn left. So you would have thought they would’ve pulled the aircraft up and gone over the mountain, but no, they just flew it full speed, straight into it.

So sure enough, five quarters later, they both went broke. While it was fairly obvious, I think, to any sensible person that the world had changed and that you needed to survive a nuclear winter, it was remarkable to me that some people, people who should have known better, just were in complete denial. They just wanted the party to continue and was unable to comprehend that the world that we had known had changed.

Adam Spencer:

Hi. I’m Adam Spencer and this is episode two of the History of the Australian Startup Ecosystem. We’ll continue our story after these messages from our sponsors.

We’re picking up our story after the dot-com crash, which wiped around $5 trillion from the US markets by 2002.

Matt Barrie:

But yeah, around the 2000s, tech died off in a big way.

Adam Spencer:

Matt Barrie is founder and CEO of Freelancer Limited.

Matt Barrie:

Because you had the dot-com crash and everyone was making fun of startups, you had a dot bomb and StartUp the movie came out with ridiculous ideas. People were ridiculing Pets.com. It suddenly died away for quite a number of years.

Adam Spencer:

Australia wasn’t spared either, as described by former Prime Minister, Malcolm Turnbull.

Malcolm Turnbull:

The tech wreck knocked a lot of confidence out of investors in the tech sector in Australia, and so it took a while to build up again.

Adam Spencer:

Many had predicted the internet would dramatically alter every aspect of modern life. And during the dot-com mania, investors scrambled to buy into this dream. After the bust, it seemed to many that this dream was dead. But ultimately, the dot-com bust would prove to be merely a speed bump in a trajectory of tech startups and the internet.

Malcolm Turnbull:

The valuations seemed insane, but the great companies, as it turns out, were very good value buying at that point. So the valuations weren’t insane for the winning companies. They were actually undervalued. It was an undiscerning market that threw money at everything. And then when the crash happened in 2000, when the tide went out, most of the rubbish went out with it and a smaller number of us survived.

And then the truly great companies went on, the Amazons and eBays, and then shortly thereafter, Google and others, went on to become immensely valuable and their valuations then looked trivial compared to where they are now. So it took a long time for people to become more discerning about which companies were actually going to be the winners. Which ones had real business models, which ones had credible management teams, which ones had a definable path to victory and some sustainable competitive advantage.

Adam Spencer:

For many years after the dot-com crash, economic conditions for Australian tech startups were very difficult.

Alfred Lo:

It was a wasteland to not pull punches.

Adam Spencer:

Alfred Lo is a co-founder of Harvest B.

Alfred Lo:

It was really a vacant period in the Australian tech scene. We were still reeling from the dot-com blowup from 2000, 2001. There were very few startups, tech startups, that you could really call on. There was certainly not really any investment scene.

Adam Spencer:

Despite this, there was still many people excited by the potential of the internet and other emerging technologies.

Cameron Adams:

The web had basically gone into hibernation.

Adam Spencer:

Cameron Adams is the co-founder of Canva.

Cameron Adams:

This big promise, that was the internet, hadn’t really materialized and lots of companies had dissolved and vanished. But what was left behind was a really strong technology base. And I think it was a great playground for engineers, technology-minded folks, who just wanted to poke around and play with things.

Adam Spencer:

In the past, many of these technology-minded folks had worked in isolation from one another, but during the 2000s they started to meet up much more frequently.

John Allsopp:

We started doing in-person workshops and started doing them right around 2000, right around the dot-com bomb.

Adam Spencer:

John Allsopp is co-founder of Web Directions.

John Allsopp:

And that was the first time, almost literally, I’d met anyone who did what I did. I mean, I knew people online. I went to New York, I’d met a couple of people there, but I basically didn’t know anyone in Australia. There were no meetups. There was none of that stuff. So if you knew someone, you knew them online. So we put this word out and a half a dozen people, Peter Ottery, who was at WhistleOut, an amazing designer who was Fairfax at the time. Tim was one of the founders of Buildkite, Tim Lucas, and a couple of people [inaudible]. We all all had a beer in the Beach Road Hotel in Bondi. And that was what it was. It was like people knew, “Oh, let’s get a coffee. Let’s have a beer.”

Dean McEvoy:

I think the earliest memory I remember of catching up was with Mick Liubinskas and Marty Wells. They used to put on this night called Stir.

Adam Spencer:

Dean McEvoy was the founder and CEO of Spreets and is currently a non-executive director at Tech Sydney.

Dean McEvoy:

You would catch up with a bunch of other geeky people like us who were doing weird stuff. Mike Cannon-Brooks turned up one time, I think Scott Farquhar turned up another time and you just caught up for beers, but sometimes they played these weird games. I remember one game, particularly, where you threw random words and put them up on two whiteboards and it was like banana and truck. And then randomly, you picked two names out of the hat. You were split into teams, you had to come up with a business based upon those two names. So we were like, “We’re Banana Truck,” and we were like, “We’re a fruit delivery service.” And you had to get up and do the pitch at the end and whoever gave the best pitch won free beers at the bar or something. So there was some educational component and sharing component, but probably sitting around a table with a bunch of entrepreneurs now that are worth billions.

Adam Spencer:

I asked Ian Gardiner, co-founder of Innovation Bay, about what the startup landscape looked like when he moved to Australia in 2002.

Ian Gardiner:

Look, the whole thing started when I moved to Australia. I’m Scottish, you might notice. I basically fell into running a startup and I didn’t know anyone, so there was a group that was around when I came to Australia called internet.com and it was awesome. Mike Walsh, who’s some you might know as a futurist and speaker, he was running it at the time and they were putting on events at Cafe Sydney in Sydney. So I turned up, fresh off the plane from Scotland, and I was going to these incredible events. And this beautiful morning and the outdoor deck at Cafe Sydney overlooking the harbor and the bridge and I’m like, “This is the best. I’m meeting some great people.” And then about two months later it went bust, because it was… The whole thing was at the end of the dot-com boom.

And then there was no community, so I didn’t really have a group and I wanted to find one, but I couldn’t. So I guess it was the founder in me. It was like, “Well, shit. I should go and launch one.” So Innovation Bay came about as a result of that. I launched Innovation Bay along with Phaedon Stough, and it was a community group for startups.And the first few events were just… You’d call them meetups now. We met in a bar, you’d chuck some money in a hat to cover the catering and we just heard from our speaker. So people came to hear the speaker, but they also came to meet each other. And I guess, by extension, we started building the community just off the back of that. It was scratching our own itch.

But those early days, ecosystem community was not a word that was part of the vernacular. And for me and Phaedon, when we were doing this, it was more about just, I guess, scratching our own itch. We were tech founders or in the tech community and we wanted to hang out with like-minded people and that was our way of doing it. And we didn’t really think about what it was or why we were doing it. We just did it because it felt right and it felt good, and we enjoyed it

Adam Spencer:

Thanks to community groups like Innovation Bay, as well as informal meetups at pubs and cafes, Australia’s tech startups, which had up until this point largely worked in isolation, were starting to build communities. There were also some more high profile events, held in the 2000s, that helped grow the fledgling startup ecosystem.

Matt Barrie:

Yeah, Sydney was taking off because you had the Olympics in 2000, and so it was exciting. We were finally becoming a world city.

Adam Spencer:

Again, Matt Barrie.

Matt Barrie:

There were some VC funds that we’re trying to get going and at this point in time, there were no real successes, not like it is now. But the guys who really got everyone excited, I think were the TiNSHED guys. So Janusz Hooker, who’s actually now the CEO of LJ Hooker, he started a thing called TiNSHED and TiNSHED was a clone or a compatriot of Garage.com, which was basically a startup incubator sort of thing, early stage investor. And so with Viv Stewart, Janusz Hooker and a bunch of other guys, they ran a massive conference. I remember it being run. It was about 2000 people and you had… It just got everyone super excited. It was this brand new thing to Australia where, wow, there’s all these guys starting tech companies and there’s people who will fund your ideas. And that was… I think those guys really lit the flame in Australia. That conference was in Sydney, it was around 2000, and that was the thing that really got people super excited.

Adam Spencer:

John Allsopp, who earlier told us about meeting up with other founders at the Beach Road Hotel in Bondi, helped launch the first Web Directions conference in 2004. This was an event for people developing products on the internet, at a time when this was still a relatively new field.

John Allsopp:

It was a place where a whole bunch of people who’d been doing web related stuff got together and realized they can meet people doing what they do, because back then probably even the biggest organizations might have maybe one or two people doing web stuff. We had a couple of hundred people turn up including… I mean, one thing I always remember is one of the founders of Campaign Monitor, and young folks don’t know they were one of the first really early success stories the Australian web startup world, and this is before they even were. They were an agency that had built the software to do [inaudible] marketing, and I remember one of the founders coming up to me, he said, “Oh, this is so great. There’s all these people doing stuff like us.” And I’m like, “Wow.” He said, “Oh, we’re looking to hire someone.”

And I thought, “Wow, this is real. People will have real jobs in this industry now.” And I remember for years later joking, I should have just taken a job with him now instead of trying to bang the head against the wall and do the conferences for the last 20… Well, nearly 20 years. I would like to think, without being too conceded, that Web Directions really did bring together people at a scale that hadn’t been. And not just from Sydney, people coming from Melbourne and even Perth. It was like people coming from all over Australia, maybe even a couple from New Zealand, because if you did this stuff, there just wasn’t anything else like it.

Adam Spencer:

Niki Scevak, co-founder of Startmate and Blackbird, shared with us his perspective on the state of the Australian startup ecosystem during the 2000s.

Niki Scevak:

You had a bunch of successful companies, so Atlassian was created in 2003. There was Campaign Monitor, Halfbrick Studios, Redbubble, Aconex, these are all companies that were already successful in 2009, 2010. Even though you had great startups, you didn’t really have great investors or you didn’t really have great other parts of the ecosystem alongside those companies. But really, the essential ingredient is successful companies and certainly there had been many in Australia, they were disparate, they weren’t talking to each other. The circle of life, the magic of Silicon Valley, when someone creates a company and invests and helps the next generation, that moment hadn’t happened.

Adam Spencer:

As well as the startups Niki mentioned, Cogan, Culture Amp and GoGet.com were all high growth Australian startups that were founded in the 2000s, leveraging software and the internet to grow at a staggering rate.

Phil Morle:

Kazaa really became one of the first high growth startups in Australia’s history in my reading of this.

Adam Spencer:

Phil Morle, who today is partner at Main Sequence Ventures, told us about the rapid growth of one such company, Kazaa, which was founded in 2000 and purchased by an Australian firm in early 2002.

Phil Morle:

That company very quickly exploded because it was an alternative to a very popular piece of software at the time called Napster, which was one of the file sharing applications. And that company, Napster, was being sued by the entertainment industry and all the consumers moved very quickly over to Kazaa, and Kazaa moved very quickly to Australia. And before I knew it, I was the Chief Technology Officer of Kazaa.

It was growing like the clappers. At one stage it was 80% of the world’s internet traffic, because these are the days before YouTube and high bandwidth internet websites. And Kazaa was really how you shared videos of your party at the weekend and things like that. And that business became enormous, not by today’s standards, but by the standards of those days, having millions of users on it at any one time, tens of millions of customers altogether. That was a real rollercoaster and that all happened out of Military Road in Cremorne in Sydney.

Adam Spencer:

It was during the 2000s that we also started to see what could be considered to be Australia’s first startup incubators, accelerators, and coworking spaces. While these concepts were in their infancy at the time, each would go on to become an important part of Australia’s startup ecosystem. Dean McEvoy told us what he sees as the differences between the three.

Dean McEvoy:

An incubator is an entity that goes and actually builds your technology startup. So you might go with just an idea and they’ll provide the technical resources and sometimes some of the marketing resources to bring your idea to fruition.

An accelerator takes an existing team that has the capacity to build and provides advice, mentoring, and guidance to accelerate the trajectory of your startup.

And a coworking space is simply just an office space that allows collections of people who are building startups to live together, share off each other, and work off some shared knowledge. So that’s probably the difference between an incubator and accelerator and a coworking space.

Hamish Hawthorn:

My name is Hamish Hawthorne. My first formal role in the startup ecosystem is when I joined ATP Innovations.

Adam Spencer:

ATP Innovations, now known as SAKATA Innovations, was first founded in 2000.

Hamish Hawthorn:

This was a startup incubator. The original founding members of this organization were the University of Sydney, the University of Technology Sydney and UNSW. They came together with the New South Wales government to redevelop what was at the time a derelict industrial site. The Australian Technology Park is what came out of this. And so from this, there was the formation of a startup incubator.

Adam Spencer:

ATP Innovations specialize in deep tech, a term used to describe companies developing new products based on scientific discovery or engineering innovation. An example would be the nucleus group of companies we discussed in episode one, which developed pacemakers and hearing implants. These types of companies generally require lengthy research and development and large investment before they turn any amount of profit, which makes them different from software startups, which generally require far less development before they’re able to bring a product to market. It was primarily these types of startups that ATP was created to support.

Hamish Hawthorn:

This incubator followed a very traditional model of what incubators were like in the early 2000s, a physical space, we had a building called the National Innovation Center that was based at the technology park. It was divided into a bunch of different spaces, not simply the coworking spaces we see around us today, but also things like clean rooms. We also had laboratories for medical device biotech companies. We also had manufacturing areas, for particularly the photonics industry, which was a great strengths and catalyst for the Australian Technology Park coming into existence.

Adam Spencer:

Also in the year 2000, iLab was established by the Queensland government to support early stage technology companies. Both of these organizations could be considered among Australia’s earliest startup incubators. Though in the 2000s, these concepts were still very much in their infancy.

Hamish Hawthorn:

In 2005, it was a very different environment to what we see today. Even in 2005, it was still quite a unique thing to talk to somebody about being an entrepreneur or working in a startup company. It wasn’t something that really had any distinct identity yet. To be honest, entrepreneurs still had a somewhat negative connotation back in 2005, 2006. Now, if you called yourself an entrepreneur, it generally meant that you were somehow shonky in some way. It was generally that you had ripped somebody off.

Adam Spencer:

Author and podcaster, Mark Petchey, who moved to Australia in 2003, shared his perspective on the startup landscape during the 2000s.

Mark Pesce:

When I came here in 2003, this was after the tech wreck, the tech market had completely imploded. And it wasn’t until you start to see companies like Facebook emerge in that post tech wreck landscape that people start thinking about startups again as, I guess, viable business opportunities maybe a way to think of it. And that was the period of time that I think Australia needed to be able to start to put some basic elements in place about how do you nurture at least the very first ideas. You also have the 500 startups and the Y Combinators also coming out of America. So you have these different models of how you can nurture many startups into being.

Adam Spencer:

Y Combinator, and American tech startup, Accelerator, founded in 2005, had great success supporting many early stage startups. Pollenizer, founded in 2007, was one of the first Australian organizations which aimed to emulate Y Combinator’s model. Phil Morle told me how he came to co-found Pollenizer after his time at Kazaa.

Phil Morle:

It was my first taste of operating a digital business at scale, and that’s where I met Mick Liubinskas, who was also working at Kazaa. We learned so much about building businesses and technology on a world stage. And we also learnt about the bad things that happened, because we were sued by all the big movie studios and all the record companies. And so there were lots of challenging times there as well, but we came out knowing a lot and feeling excited about the digital universe that was unfolding.

And Mick I wanted to do that again. Looked around for startups, couldn’t find any and decided we’d make our own. At the time, there were a number of people in Australia trying to create Australia’s version of Y Combinator, which had started recently in Silicon Valley. And Mick and I said, “Well, why don’t we do that? And let’s not wait to raise money. Let’s just get started. Let’s bootstrap. Let’s offer what we know, what we learned at Kazaa to people. You offer the marketing, I’ll offer the technology, and we’ll get people going quickly and over time we’ll raise a little bit of money and we can start investing in companies like Y Combinator does.” And that’s when the whole Pollenizer thing started. And really, it was around that time that the startup ecosystem that we know today, really started to get into its stride.

Adam Spencer:

Pollenizer was founded in 2007 and would shut its doors a decade later. Phil’s co-founder, Mick Liubinskas, believes that ultimately Pollenizer was a little too early to have the impact it might otherwise have had.

Mick Liubinskas:

Yes, I’m really excited about what Pollenizer was able to do in terms of the positive impact in the industry, but we spent so much time learning about it and creating and investing in it… In the creation of it, that we didn’t actually invest in enough good companies. I will unfortunately always look at Pollenizer as massively underachieving, because even though we had a couple of good companies come through it, we were just a few years ahead of the big growth curve.

Adam Spencer:

Many people we spoke to for this series echoed Mick’s sentiments here. It wasn’t until the 2010s that things really kicked off for Australia’s startup ecosystem.

During the 2000s, any startup support organizations that did exist had limited reach and visibility throughout the broader community. And without an established startup ecosystem, there was still many practical hurdles for early stage startups.

Sylvia Pfeiffer:

Yeah, so I’m obviously from Germany. I came to Australia in year 2000 to work as a postdoc in the CSIRO.

John Allsopp:

Sylvia Pfeiffer is CEO of Coviu.

Sylvia Pfeiffer:

And by 2006, I’d gotten to the point where we’d been working on digital video technology for six years, and I’d seen the birth of Google, YouTube was born around 2006. We were developing a video search engine within CSIRO. And so in 2006, I decided to also go out on my own and build a digital technology company, a video technology company.

So in 2006, there were a couple of VCs around, but you can count them on one hand. They had maybe a couple of million dollars of investment for digital companies. Most VCs would be investing in mining, or maybe some in digital technology, but very few. I was going out to raise capital and the first thing I was always asked was, “So you’re writing a couple of software programs, why can’t you just do it in your garage? And why do you need investment for that?” So there was just no appreciation of the complexity and the effort required in building a digital company.

There were very few people that would actually provide support and you do need support companies such as cheap or affordable lawyers and accountants and that kind of stuff. So it was just really difficult to do it back in the day and very expensive.

Jodie Fox:

Well, there wasn’t really a lot of infrastructure and support.

Adam Spencer:

Jodie Fox told us about the various friction points she encountered when co-founding Shoes of Prey in 2009 out of her apartment.

Jodie Fox:

I was reminiscing about it the other day. It was just crazy. It was this one bedroom apartment in Surrey Hills, and I remember having a team of eight people in there, hundreds of pairs of shoes over a period of time where it was summer and it was 40 degree days and no air conditioning. And it was amazing. And I do remember as well, even service offerings were really tough to engage with.

So a good example was when we went to set up our first bank accounts and we needed to submit business plans in the format that the bank prescribed. And then because we were global in this online retail world, we needed to be able to trade in different currencies because it increased our conversion rate and reduced consumer friction in the funnel. And we needed to have separate accounts for each currency. And the fees were becoming phenomenal and the administration was really challenging. And it was when PayPal wasn’t even really fully accepted in Australia, because the banking regulations didn’t contemplate financial institution that was neither a bank nor a customer. So there was lots of friction points for us very early on, because the system itself didn’t contemplate what it was that we were looking to build or that we were operating in.

Adam Spencer:

We’ll continue our story after these messages from our sponsors.

News Person 1:

Today stocks have fallen to their lowest level since 1997 as the Dow Jones continues to plummet.

News Person 2:

The global economic collapse of the last several months has already surpassed the events of 80 years ago, which triggered the Great Depression.

Adam Spencer:

We started this episode with the dot-com crash of 2000 and before the end of the decade, another economic crisis had gripped the world once again. The global financial crisis of 2008 caused many to lose their jobs. And according to CB Insights, global VC funding for startups dropped 10% in the fourth quarter of that year. While Australia was spared the worst of it, economic growth did slow significantly and the unemployment rate rose sharply. But while the GFC undoubtedly caused a lot of grief, most of the people we spoke to argued that, in fact, the GFC held unexpected benefits for Australian startups.

Matt Barrie:

The startup scene really only took off again around the global financial crisis.

Adam Spencer:

Again, Matt Barrie.

Matt Barrie:

You had an intersection of a financial crisis, so people were being laid off and put out of work, and the stock market was crashing around the world and this, that, the other. So there’s three things happening there. You’ve got people looking for work, you’ve got companies looking to hire people cheaper, and you’ve also got people who are looking to bridge a period of time with a startup before they go back to their real job or before their company can function again. You had a lot of people, for example, out of work from the banks who were like, “You know what? I will go back into banking, but I’m going to give that startup a go for a year or two or help my wife’s company, or what have you, and work on a side project for a period of time before I get back in there.”

Yasmin Grigaliunas:

While the GFC hurts everybody, and you don’t wish it upon anyone, it creates extreme stress, in particular, for financial markets.

Adam Spencer (26:58):

Yasmin Grigaliunas is the Founder and chief evangelist of Circonomy, formerly known as The World’s Biggest Garage Sale.

Yasmin Grigaliunas:

But I think like bushfires create new growth, I think GFCs create new growth. I think the GFC does definitely hurt and burn out some businesses and maybe burn them to the ground, but what it also does is it actually creates that new growth, new ideas, new innovations, and new energy, and potentially even new people in an ecosystem that does constantly need maybe to burn to the ground a little before it can rebuild.

Dean McEvoy:

I think in general, the GFC and most external financial events, don’t have much of an impact on the startups that really matter.

Adam Spencer:

Again, Dean McEvoy.

Dean McEvoy:

What it tends to do is it tends to take the people who sit on the sidelines, the people who jumped in because it’s hot and new, and they tend to not be the best founders or the best companies. It’s the people who have this real authentic connection with a problem that tend to make the best startups. And in times of financial crisis and in times of hardship, the people that stick at it through those hard times are the founders that actually have the most success. So in fact, it takes all the bystanders and people who are here just because it’s cool and hot out of the market, which I think is a good thing.

Niki Scevak:

I think the other element that really laid the groundwork was the decision by Google to open up a local engineering office.

John Allsopp:

Again, Niki Scevak, who told us about Google opening an office in Australia in 2006.

Niki Scevak:

Google Maps was invented and built in Sydney. Google acquired the company, so the team was in Sydney beforehand, but they also built large parts of Google Chrome, large parts of other Google products.

Alan Noble:

Well, I’ll go back to 2007, which is when I joined Google.

Adam Spencer:

Alan Noble is the founder of AusOcean.

Alan Noble:

So I was hired by Google to grow their R&D presence in Australia, to run the R&D center in Sydney. I was given the task of, essentially, growing the engineering center from 20 engineers to 150 engineers in three years. Well, I didn’t stop there. I kept hiring and growing the center. We ended up, by the time I finally moved on from Google in 2018, there were over 650 engineers working for Google in Australia.

Now, along the way, a few interesting things happened. Shortly after I joined in 2007, Lars and Jens Rasmussen set about to build Google Wave, and that became a huge focus for the engineering… Google’s engineering center in Sydney. So Google Wave was released in May 2009 amid a flurry of excitement and activity. Unfortunately, it didn’t really achieve the traction with consumers that Google had hoped for. It was a bit of a disappointment, unfortunately, and Google canceled the product barely a year later. It was August 2010.

Now, that was a very hard decision for Google, but it turned out it had very great unintended consequences for the Aussie tech startup ecosystem, because it unleashed a flood of tech talent onto the local ecosystem. Because the engineers that had been attracted to work on Google Wave tended to be the engineers that were perhaps a bit less risk averse, a bit more inclined to work on something a bit radically different. And so many of those engineers, when they found themselves no longer working on Wave, they started chomping at the bit. They thought, “Well, maybe I should be looking at startups instead.”

It didn’t happen overnight, but it certainly has happened. And in the intervening years, we’ve seen dozens, if not possibly now in the low hundreds, of former Google Australian engineers essentially go out into dozens of Aussie startups. Perhaps the most famous example would be Canva’s Cameron Adams.

Adam Spencer:

So to briefly recap our story so far, despite two economic downturns and limited startup support infrastructure, the 2000s saw a wave of Australian high growth startups. And the community continued to grow thanks to conferences, workshops and grassroots community groups and informal meetups. And while the dot-com crash had soured the promise of the internet for some, the 2000s would see three new technologies come to fruition, which would further propel the internet into the mainstream, Wi-Fi, social media and smartphones. Collectively, these technologies had an enormous impact on the world at large, and the world of startups in particular.

Alan Jones:

Wi-Fi has played an enormous role in the growth of the tech startup industry.

John Allsopp:

Alan Jones is an investor and interim CEO of Fishburners.

Alan Jones:

Prior to Wi-Fi, you had to connect your computer to everybody else’s computer via ethernet cable and, generally speaking, that meant there had to be a little socket in the wall where you could plug in. And the cable and the sockets and the device that connected them all together and connected that to the internet was pretty expensive and non-trivial to install.

So offices had them, and corporate campuses, and maybe universities, but almost nowhere else. So Wi-Fi letters work from informal spaces. It allowed us to be connected to the internet from home without interrupting everybody else’s use of the telephone. And it also meant that we could collaborate and do our own work at the same time.

Adam Spencer:

Wi-Fi itself was in large part an Australian innovation, made possible thanks to groundbreaking research and development done during the 90s at the CSIRO. I’m going to take a brief detour to acknowledge CSIRO’s long history of innovation in Australia. It was initially formed as the Advisory Council of Science and Industry in 1916. So its history goes back over more than a century. The very first computer in Australia was owned by the CSIRO, which first booted up in 1949, making it one of the world’s very first electronic computers. Some of the CSIROs most notable inventions include extended wear contact lenses, polymer bank notes, the insect repellent used in Aeroguard, and of special importance to our story, key components of Wi-Fi technology.

Simon Thomsen:

Wi-Fi is the most extraordinary thing that we have given the world.

Adam Spencer:

Simon Thomsen is the editor of Startup Daily and the host of the Startup Daily show.

Simon Thomsen:

We should be incredibly proud of this. We could have a national Wi-Fi day and just have another day off, which would be great, where we all celebrate.

Adam Spencer:

And just like Wi-Fi, the introduction of smartphones, beginning with the iPhone in 2007, brought more and more people online.

Phil Hayes-St Clair:

Obviously iPhone 2007, I still remember seeing Steve Jobs release that.

John Allsopp:

Phil Hayes-St Clair is co-founder and CEO of Drop Bio Health.

Phil Hayes-St Clair:

When I think about him saying on stage, “Are you getting it yet? About the fact that we combined all these things in this device?” I did remember thinking, “Wait a second, this is going to change everything.” It wouldn’t be understated to say that everyone is trying to pursue something that leverages off the back of that change. And that’s really, really exciting.

Alan Jones:

So what happened with smartphones was basically in that first generation of Australian tech startups, to get you to try my tech startup I had to get you to my landing page. And you were on your computer mainly at work and maybe in the evenings, and you carried around a phone in your pocket that you could send text messages to and from and you could make calls. But that was all it did.

So in order to get you to my web address, I had to get you to remember it. And the way that I would do that would be by plastering things in your real world with my ads. So I would put ads on the back of buses and cinema screens and television commercials or radio ads, wherever I could get them. There’s old people out there who will still remember the sound of the Yahoo! yodle, which was our signature sign off on our television and radio commercials.

Adam Spencer:

Alan Jones worked as a product director for Yahoo! during the early 2000s.

Alan Jones:

Now, we were building one of the biggest online media properties ever, and most of our advertising media was spent in physical spaces instead of on the internet. And all of that was because the time between you when you were exposed to the brand and when you actually got to sit down and type in www.pets.com, that might be five or six hours in which a bunch of other stuff might happen.

And so the huge thing that smartphones changed for the tech startup industry was suddenly we could reach people in between those two tiny slices of their day. So there was a slice of day when you’re at work and slice of day in the evening when you’re on your computer, the rest of the time you’re not thinking about tech startups at all. And now with a smartphone, we could reach you with… Initially with an email, and then later you would check into a social media app to see what was going on and we could serve you an ad there. And then eventually we were able to send you a push notification and actually make you go, “Ooh, my pocket’s vibrating.” And pull it out and “Oh, Facebook wants to tell me that my friend just liked my photo.”

Another thing that changed around that time was social media. The early versions of social media started to bring a broader set of society onto the web for the first time to rediscover with old university friends and old high school friends what they were doing now.

And then the other thing that really changed is the technology industry realized the power of the long tail. That it would be much more effective to sell clicks rather than impressions and only charge advertisers when somebody clicked on the ad. And so that made online advertising much more accessible for a much broader set of much less well funded online brands to get going when they only had to pay for clicks.

Adam Spencer:

So throughout the 2000s, Wi-Fi, smartphones, and social media hastened the mass adoption of the internet. After this buttering start of the dot-com boom and bust, the internet was now well and truly in its stride, and would ultimately touch almost every aspect of human life.

The global economy was in the middle of a dramatic shift, in which software companies delivering online services would disrupt many existing industries. Between 2011 and 2015, we would see a new wave of Australian startups, many of which were software companies providing online services, including Canva, Airtasker, Buildkite, Afterpay, [Sandel] and Shippit.

During this time, we also saw an explosion of new organizations founded specifically to support Australian startups, such as Startmate, Fishburners, Square Peg, River City Labs, BlueChilli, and Blackbird. While not everyone agrees on an exact timeline, most of the people we spoke to for this series agreed, before 2010 Australia didn’t have a true startup ecosystem. It was during the early 2010s that we saw a huge explosion of startup activity. And from that explosion, the Australian startup ecosystem finally emerged.

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Credits

Production Credits

  • Andy Jones
  • Will Tjo
  • Alex Carpenter
  • Alan Jones
  • Oliver Gaywood
  • Aleshia Spencer

Special Thanks

  • Sorrel Osborne
  • Alan Jones
  • Murray Hurps
  • Maria MacNamara
  • Peter Davison
  • Pete Cooper

Music Credits

Music by Lee Rosevere

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