Adam Spencer: Hi, I'm Adam Spencer and welcome to day one, the podcast that spotlights Australian startups, founders, and the organizations that empower Australian entrepreneurship. We go back to the beginning to tell the story of Australia's most inspiring founders and how they built their companies. You're listening to a special interview series as part of a documentary W2D1 is producing about the history of the Australian startup ecosystem.

Adam Spencer: On the episode today, we have

Terry Hilsberg: Hi, I'm Terry Hillsberg. I am one of the owners and partners in a private investment company, um, where my partner and I invest mainly in crypto

Adam Spencer: projects.

Adam Spencer: When did you first

Adam Spencer: get involved in the Australian startup ecosystem? And, and let's just forget about the vocabulary that, you know, that we know it by today. Go back as far as you want.

Terry Hilsberg: Um, I started out life, um, as a. as a pilot, but then became an economic bureaucrat in the Commonwealth government in the late 1970s and By the late 70s, early 80s, um, the so called failure of the Australian economy to adapt and become a highly valuated economy was already an interest of the day.

Terry Hilsberg: So for instance, um, Literally in the early 80s, the then Fraser government, um, was undertaking studies as to how to attract Intel and national semiconductors to set up fab plants in Australia. And so I was a part of a lot of that when I was a bureaucrat. And then, um, Uh, the, uh, Hawking government came in in 83 and started, uh, putting very significant money into R& D subsidies and subsidies of venture capitalists.

Terry Hilsberg: And so you had the first great wave of that, uh, taking place, uh, in the, uh, from 1983 to 1987. And during that period, um, Many of the, uh, uh, of the venture funds, uh, were started and some of the great iconic, um, Australian, uh, unicorns were created companies such as, uh, Cochlear and slightly later companies such as ResMed.

Terry Hilsberg: And during that period, I was a Commonwealth bureaucrat in charge of that stuff. And then in 87, I left the Commonwealth bureaucracy and, uh, became a partner in a venture firm in Melbourne called, uh, CP Ventures. Um, it was the management company, the GP, that was, uh, Venture Management Associates, working with a fellow called Roger Backridge, who is probably, you know, probably the iconic figure in the Australian, uh, venture capital industry.

Terry Hilsberg: And, uh, he had decided that we need to raise some more capital and the Australian capital markets had basically collapsed for venture after 87. So I was then sent off around the world to raise venture capital, um, to invest in Australian startups and. So he and I then roamed around the world raising money and it turned out that, uh, that the only place in the world that really wanted to give us a lot of money was in Japan.

Terry Hilsberg: So I moved to Japan and, uh, um, raised a fund called the Japan Australia Venture Capital Fund. Which was by then probably the only fund raised in the early nineties in Australia. Plus I also was associated with and helped raise a thing called the Apple computer Australia fund, which was, uh, not many people realized that Apple computer in fact had a venture capital, um, in Australia in the early nineties.

Terry Hilsberg: And, uh, those funds then proceeded to invest in some of the more iconic, um, companies, uh, in their expansion phases, such as Cochlear, et cetera. And then that, that sort of, uh, phase ended and I went off. I sold my, my partnership in that venture firm and, uh, went from Tokyo and went to live in Beijing. Cause my, the money that I'd made as a general partner, I said, Oh, well, I might as well invest that, uh, that sort of amount of money in, uh, Chinese startups.

Terry Hilsberg: And China was just starting to get going. So I went and started investing. Uh, my money in Chinese startups, um, in all sorts of things, and I think from, uh, light aircraft design and manufacture through to, um, uh, cold trading systems, et cetera. But then eventually in about 1998, I ended up, uh, doing a bunch of startups myself.

Terry Hilsberg: And for the next, uh, until about 2010, I did, uh, five or six education ed tech startups in a row in mainly in China, uh, but to some extent in Australia. Okay. Um, companies such as next ed and others. And one of the things that also, uh, out of all that, uh, be, was quite relevant was that both in what Roger Buckridge and I, uh, had done, uh, as fund managers and in terms of my own startups, um, the venture capital industry over that period was, in Australia was very international and had some of the best venture firms in the world co investing with the, uh, the company, uh, with the Australian venture scene.

Terry Hilsberg: And into Australian startups. So for instance, one of my startups, um, next ed did quite a large, um, uh, series B rise, um, in, uh, 19, uh, in 2000, um, just to literally just after the crash of the, uh, web 1. 0 scene. And, uh, that, that EdTech startup, uh, raised nearly all of its capital from top tier American, uh, venture firms.

Terry Hilsberg: And so we did all that for a while and did a bunch of stuff, made a little bit of money in the EdTech scene, and eventually came back to Australia in about 2000, full time. In 2012 to 2014 and found a very different scene, a scene which had withdrawn into itself and become very domestic market focused.

Terry Hilsberg: Um, it was starting to reignite, but it was mainly around deals which were very domestic market focused because what had happened in the meantime was that the cost of getting into, um, doing mobile type apps had come down. The cost of doing startups had come down quite dramatically due to the software eating the world.

Terry Hilsberg: As Mark Andresen said, and as opposed to when, for instance, Cochlear, um, got going back in the 80s, it required, you know, 20 million bucks before it even really had a very good product. So that change around 2010 totally changed things, but also it was good, but it made the Australian venture scene very inward looking.

Terry Hilsberg: And, uh, so. It then rebuilt itself with a bunch of new fund managers and stuff. But then what also was happening was the whole accelerator scene, the sort of stuff that Phil Morley and others were doing. And they were doing some good work, but it wasn't really till things like Startmate came along or uh, Telstra's Mooroo D that you started to get uh, people um, again looking internationally, again looking at uh, starting to look at deeper tech.

Terry Hilsberg: So, I then said, Oh, well, what's my competitive advantage? My competitive advantage is I know China and I'll try and get some investment into some of these companies from, uh, Chinese VCs and, uh, and also help the companies go into China. The latter was not terribly successful because Xi Jinping started closing down investment, uh, closing their money, leaving China in around 2016, but we did get a bunch of good investments.

Terry Hilsberg: And so out of those accelerators, you now find some of the, the really classy deep tech companies. And in the meantime, that the scene had also divided between the light tech and the deep tech. And, uh, uh, Um, and I was tending to do more in the deep tech in, uh, in the AI space, in the robotic space, etc. And I made a few investments there.

Terry Hilsberg: And some of those, uh, starting now to give good returns like four years into some of those investments today, we're getting sort of, uh, 30 times our money. Um, it's all doing reasonably well. And then the next big fork was that, you know, it was obviously you get people like MainSequence doing the deeper tech stuff and a lot of this lighter tech stuff.

Terry Hilsberg: But the next big fork was when the industry, um, had to come to grips with crypto. and blockchain. And, uh, that took place in about 2017. And that is a split, um, that, and to this day is, is probably the, the largest split in the last five years, um, where the crypto investors have different, uh, different business models than the traditional VCs.

Terry Hilsberg: And there's very little overlap. Now, there's, there's, Some small overlap where you get, you know, like Air Tree recently invest, invested in a, uh, a startup called Immutable, or, um, Reveture invested in Coinbase way back and recently in immutable. But most of the VCs are still stuck in traditional land, as are most of the angel investors.

Terry Hilsberg: And they're totally different than the young generation of, um, entrepreneurs who are building the Defi companies and the NFT companies.

Adam Spencer: I want to talk more about crypto actually and why is the industry, uh, struggling to come to terms with that so much?

Terry Hilsberg: Um, mainly because the, um, the models are totally different.

Terry Hilsberg: Um, uh, there's a number of aspects of it. For instance, in crypto deals, liquidity is much earlier. Usually, um, by the second year you start to get some liquidity. Not necessarily, but Second to fourth year, you start to get some liquidity. Therefore, the, the fund structures tend to be structured more like, uh, hedge funds.

Terry Hilsberg: In other words, uh, there's still an aggregation of funds to invest, but investors are putting money in and taking it out, um, almost constantly as opposed to the, the long term locked in nature of traditional venture models, which work on 10 year liquidity cycles. So that's, that's one difference. A second, uh, difference is that most crypto deals are totally in the virtual world.

Terry Hilsberg: And in particular, DeFi deals and NFT deals are all in the virtual world. So the so called metaverse. And so what you, what you see is that this metaverse is at the intersection of DeFi Um, NFTs, uh, traditional crypto and gaming and VRAR. So there's deals that I've got investments in that, that do all of those things in one.

Terry Hilsberg: And it's evolving incredibly quickly. It makes the rate of progress in AI look very slow in comparison, but this is all happening in the metaverse. Which is largely unregulated and therefore compared with, say for instance, um, traditional venture investing in health tech, um, say in a cochlear or in, uh, in traditional FinTech, um, which is heavily regulated, um, or in, in a number of, or even space tech.

Terry Hilsberg: You know, there's a, a lot of the latest deep tech type investments are in heavily regulated industries or even food tech. What, like Phil's some stuff. You know, a lot of them are very regulated compared with investment in the metaverse, which is the whole crypto space, which is in largely unregulated. Now the regulators may come and try and stop it, but in the meantime, it's unregulated.

Terry Hilsberg: Another feature of the metaverse and the whole crypto world is that it is, it's international day one. It goes back to what Roger, Roger Buckeridge was doing 30, 40 years ago. Roger used to, you know, create companies which would say bring Australians back from the USA and invest in them here, but day one they would be Australian and US companies.

Terry Hilsberg: That was forgotten about for 20 or 30 years. To some extent, um, you know, Startmate and Blackbird started doing it when they started sort of taking companies to the U. S. or some were born Global Day One like Canva, but most Australians were inward looking and then they'd eventually go overseas. So I think, but crypto is Global Day One.

Terry Hilsberg: The teams are Global Day One. Even if they might have a headquarters in Sydney, they have teams throughout the world in their infrastructure. What is a most fascinating thing, um, is that Sydney is one of the global centers, Sydney and to Melbourne to some extent, is one of the great centers in these metaverse companies.

Terry Hilsberg: The market cap of, for instance, just, um, NFT and DeFi companies in Sydney today is between 10 and 15 billion US dollars. Wow. And this strips out and is, you know, is in a different world than your, than your traditional startup scene.

Adam Spencer: You've just outlined this great history of, uh, venture capital going back to the 70s, but I'm hearing venture capital was, was hard for startups to get access to, and it only started to change in around 2010 onwards.

Adam Spencer: And that doesn't sound like that's the case from what you've been, why, why is there that misconception?

Terry Hilsberg: I just think people forget history, and no one wrote the history down, which is why your project, um, at least from 2010 onwards is a very good idea. And. You know, the old stages like the Phil Morlays of the world who were doing it, even back in 2010, people have forgotten what they were doing.

Terry Hilsberg: But it was very difficult at that stage where there was probably, there was this revolution being undergone in mobile, which was making cost of developments and everything, cost of development come down dramatically, the software eating the world thesis, but the sources of capital had not adapted to that.

Terry Hilsberg: And more importantly, the world of Australia. venture scene had just gone through a failed cycle. If the cycle in the 80s and early 90s was reasonably successful, which it was, the cycle from the mid 90s to the late 90s and early 2000s largely produced nothing in the way of unicorns, right? So people just didn't want to invest in it.

Terry Hilsberg: The irony is that the Australian superannuation funds were investing in VC funds back in the late 80s and early 90s and then just stopped for 10 to 15 years and a new generation of managers came along and eventually started investing again. Similarly, like for instance in that Japan Australia Venture Fund that I mentioned that I raised, my investors were the main Japanese insurance companies.

Terry Hilsberg: You know, whether it's Nisei, Asahi Life, et cetera. So these were major international insurance companies invested in the Australian Venture Fund. Um, and our, our anchor Australian investor was the ANZ Bank. And so that, that sort of died then for a long time. That was sort of late eighties, early nineties.

Terry Hilsberg: And then there was just cycling venture capital, which just didn't work in the late nineties. 90s, early 2000s. And I think part of it was that the cost of product development was quite high. Australia had lost people, had lost people who were willing to take big bets like Roger Buckridge, even though he was still in the scene.

Terry Hilsberg: And we weren't doing those global deals which could get big global star, uh, scale quickly. Our, our appetite to diminish to domestic market type stuff. And so people like me who are creating companies over that period, I would look at the Australian venture capital scene and I'd say, these venture capitalists, uh, domestic market focused, um, as are the angels.

Terry Hilsberg: Um, I'm not going to bother talk to them. Even I'm not going to try and raise any money in Australia. I raised the money for all of my startups over that period, uh, just by hopping in a plane and going to America, Japan, and Hong Kong. And that's where people who were successful did.

Adam Spencer: Going back to when you said you were sent overseas to look for investment to come back into the country and the only place you had luck was Japan.

Adam Spencer: Yeah. Why was that the case? And not, not even why was it the case that Japan come on board, but why did nobody, why couldn't you convince anybody else?

Terry Hilsberg: Um, maybe the Americans were arrogant. And, uh, one of the great things that, uh, a company like Canva has done is that. People start realizing in recent years that there was good deal flow out of Australia and that the deals didn't have to be 10 miles away from your door in Menlo Park.

Terry Hilsberg: That sort of feeling of arrogance amongst the valley venture scene meant that for a long time Americans weren't interested. In particular, the American funds of funds and the American pension funds and that were not interested now that that's also changed the nature of the business has changed, um, in early stage venture in the last 5 to 10 years, such that the big American funds will.

Terry Hilsberg: You know, we'll be friendly with the early stage Australian angel investors and seed funds and series A type funds and realize that deal flow out of Australia isn't too bad. And this is completely different in the crypto metaverse stuff where, um, you know, for instance, a deal, which I just made a commitment to invest in today, where the lead investor is one of the world's top five venture funds.

Terry Hilsberg: Another investor in that deal is a top 20 U. S. fund. The Australian the family offices. So there's like five, 10 Australian investors and some international investors. That's all day one. Now that comes about because the current generation of Australian Um, investors who invest in this risky stuff, um, are very well internationally connected.

Terry Hilsberg: And that was lost for 10 to 20 years, whereas it existed back in the eighties. Um, but existed back in the eighties, mainly because some of the VCs then, whether it's Nick Cullinan or Roger Buckridge would hop on a plane and every second week be in America or Europe setting up the deals and indeed creating the companies.

Terry Hilsberg: Another thing that was lost for a long time was that In Australia, generally speaking, the venture scene until again, perhaps five years ago, were largely recipients of what founders wanted to do. And so backing the great founders was the only business model. The problem is, is there may be a shortage of great founders.

Terry Hilsberg: So whereas back in the eighties, the, the problem was it was too much money and not enough good founders. So The great venture, venture capitalists of that era like Roger Backridge would go out and literally create the companies.

Adam Spencer: That's really interesting.

Terry Hilsberg: And bring the Australians back home to create them around.

Terry Hilsberg: And sometimes they failed, sometimes they won. But a classic story like this, which not many people remember now, is that there was this young chap called, um, there was this guy called John Shine, who was one of the early biotech people in the Valley, a world leader. He was an Australian. So, he was brought home to live in Sydney and run a research institute, and A venture firm was set up around him called Pacific Biotechnology and a lot of money was poured in and all of it was lost because their products just didn't work in the end.

Terry Hilsberg: But in the meantime, the CEO that was recruited to run that was a fellow called Brian McNamee. And Brian did such a good job and everyone said, God, this guy's world class that he was then invited basically to take over CSL. And turns a crappy old government, um, blood transfusion type factory into the, what is today's, uh, if it's not the largest company in Australia is one of the top five companies in Australia.

Terry Hilsberg: And Brian did that transition over 20 years. And that came directly out of him learning the ropes via a venture investment made by CP Ventures and Roger Buckridge associated with bringing in Australian. And. John shine home from America and I couldn't give you 10 stories like that that occurred in the 80s

Adam Spencer: Can you get can you give me one more?

Adam Spencer: That's amazing.

Terry Hilsberg: Another one the problems I can't remember the names of the the people I can find for you afterwards But there was another fellow who became who was part of the creation of this CP ventures along with Roger Buckridge called Roger Allen Who was running a thing called, um, computer power group, which was Australia's only international systems integrator.

Terry Hilsberg: He grew that, um, by in the eighties to be coming about a 400 million a year business. And he eventually sold it. And this was one of the world's larger medium to larger size systems integrators. So Roger would go around the world, finding the latest trends in software and stuff. which he could, um, put into his, um, systems integration company, including AI.

Terry Hilsberg: So he then found that there was this guy, um, again, at the, uh, the Stanford Research Laboratory, uh, Stanford Research Institute, SRI, in Menlo Park, called Mike Georgoff, who was, um, one of the world's then leading, um, uh, AI experts. And so Roger literally set up, uh, an institute and a company around him in Melbourne to exploit Mike's expertise and brought him home.

Terry Hilsberg: And unfortunately, this was, uh, at the period where the, the rules based, um, AI didn't really work real well, and so that went into the tank. But for every one or two of them that went into a tank, there would be another one that would get somewhere and make a little bit of money. And the classic stories there, ah, to give another story, which was not done by a VC, but was done by the person himself, of course, was, um, uh, Peter Farrell.

Terry Hilsberg: Um, Peter Farrell had been, uh, a senior vice president at Baxter Travanel, had come back to Australia, an Australian who'd come back and was looking around to create a company and became a professor, I think, at UNSW, you said. And he figured out that this whole sleep apnea thing was, um, you know, was a, was a thing.

Terry Hilsberg: And so he then created a company around that and lo and behold, some Japanese venture capitalists, uh, uh, put some money in, um, in the, uh, early nineties. And, uh, Peter went on and founded ResMed and ResMed, you know, to, to this day has the single largest concentration of engineers in Australia out at Northwest Park.

Terry Hilsberg: And, uh, you know, You know, is a foundation of the New South Wales economy. And that came out of a venture capital investment by a Japanese venture firm. Together, they were backing this Australian who'd, expat who'd returned to Australia after a stellar career in America. And there's not many people who do that to this day.

Terry Hilsberg: It's happening in the crypto scene a lot, but in the traditional venture scene, we're sort of trying to educate all our entrepreneurs. starting out from Australia rather than finding Australians who know what they're doing, you know, and they're successful around the world and bringing them back.

Adam Spencer: If we go now to today, present day, what are some of the biggest gaps apart from that one, obviously, that you just said that you see in, in the ecosystem today?

Adam Spencer: Like where, where could we improve?

Terry Hilsberg: Um, I think elements of the ecosystem are now reasonably well, um, uh, integrated internationally. So, you know, you've got, um, good accelerators like Antler and others who are very integrated into the world scene, right? So that is, is good, but when you get, that's good in the top tier, but if you've got 50 or 60 accelerator type programs helping form new companies and work with companies.

Terry Hilsberg: Many of those programs are just not very, um, internationally focused. And so, the lack of international focus in the ecosystem that develops entrepreneurs, I still think is a major international problem, a major problem of the ecosystem. Because if you're not prepared to go and find the Australians who are successful overseas, you've got to develop that talent with an international focus, um, in Australia.

Terry Hilsberg: Because there's very few startups you can do just in the Australian market that can achieve global success. Uh, global scale, just in Australia, there are exceptions, of course. So, you know, for instance, in the renewable energy area, there will be a number where you can do it. Now, again, the exception is the metaverse or the crypto game where deals are international day one and where teams will typically have developers in the Philippines, Russia, Nicaragua.

Terry Hilsberg: all over the place. Um, and the Aussies are part of these global day one teams and sometimes leading them, but that's the exception. 90%, I'd say of, um, the startup scene in Australia is still inward looking and dealing with inward looking players. in the incubator and accelerator ecosystem who are very domestically focused and dealing with VCs and angels who are very domestically market focused.

Terry Hilsberg: Now there are exceptions. Some of the top tier venture firms are very good in this regard. Like, like Airtree has deliberately structured themselves by bringing back Aussies who are, have been reasonably successful as VCs internationally. And that's great. And alternatively, there are people like Nikki Skedak who have been international themselves for a fair old period and have brought that, uh, experience and linkage back into their firm.

Terry Hilsberg: But by and large, 80 percent of the Australian VCs are very domestic market focused. And, uh, and, and more importantly, the angel infrastructure, the 500 or so angels, unfortunately, are very, uh, Domestic market focus and really can't help their, their companies. So the average founder doesn't really have anyone they can turn to if they're a global day one startup.

Terry Hilsberg: Now, there's the odd exception like a Mel Perkins who just gets on a plane anyway and goes and does it and uh, really does do a great job, but they are the exception amongst my startups. Most startups are still sitting in that sort of thing. Oh, I'll try and be successful in Australia. Then eventually I'll sort of go international.

Terry Hilsberg: But what often happens along the way is they, Roger Buckridge once described it, they get to what we call the, the kids in private school, the merc in the garage and the mortgage paid off syndrome and, uh, somehow don't quite go international.

Adam Spencer: If I asked you

Adam Spencer: what advice you'd have for founders, I mean, you've already dropped some good advice, but if you could give them one piece of advice, what would you tell them? Would it be go international?

Terry Hilsberg: Um, if you're dealing in a market that doesn't have global scale. In just the Australian market, yes, it's go international pretty quickly.

Terry Hilsberg: With the exception, there are some markets like renewable energy or even traditional finance that you can get to global scale in the Australian market. But if you're going to deliver venture like returns to your investors, then you've got to deliver global like scale in most markets. So going global day one, I think is, um, or at least looking global day one is incredibly important.

Adam Spencer: This has been amazing. Um, I have one more question that I want to ask you now. Sure. As you know, I'm trying to put together this documentary that will have the entire history of the Australian startup ecosystem. I want people from all corners of the ecosystem to actually to listen to this. What, what would you want to tell them?

Adam Spencer: What do they need to hear?

Terry Hilsberg: I think the key thing is that when the next big crash comes, How can we stop all the good work of the last 10 years from disappearing? Because let's look at history. The simple fact is there's been three crashes in the Australian venture scene in my lifetime. And each time we lose a substantial proportion of the infrastructure.

Terry Hilsberg: Of course, people get disillusioned and go off and do something else. That has some good aspects in that you get renewal. But it has some bad aspects in that we forget everything we learned the first time or the second time or the third time around. When we have that crash, um, which is inevitable, how do we stop the whole scene just disintegrating?

Terry Hilsberg: And I have some confidence that that may, uh, this time around when the crash occurs, that that may, it may be okay because there are some firms, at least the big ones who've got sufficient powder. Indeed, a crash would be good for them because it would make the valuations of startups more reasonable. I mean, you've got situations in Sydney now where, you know, you get, uh, seed rounds on pre monies of 68 million.

Terry Hilsberg: Um, when I was involved in the other day or series I on seed round series, I rounds on 200 million pre money. It's become absurd. And that's great for founders to some extent. If they can then build their companies quickly enough to, um, get those valuations justified. But it is becoming a bit, a bit ridiculous and I think is not healthy.

Terry Hilsberg: All I'm suggesting though, the big issue will be when there is a downturn, which is inevitable, and there is a crash, don't forget the learnings of the last 10 years.

Adam Spencer: Actually, one follow up question to that is, what drives that uptick? craziness, those crazy valuations. How does that happen?

Terry Hilsberg: It's a number of forces.

Terry Hilsberg: Um, one is just that, uh, the equivalent of the U S fed is just printing money around the world and therefore interest rates are at zero. And therefore it's extremely hard in traditional asset classes to make a buck unless you put everything into property and, uh, or into collectibles. So, um, the venture asset class, whether it's a traditional venture or the crypto version of it.

Terry Hilsberg: Um, it's one of the few places where, you know, you can get decent returns on your money. So for instance, most crypto funds this year in Australia are up 500 to 600%. So that's one thing that drives it, which is related to interest rates. So, and then some asset classes will also be a hedge against the inflationary times we're about to experience.

Terry Hilsberg: And so in particular, you know, the counter cyclical nature of, um, say crypto investing will, will be saying in, in that regard, um, but. Traditional venture may have problems with very inflationary times. Um, it was why amongst other things, it was extremely difficult to raise money during inflationary times in the late eighties, early nineties in Australia.

Terry Hilsberg: So that's one, one set of, one set of factors that may lead to such a situation. Another, um, set of factors might be that good deals get run out of it. Now that shouldn't be the case, but deal quality is going down a lot at the moment and, uh, stuff, you know, like even four or five years ago, you could invest in really good, um, uh, robotics deals driven by, by AI and they were great and great quality at a reasonable valuation.

Terry Hilsberg: And therefore by going in a reasonable valuation, give them five to six years to get. a global presence and, and make money. Whereas now, you know, if you go in and the things already are pre money of say 50 million, um, in a seed round or something, the pressure on the founders, um, is, uh, is just extraordinary.

Terry Hilsberg: And then, uh, I think another, um, aspect of all of this is that in the way I've described, even though I'm suggesting things have not internationalized enough, part of what's driving up prices. is internationalization. In other words, very few deals 20 years ago involved international venture firms, even at the series B level.

Terry Hilsberg: So for instance, when I, I founded a company called next dead. And so I got in some of the world's leading VCs, but that's because I got on a plane and went and got their money. Uh, that was the exception at the time. Whereas now. You, you know, typically you will see the series A or B, but particularly the B, you'll see the world's leading VCs get into the best deals, whether it's a Canberra or, you know, uh, an Air Wallex or, uh, whatever, because people like Sequoia and others, um, uh, have been getting in at that sort of level because the Australian valuations are lower, but that's in turn driving up the Australian valuations.

Terry Hilsberg: And therefore they're having to get in even earlier to get, uh, valuations. So literally, as I said, One of the world's leading venture firms is investing in the, in the next couple of weeks in a Sydney startup, um, that has very little revenue on a pre money of 200 million. And this is at a series I level.

Terry Hilsberg: Uh, and as I said, I've seen seed rounds now at say 68 million. By the way, when I talk of dollars, I'm not talking about Australian dollars. I'm always talking about us dollars. Um, so these are the International participation in the venture industry in australia inevitably is also driving up prices.

Adam Spencer: Why do you think deal quality is going down?

Terry Hilsberg: Um, well to some extent you start to run out of people who actually know what they're doing You know at the moment if you're you if you are a solidity programmer Um, on the Ethereum blockchain or, you know, on the Ethereum virtual machine, um, or, you know, how to do rust or something in another chain like DFINITY, um, you can name your own price.

Terry Hilsberg: That's if you have to be located in Australia, which sometimes you have to have in your teams. Um, and so there's a shortage of skills. Similarly, good machine learning people, you know, we're running out of. And then that part of that is also the stop we've put on immigration for the last two years. And, uh, We will see the impact on startups of our, uh, sending all the students home and, uh, our stop in skilled immigration in, you know, another one to two years.

Terry Hilsberg: There will be a dire problem. And most people will be doing their development work offshore because they just have to do it offshore. In the old, you know, like until recently, what you do is you keep the highly skilled people like the, the people who've got the crown jewels, you know, in machine learning or in, uh, crypto programming, you keep them in as Australian residents and you send the other stuff off elsewhere, um, but that's going to be extremely difficult to do in the, in the coming few years.

Terry Hilsberg: And in addition, what we've also done is because Australia's decided, um, the Australian government basically has got in bad idea with the Chinese. It, which has, um, you know, quite good national security things that we're, we're, we're looking after our national interests. But people tend to forget that a very goodly proportion of the machine learning engineers in Australia come from either India or, um, or China.

Terry Hilsberg: And so you go to meetups two years ago in Sydney, where there'd be like two or 300 people come to a machine learning meetup and you'd look around and you'd say, you know, there's Hmm, there's not too many Caucasians here, and the ones that are here are Russians. And, you know, we're going to have some problems.

Terry Hilsberg: Unless we get our skilled immigration program and our international student programs rebooted, the start up sector is going to have a few problems.

Adam Spencer: I hope you enjoyed that interview. More interviews are on the way. Follow the podcast wherever you're listening right now. Stay tuned for more interviews with many, many more amazing people from the Australian startup ecosystem. Thanks for listening and see you next time.