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Evan Thornley

Jul 25, 2022

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Evan Thornley discusses the evolution of the startup ecosystem

Evan Thornley is a serial entrepreneur with decades of experience founding and leading tech startups, including Australia’s first to be listed on the NASDAQ and reach a more than $1 billion valuation. In 1995 Evan Thornley and his wife Tracey Ellery Founded LookSmart, which in 1999 had 500 employees and was the twelfth most visited website worldwide with 10 million users. Since leaving LookSmart Evan has had a diverse career, and is currently Executive Chair of LongView, a company aiming to transform the Australian property landscape. In his conversation with Adam, Evan discusses the highs and lows of his time with LookSmart, and the ways in which the Australian startup ecosystem has changed in the decades since the dot com boom and bust.

Resources

Evan’s Wikipedia page: https://en.wikipedia.org/wiki/Evan_Thornley 

LongView: https://longview.com.au/

Evan on LinkedIn: https://www.linkedin.com/in/evanthornley/

Transcript

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 a 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. This episode was conducted by guest host Will Tjo.

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Will Tjo: Hi everyone. And welcome back to the Australian Startup Series interviews. Our guest today is Evan Thornley. It’s so good to have you on the show today, Evan. Thank you.

Evan Thornley: Thanks very much Will. It’s good to be here.

Will Tjo: To start us off, could you just briefly introduce yourself and what you’re currently up to these days?

Evan Thornley: I’m Evan Thornley. I’m the executive chair of LongView, which is a startup in the residential property investment space, building a funds management platform for residential property. So that’s my 14th start up.

Will Tjo: Wow. 14.

Evan Thornley: Some of them have worked. Most of them have worked. A few haven’t.

Will Tjo: I’m sure there’s a lot to unpack here during our interview. But I want to take the audience right back to the beginning. Evan, would you say that you’ve always been an entrepreneur? Take us back to even university days.

Evan Thornley: Yes, actually I did my first startup business when I was a full-time law student at Melbourne Uni and I was very involved in student politics. I was president of the student union at the time, and then one of the co-founders of the national union of students. This is like… We are talking stone age here. Okay. So, 1987. And I thought that the student movement should have its own independent income so that the political fights that always seem to sink the student movement wouldn’t be quite so impactful. So I set up the business arm for the student movement and we set up a chain of computer stores on campus and a whole bunch of other things. So, yeah. So I ended up building a business with about a million dollars a year of turnover, which was a decent amount in those days and about nine full-time staff. So yeah, that was age 22.

Will Tjo: What drew you in? Was it just, I guess, problem/opportunity identification?

Evan Thornley: Yeah. Well, you don’t know what you don’t know. Right. So you see a problem and something needs to be done about it. So you get about doing it. Look, I grew up in a single parent family on welfare and mum struggled a fair bit to sort of be on top of things. So I pretty much had to bring myself up. So I was pretty much used to the idea that if something needed to be done, you needed to do it yourself because no one else was going to do it for you. So I saw things that I thought needed to be done and so set about doing them

Will Tjo: And what led to LookSmart? LookSmart is wildly famous. It’s one of the most classic stories in Australian entrepreneurship. One of our first NASDAQ listed companies.

Evan Thornley: Yeah. Yeah. I think the first sort of classic startup that got to a NASDAQ listing, certainly. And look, I was a McKinsey consultant at the time. So I was a bright young thing, traveling the world, trying to solve the world’s biggest business problems with a very high end management consulting firm and McKinsey, you’re very good at understanding the economics of a business and quickly getting across the operations of businesses in a lot of different industries. So taking those analytical skills, I looked at what was happening in the very nascent internet. This is mosaic days. Right. And it seemed to me that in a world of infinite information search was going to be the power position. And all this is obvious now, but it wasn’t in 1995.

Evan Thornley: And that the business model was likely to be direct marketing and tied to what people were searching for. And so that’s where I guess as a McKinsey consultant, you’ve got to figure out where the money is and where it isn’t, that’s where I thought the money would be in the internet. And so I thought if I went and did that and it worked out well, then I might be able to do what I really wanted to do, which was to own newspapers and sort of be a left wing Rupert Murdoch. So that was the initial motivation. And six weeks after my twins were born, I left McKinsey and started LookSmart in 1995. So ancient history.

Will Tjo: That’s absolutely amazing. There’s a couple of things that I want to unpack there. The first one is you mentioned that you applied your analytical skills learnt from management consulting and you saw that search was going to be the big thing and obviously advertising revenue was how it was all going to piece together. Although I’m cognizant that there is like a thousand kilometers between seeing that and not seeing that. How did you know?

Evan Thornley: Well, it’s an interesting question. I don’t want to sound cocky, but I guess over the years, I’ve come to realize that I seem to be one of those people who’s pretty good at following the bouncing ball and seeing where it’s going to go. What’s the old Wayne Gretzky line? Don’t skate to where the puck is skate to where the puck is going to be. I’m not sure what leads you to sort of have that trajectory view of the world rather than a static view of the world. But it’s just always been the natural way of seeing things to me. Look, you always go back to first principles. Like I said, in a world of infinite information search would have to be the power position. Right. And then, well, what’s the revenue model going to be? I don’t think it’s going to be subscriptions.

Evan Thornley: It’s probably going to be advertising and that evolved. Right. And I always thought it was going to be more direct marketing than advertising per se. Sort of more direct marketing than brand advertising, because it was so targeted. And it took a few years for us as an industry to really make that happen in terms of search targeted marketing and keyword driven marketing. But that was a correct kind of analysis. I was doing some work with the direct marketing company at the time. So I probably to be fair, had that hammer in my hand at some point, but I knew all of the challenges in traditional direct marketing and direct mail and similar. And it was sort of pretty obvious that the interactive world was going to be a much, much better, faster, more malleable, more targetable mechanism for direct marketing than something like direct mails. So you could sort of see that coming. So I guess your brain connects a few dots from different universes together and you form a picture. And that, I guess, is what happened.

Will Tjo: Yeah. It wasn’t something like a black and white formula that you followed to the T. It’s just something that you saw a little bit of connection from everywhere, and then that’s how you knew.

Evan Thornley: Yeah. But look, I think that’s where most insight comes from. Right. The basis of intelligence really is the ability to connect seemingly unconnected data and look for patterns and follow trajectories. Those are all the sort of generic mental processes, I think, you go through.

Will Tjo: Yeah. So the other thing that I wanted to ask you. You mentioned like nascent internet, and that really peaks my interest. What was it like creating your own startup back in 1995? Like in terms of support structures?

Evan Thornley: Let’s be clear about where we were. Right. I mean, mosaic arrived and that was the first HTML browser. So prior to that, those of us who were on the internet were on proprietary platforms that were all Unix based platforms. So the original CompuServe and stuff like that, where you were typing Unix command lines into things and trying to find stuff. Right. So I remember it clear as a bell, I’d read all about mosaic, but I hadn’t actually seen it. And a friend of mine in the New York office of McKinsey said, oh, I’ve got… And then it was renamed Netscape. Right. So I’ve got Netscape on my browser. Sorry, I’ve got Netscape on my… I’ve got Netscape on my computer. Do you want to see it? And I said, oh yeah, I’ve heard all about this thing. I really want to see it.

Evan Thornley: And he was a British guy. His name was Richard Blue. And he fires up his Netscape 1.0 browser, and five seconds later, we are searching for apartments to rent in London, point and click. And the light just went on and I said, wow, this is going to change the world. The usability of that point and click interface, HTML interface of the first browser compared to the sort of really clunky, very technically complex environment that online services had been to that date just it was a blinding flash for me. And six weeks later, I left McKinsey and started the business. So, yeah. So when you say, what was… I mean, there was no internet ecosystem. There weren’t any internet companies. Netscape was the first internet company because they were the first browser. So then you got the first of the directories and search engines starting with Yahoo and gradually that evolved out of the US. And obviously there was nothing in Australia. So there was no ecosystem.

Will Tjo: Could you tell me a little bit on your perspective or what was it like at the height of the boom?

Evan Thornley: Yes.

Will Tjo: Like in terms of… You know, there were crazy valuations everywhere. Everyone was just getting into tech stock. As long as they had dot com in it would raise millions.

Evan Thornley: Yeah. Look, 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, but the valuations seemed insane, but the great companies, as it turns out were very good value buying at that point. Right. So the valuations weren’t insane for the winning companies. They were actually undervalued, I think what it took a long time and it still takes a long time. You still see these fashion trends in the capital markets and in venture capital in particular. 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 sort of sustainable, competitive advantage.

Evan Thornley: And so 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 the eBays. And then shortly thereafter, Google and others went on to become immensely valuable and their valuations then look trivial compared to where they are now.

Will Tjo: Yeah. What was it like running LookSmart in the wake of the bust?

Evan Thornley: Oh, look, tough. January the 8th, 2000, I think it was, 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 were 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@Homeome 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. Right.

Evan Thornley: 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. So 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 sort of were in complete denial. They just wanted the party to continue and was sort of unable to comprehend that the world that we had known had changed.

Will Tjo: What was the decision that led to you leaving LookSmart and then your brief stint in politics?

Evan Thornley: Yeah. Look, I guess I’d done what I’d set out to do and the company was based in the US and it was really a family decision. We wanted our children to grow up in Australia and it wasn’t practical to stay on as CEO of a NASDAQ listed tech company in California from Australia, certainly not in those days. And to be honest I’d made more money than I ever imagined I ever would and I still had a burning desire to fix the Australian Labor Party, which in retrospect was one of my more full hearty aspirations.

Will Tjo: This next question, I’m cognizant that it could be quite difficult for lack of better term, so feel free to skip it or tell me that I’m out of line for asking this.

Evan Thornley: Oh, look, you’ll have to do better than that. I used to say in my all-hands meetings, there’s a bottle of wine here for the person who asks the first question and there’s another bottle of wine here for the person who asks the most difficult question. The difficult questions are the good one. So fire away.

Will Tjo: Yeah. LookSmart is a search engine. It could have been Google. What went wrong?

Evan Thornley: Oh, look, so many things that I think as a first time entrepreneur, there’s many things that you would’ve liked to learn from your subsequent life. But look, I think the first thing I would say is we started out looking at the world as it was in 1995 and there was a split between keyword search and category based directories. And Yahoo was the leading category based directory and things like Alta Vista were the lead keyword search engines. And we first set out to build a much better category directory than Yahoo, which we succeeded in doing. But it’s also clear that as the volume of information grew, category directory became unwieldy and the keyword search was the only practical way of running things. So I think we were playing down the wrong fairway there. We realized that and therefore morphed into looking at the revenue streams and became one of the pioneers of what’s effectively Google AdWords as a revenue model. Right. So keyword targeted search terms.

Evan Thornley: So us and a company called Goto.com were the sort of the two pioneers of that. And then as Google came along, they adopted that revenue model and it seems to have worked out okay. So we had to pivot at that point. To make the best of a situation where it was clear, we weren’t going to be the leading player in search, so we had to sort of pioneer a different approach to the revenue. And then we didn’t have the venture to compete with the big brand building players. So we had to syndicate our product through other people and white label our product to others. And so we built a syndication driven business. So I think we made the right responses to where we were, but the entire world of search, I’ll get a bit technical with you for a minute, was driven by search algorithms that were driven by proximity and frequency of the search terms in a document.

Evan Thornley: And Google had the profound insight that it was more about the relevance of the document rather than proximity and frequency and using an analogy from academic citation analysis, the real way you find out which documents are relevant is by which other documents linked to them. And so they’ve built a link topology ranking algorithm. And that of course was a revolution. It was a technical revolution in search and they quite rightly deserve to win at that point. And some of us did try to buy them, but sadly that wasn’t the case.

Will Tjo: Thanks for sharing that insight. I’m interested to hear. So you’ve pretty much been in the whole startup ecosystem for the better part of the last two decades. And I’d love to get your insight on how that has changed over the last 20 years. Has it been what you expected it to be more or less?

Evan Thornley: Yeah, well, I think you’re right in saying two decades, because the first five or six years we were there, there was no ecosystem. So let’s start the clock at 2000. Well, we were already a public company by then. Oh, look, I mean in Australia in particular one has developed. I mean, there was really nothing. There was no, even the basic stuff of who are the lawyers who know how to knock up a stock option plan. You know, where are the venture firms? There was one venture capital firm in Australia in those days, which was a small outfit called Allen and Buckeridge. There were a couple of lawyers or accountants who’d had some experience of stuff in the US.

Evan Thornley: There were no incubators, there were no serious venture firms. There was nothing here. The entire ecosystems been created in 20 years. And it’s fantastic to see. It’s absolutely fantastic to see and at the same time, obviously, the technology’s advanced to the point where your capacity to launch something online, some consumer application that’s going to be exciting and interesting with relatively off the shelf platform configuration is… It just means the amount of time and the amount of money to actually launch something has dropped by an order of magnitude. And so anyone with an idea can get out there and have a crack and quickly test and learn and see if they’ve got something or not. Whereas we had to raise some millions of dollars just to be able to build something and hope that it would work with no precedence and nothing to compare to.

Evan Thornley: I mean, you look at your average sort of new SaaS platform play in Australia and you know what all the metrics are that you need to hit, which players are doing well and badly. You’ve got a whole ecosystem from way precedential through to post public financing. You’ve got lawyers, accountants, head hunters. It’s an ecosystem. It’s still relatively small even compared to somewhere like Israel, let alone Silicon Valley. But it’s a functioning ecosystem and of course it’s birthed some amazing companies. The Canvas and Atlassians and Afterpays and others and the previous generation, Seek in particular, I think, stand out. So yeah, it’s a functioning ecosystem and all of that’s happened in a relatively short period of time. As you said, in 20 years, all of that’s come to pass. And now somebody who is onto something can have a reasonably clear run through to exploring that and turning it into a serious business.

Will Tjo: Yeah. Can you pinpoint a specific year which it all started to kickstart and maybe some catalysts?

Evan Thornley: Look, always the biggest catalyst is success. Right. And so I’d like to think 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 by market value. Obviously that drew a lot of interest from a lot of people. And the next generation came through after us, the marketplace plays, real estate, Carsales, Seek. And so then once those were successful and Seek’s the story, I know best just because Paul was originally my lawyer when we started LookSmart, we were mates from Melbourne Uni law school and he was at Arnold Bloch Liebler and he did all the early legal work for LookSmart.

Evan Thornley: And then one day he came in and said, oh, Evan, I’m sorry, I’m leaving the firm. I said, oh, what are you doing? He said, I’m going to go off and be an internet entrepreneur. I said, oh, fantastic. What are you going to do? And he pulled out… I still have the evidence here. He pulled out a business plan for a thing called The Spot, which is in fact what became Seek. And I looked at it and I said, whew, taking on Fairfax and the rivers of gold classifieds mate, it’s a big market, but they’re going to be tough to beat. And you know, history tells the tale. They absolutely cleaned Fairfax as clocks and built a magnificent company.

Evan Thornley: So I think… I mean, LookSmart was a bit of an anomaly for people, but it certainly got people’s attention. And then when material success was then replicated by, as I say, the Seeks and REAs and Carsales then entrepreneurs had role models and believed that it was possible to do this stuff from Australia. Certainly, LookSmart listing on NASDAQ, I think, really helped people believe that we could play globally and the success of the marketplaces in Australia in particular. And the money people aren’t far behind. So our early stage investors made 100-baggers on the deal. Right. So people notice that and many others want to follow.

Evan Thornley: And the lawyers, and associated the investment bankers and others build experience and can then give that experience quicker and easier and cheaper to the next generation. So I think that was the first big turning point was seeing the early successes. Then I do think that just the evolution of technology and the lowering cost of entry has really helped. And then you get to a certain critical mass where there’s institutional knowledge. The way people, everybody in the system now can understand what’s a minimum viable product? When can you establish product market fit? All your key metrics, particularly in SaaS businesses. These become known teachable things. And then you have a sort of mass education that happens in the community, and then you have a flourishing of new players and a sifting out of the success from that. I think the biggest change was really that entrepreneurs could see that it was possible. And once you believe it’s possible, especially when you are young and crazy, then you have a swing.

Will Tjo: Yeah. I love that. It’s in essence, shining a spotlight to past founders because that paved the way for the next. Once the spotlight started to fixate on startups, it just-

Evan Thornley: And look, the other thing that happens, and this is critically important is people that work in those early success stories they know what a successful company looked like, and go off and found their own. And that’s happened for decades in Silicon Valley. Most people don’t found their first company out of nowhere. Most people who are good founders actually started in other companies. And we saw a lot of that. Obviously, Martin Hoskin was… You know, Martin was, I think employee number three at LookSmart, and really a core part of the founding team. And then went on with Redbubble and his role in Aconex and other things. And similarly people came out of Seek and came out of REA.

Evan Thornley: And so you really then get that second generation that flows from that. And then of course you get the founders and the early venture investors, who’ve made serious money in those early startups then looking for the next generation of founders and the next generation of companies to invest in. And it’s often with their own people coming through, that they start that. I mean, we used to back a bunch of our own stuff. I always encourage people if they had a startup, we’d hate to lose them from the company, but we wanted to help them succeed. So we’d often back them in.

Will Tjo: Yeah, absolutely. The flywheel. So they say, right?

Evan Thornley: Yeah.

Will Tjo: Yeah. Do you think that we do have a PayPal mafia in Australia? And if so, what company would you say is the PayPal that led to the flywheel?

Evan Thornley: Oh, that’s an interesting question. I haven’t thought about it in single company terms, because there was so few of us. Right. Like everyone knew everybody. So I’m not sure it narrowed to a single company per se. I mean, obviously a lot of the sort of digital marketing folks did come out of LookSmart because we pioneered that space. All the marketplace spaces have now, well, famous last words have now been taken up. I’m sure they haven’t. But a lot of people learned about marketplace businesses from the three Amigos in terms of Seek, REA and Carsales. I’m not sure that… I’d be interested, now other people may have a better vantage point on that question. It’s an interesting question. I can’t think of a single company that sort of had that type of impact per se, but I may be missing something really obvious.

Will Tjo: No, I understand your point and that’s fair enough. The next thing that I wanted to ask is a theme that has popped up a couple of times in our conversation so far is the idea of lowering cost to entry. You mentioned a couple of minutes ago that back then it costed millions to test something that had no precedence and you’d have to be crazy to go off and do something like that. What would you say are the catalysts that led to this lowering cost of entry? A couple of other guests have mentioned like AWS startups.

Evan Thornley: Yeah. Look, obviously AWS is part of that. That’s certainly part of it, but just the whole… I mean, just dev generally. Right. I remember I left McKinsey the same week as my then boss at McKinsey left and he said, oh, I’ve got bad news. I’m leaving the firm. And I said, oh, that’s funny. I’m leaving the firm as well. I said, what are you going to do? He said, I’m going to go and build this internet directory. And I said, that’s funny. So am I. His name was Charles Conn. His internet directory was a local business directory. And it ended up being a thing called Citysearch, which ultimately got bought by Barry Diller and his people for a couple of billion dollars.

Evan Thornley: But one of the funny things Charles said to me when we caught up a few years later and this will date me, but he said, Hmm, Java, great for raising money, bad for building websites. And everyone was doing their own bespoke development in those days and that was necessarily time consuming and expensive. Whereas you can really plug and play a lot of modular stuff these days and configure it and get yourself a working MVP to test a value proposition with customers. And obviously AWS and everything associated makes that. Yeah, you’ve then got shared infrastructure. So that’s quicker and easier and cheaper.

Will Tjo: Yeah. I’d love to turn to the ecosystem today. What would you say that there are things that we could still be doing better?

Evan Thornley: Look, I’m a bit remote from the mainstream of it. I think I’ve been, funnily enough, still just going off and doing my own things. And so I’ve got observations and firstly, overwhelmingly, I’m just incredibly excited and proud of where the country’s got to and that we have got a viable startup system at minimum Sydney, Melbourne and Brisbane and great companies come from other places as well. Seen a couple of great companies from Adelaide and elsewhere. But I would also say particularly the venture scene, I think is a bit monochromatic. If you’ve got a global SaaS platform play, then venture folks are all over you and if you’ve got the right metrics, they’re going to be all over it. And that’s fantastic, and it’s natural particularly because Australia’s a small domestic market. So global plays are important and SaaS models with recurring revenue streams are obviously attractive.

Evan Thornley: But I think that there’s a lot of other ways that great businesses start and a lot of other business models that can work, bu they’re innovative so you don’t have precedent for them. So they’re harder to judge. So in a weird way, I think there’s a little bit of risk aversion there or perhaps put another way there’s enough great SaaS platform businesses, why would you go to back things that were different to that? Afterpay didn’t come out of the venture scene here. Right. Because that was a different model. So I think that the Australian venture scene does some things really, really well, but perhaps misses out on a broader range of things that would require some first principles analysis to try and determine whether those models were attractive rather than a sort of more formulaic recitation of metrics, which unquestionably are correct and work in a particular business model.

Will Tjo: How about on the flip side of that, what would you say we do better than say other geographies?

Evan Thornley: Well, that’s a good question. Look, the only three geographies, honestly, that I really know anything about is Silicon Valley, Israel and Australia. So that’s pretty tough competition to say, what do we do better than Israel or Silicon Valley? That’s pretty rarefied air. Well, I’d say… Look, let’s compare with, say, Israel. And like Israel is at least an order of magnitude more startup intensive than we are. Possibly two orders of magnitude. Right. I think we’ve put five companies on the NASDAQ. Four or five in our 20 something year history. One department of one university in Israel put more tech companies on the NASDAQ in one year than our country has in our lifetime. Right. The computer science department at the Technion in Haifa did five in one year. So while what we are doing is incredibly exciting and compared to where we were is incredibly heartening, let’s not kid ourselves that we’re at the world’s leading edge.

Evan Thornley: But the flip side I would say is generally Israeli startups tend to sell out early and not go on and build great companies. They tend to sell the technology early, take the flip and move on. Whereas, I think Australia has got a bunch of great companies that have really gone on with it. Atlassian has really gone on with it and built a great global company. Canva is well on the way to building a great global company. So I think that we have… Australians have been willing to go all the way in a way that is less common, for example, in Israel, which is otherwise a much, much more intensive and vibrant startup scene than we have. So I think that’s something we’ve certainly done well.

Will Tjo: Do you have any unpopular opinions, Evan? Something that you believe is true, others aren’t on the same page as you?

Evan Thornley: Oh, well, I think I would say what I said about the sort of somewhat one dimensional nature of the Australian venture scene. It certainly would be an unpopular view and in both unpopular sense, people don’t like it, but also unpopular probably in the sense that may not be widely shared. I’m always doing completely new stuff that no one else is doing. So sort of by definition it is that. Right. So, just to talk about what I’m working on at the moment, which nobody else is working on to my knowledge seriously, which just astonishes me is residential property is the biggest asset class in the country. Right. Not by little bit. The Australian Stock Exchange and every company on it is $3.3 trillion and Australian residential property is $10 trillion. Right.

Evan Thornley: And yet if you want to buy domestic equities or trade domestic equities or analyze, or do anything with domestic equities as an asset class, there is a whole industry of stock brokers and analysts and financiers and everything else in domestic equities. And you look at Australian residential property as an asset class, and there is literally nothing. There is literally nothing there. Commercial property which is one ninth the size is a whole industry with commercial rates and a whole bunch of other things. And so I’d call that a bit of an oversight. You know, there’s more funds in crypto, mate, than there are in residential property and exciting as the crypto stuff undoubtedly is, my unpopular view would be that residential property is somewhat more important and a lot less competitive. And there’s more crushing social needs, quite frankly. The entire Australian housing ecosystem is a disaster.

Evan Thornley: It’s the worst country in the developed world to be a tenant. It’s one of the hardest countries in the world to save for a deposit to buy a home. And there is absolutely no one that’s there to help anybody either to buy their own home or to be a successful just garden variety mum and dad property investor. So, I don’t know, that looks like the biggest of blue oceans I’ve ever seen. And in that sense, to use your phrase, an unpopular view, it must be because basically no one else is doing it. We’re about to launch our first shed equity offering to help folks get the deposit they need to buy a home.

Evan Thornley: There’s a few other terrific startups doing a similar thing. So I guess in that particular corner, there’s a little bit of action, but that’s it. So hidden in plain sight. So I guess I’ve always been a bit contrarian. So while everyone I know is going to build global SaaS platforms, we are going to focus on the biggest play in the country by a factor of three that’s hidden in plain sight, which is residential property and fixing the problems that exist in the Australian housing landscape for tenants and potential purchases and for investors.

Will Tjo: Yeah. This is a little bit of an off tangent question, but how do you make sure that you’ve struck gold or you are maybe in something that no one else is in that, and maybe you’re wrong, if that makes sense?

Evan Thornley: Oh, 100%. You worry about it every day. Right. Every contrarian who has any sense worries every day, what am I seeing that other people aren’t seeing? And anyone who’s ever done anything new, if they’ve got any humility left in them, does that. So you just keep testing that hypothesis and you keep asking and you keep welcoming hard questions and contrary views and testing what you’re working on against that and against the facts. So I think in this particular case I’ve talked to just about anyone I can think of in the space over the last five years that we’ve been working on this, and I’m now pretty comfortable that we are onto something.

Evan Thornley: And actually it’s very validating. You know, we started working on shared equity as a critical affordability tool for young people to buy homes about a year and a half ago. It’s been a huge project. And lo and behold as we were doing it, two or three other tech startups have come out, people are starting to get funded following that model. There’s a bunch of government schemes around and soon it’ll be flavor of the month. And so it’s always validating to have competition, actually. I remember saying to a fellow I knew in Silicon valley who said to me we are two years ahead of the competition. And I said to him, well, if you’re one year ahead of the competition in Silicon Valley, mate, you’re a genius. If you’re two years ahead of the market, the market might be trying to tell you something.

Evan Thornley: But ultimately by definition, you have to be willing to pursue something that you think has underlying fundamentals that support your view. And that the conventional thinking is not based in underlying fundamentals. So it’s usually based in some misunderstanding or some commonly held, but ultimately outdated or wrong world views or some other form of sort of mass psychological distraction. And you keep testing those underlying fundamentals. It’s like I was talking about LookSmart in search, you always have to go back to fundamentals rather than fashion trends. So if you are worried about what other people think, and you’re wanting to follow the crowd, then you will never do anything fundamentally new and interesting. That doesn’t mean that doing something that no one else is doing makes you smart. It should make you extremely cautious and weary and asking yourself the question you just asked me every day.

Evan Thornley: And I guess we’ve been trying to do that. And so far we are as comfortable as we can be that we’re onto something and as more competition and the more we’ve taken the covers off this thing in the last few months, and a lot of people seem to be sort of deeply intrigued by why we see the world differently. I’m encouraged by that, but the market will speak in time and we’ll be right, or we’ll be wrong. And if we’re wrong, hopefully we’ll see that first and change.

Will Tjo: Yeah. That’s a good segue into the next question, which is reflecting on your experience, your wins and your mistakes. What would you tell a new entrepreneur to help them increase their chance of success? Is it that be willing to have a crack and test and validate, right?

Evan Thornley: Oh, look, all of that is absolutely true. And I still go back to team is everything. Getting the right founding team and building that team as a team that has the right diversity of experience and mutual respect and has all the basis covered between those first three to five people is hugely, hugely important. So, yes, the idea is obviously important in testing the idea and validating that there are real customers who will pay you money for that is absolutely essential, but often they won’t with your early ideas. But if you’ve got a good team, that team will take up that data and take up that challenge and keep pivoting until they’ve found something. So I’ll back a team over an idea all day long. I think my favorite I used to probably spend more time with young founders, I guess there were less mentors around a decade or so ago.

Evan Thornley: So I used to have people every second day come and ask me for help. And I’d always try and make time for them. Thankfully, there were many others that take up that burden now, and I’m back doing my own stuff, but the second thing that I always got people to focus on, which was never top of mind for any of them, and this is not so much a key to success, it’s a key to avoiding failure, is that governance matters. Boards and board structures and board personnel really matters. A good board really improves the likelihood that you can take something from good to great, but a bad board will almost always kill you. And it’s just the last thing anyone thinks about in the early stages of a company, but very quickly the structure of that board and who you put on it and how that board works becomes important.

Evan Thornley: And it inevitably becomes most important in two critical situations either when something goes wrong or when things go staggeringly right. Right. And dysfunctional boards in either of those situations could kill you. I’ve seen the number one reason I’ve seen startups fail is they run out of runway, but a very close second is problems at the governance level, either disputes between founders, disputes between founders and venture, disputes between venture and venture. And all of those human elements and the structure and who’s ultimately legally got the power to determine the direction of a company that stuff really matters, and it’s probably the one sort of piece of advice I’ve given almost every entrepreneur I’ve met that they’ve almost never gone, yeah, yep, no, we’ve thought a lot about that, and this is what we’ve done, and this is how it works.

Evan Thornley: And they’ve always gone, oh, well, I hadn’t really thought about that. And yet the number who come to me and say, oh, we’ve got this nightmare on my board or between us founders or, you know. And they think they’re the first person who’s ever had a problem in the power structure of the company who gets to call the shots, and yet it happens all the time. So that’s probably the one sage piece of advice. I’d give everyone it’s not a sexy topic, but it really matters.

Will Tjo: So Evan, as you know, what we’re trying to do on this podcast is to document as historically and accurately as possible, the history of our ecosystem, just so that we can look to the future. And we’re aiming to reach all corners from founders, investors, academics, and policy makers. Is there anything that we haven’t discussed today that’s always top of mind for you?

Evan Thornley: Oh, look, when you say policy makers, here’s the thing. And as someone who’s been very active in political life in a range of different forms, as well as in startup life, one of the things I’d say about Australia as a nation and Australia as a polity is that almost every problem we have in this country, the dialogue about what to do about it usually starts with somebody saying the government ought to do this or that. And that includes how do we build a better startup ecosystem and how do we fix all these things? And I would say broadly speaking, that government is spectacularly irrelevant to 99% of this stuff, and that we would all profit by wasting less breath on debating what governments ought to do to make us into an innovative economy. It’s a peculiarly Australian obsession, which certainly doesn’t exist for example, in the US, or for that matter in Israel.

Evan Thornley: Although I might say, if any, government’s actually done a good job of helping formulate an ecosystem, it probably is the Israeli government. But Australian governments will never do anything in that form anyway, regardless of who’s in power. So I just think it is a massive distraction. And all the people that have spent years trying to get governments to put money into this and money into that. I mean, yes, there are a few things that obviously really matter. It’s very import that you have a tax system that doesn’t create cash tax liabilities for non cash rewards in terms of stock options, for example. Clearly that stuff’s got to be right. But so that would be the one thing I would say, and the tech council and folks doing important things and no doubt will be representing our community on important issues. And it’s great that people do that and are of service there. But I just wouldn’t get too ambitious about what you’re going to get government to change its position on. And even if you did, whether it would have any material impact on the outcome.

Will Tjo: Why is that? On both tangents, why is this a uniquely Australian obsession? And secondly, it seems like, yeah, why should government sort of stay out?

Evan Thornley: Well, because government is a slow moving bureaucracy. It’s an organizational model that’s a Webarian bureaucracy from the 1930s. It’s 100 years out of date. So why would you expect something that’s working on a model that’s 100 years out of date to be relevant to stuff that’s meant to be at the cutting edge? I mean, it’s completely antithetical. It’s an organizational form that is the complete antithesis of a startup in every possible way, structurally, culturally, and in every other way. So it’s not because people who work in government are bad people or politicians or crooks, or this party or that party’s doing the wrong thing. There’s very decent people in public service and doing the long march through the institutions to try and make the country better, and I commend it and many of them are friends of mine, but the idea that organizational model can do anything useful for something that’s moving as fast as we are moving is just laughable.

Evan Thornley: And I’m sort of confused as to why people think it would be otherwise, but because our answer to every other problem in this country is the government ought to. I guess when we get to challenges for startups, we start out with the government ought to. I’m trying to think of anything material that governments have done in the last 20 years that have really changed the answer and I’m struggling.

Will Tjo: How about the national innovation and science agenda introduced by the Turnbull government? Would you say that moved the needle somewhat?

Evan Thornley: Look I’m not close to the specifics and they maybe worthy things that have come out of it. And I’m not trying to pull these things. So look, I don’t know, specifically at that level. I mean, look, I recall there was a government scheme and this is 10,000 years ago, okay, in LookSmart days. And they invested in a whole lot of startups. And one of the… What they did was the private equity firm that put early money into LookSmart was sort of a bit worried about the risk profile. So they laid some of that risk off and took some of the government money in exchange for a portion of their shares. And as it happens of the, I don’t know, 30, 40, 50 companies, the government put money into the only one that made anything was that share in LookSmart.

Evan Thornley: Fortunately it was a 100-bagger. So it actually paid for the entire thing, and the scheme coming out in front. And I remember being at a dinner in New York when Prime Minister Howard was there, and he sort of pulled me aside and said, well, thanks to you guys, this thing is not in a complete train wreck. And so even at that time, I was sort of like going this is probably not the most useful space for governments to be trying to intervene. So look, I thought some of the policy settings in the Turnbull agenda were good and hopefully they’ve made differences at the margins. And again, the last thing I want to do is criticize the good people who are working hard to try and make sure government policy is as good as it can be. That’s important work. And it’s great that people are willing to put that effort in and then make those changes. I’m just saying, if you calibrate that as one of the levers of change for our ecosystem, I wouldn’t calibrate it very highly.

Will Tjo: Yeah. The last question, Evan, and I know that we’ve mentioned quite a lot of people in organizations already is who are the heroes in the ecosystem that you know, or in your personal journey that you’d like to shout out?

Evan Thornley: Oh, look, they’re just mates of mine. So look, Brother Bassat has been remarkable. Right. Because I’m talking about Paul, but you know, I’m a huge admirer of Andrews as well. But you know, Paul’s done it twice. Right. He and Andrew and Matt built Seek into a truly great company. A wonderful culture. It’s still a wonderful organization. I did a start up a while back, which unfortunately didn’t make it, but which Seek backed, and I’ve never worked with a better strategic partner. They were just fantastic. And it was a real credit to them that company, which is now large and successful, still has such a fabulous culture. But Paul not only was obviously central to that magnificent success, but then has gone on to really lead in the venture world through Square Peg.

Evan Thornley: And so I think to do that twice is astonishing and a great credit to him. I think what Niki Scevak’s done and the way they’ve built Blackbird is fantastic. The way that the venture scene has developed and the Blackbird and AirTree and Square Peg guys, and Danny Gilligan’s a good mate of mine at Reinventure, who’s one of the people I probably rate the highest that I’ve ever worked with. And so they build a real venture community here that’s had extraordinary success, and they’ve had extraordinary success because they’ve helped other entrepreneurs become incredibly successful. So that’s the stuff that matters. Not what governments do. So I think all of those people are heroes.

Evan Thornley: Look, I don’t know much about Canva, but that founding team have done an incredible job. And it’s really just such a great global platform. And obviously the Atlassian guys, and you talk about, again, I’ve sort of put government. You want action on climate change here’s Mike Cannon-Brookes from Atlassian shutting down coal fired power stations by buying the bastards. Right. That’s heroic stuff that should get a shout out for sure. So it’s exciting to see people who take their success in the business and continued success. I mean, what a great company. And then take some responsibility to try and really shape the nation and the world on things that matter, and nothing matters more than climate change.

Evan Thornley: So look, I’m sure all of those are fairly familiar heroics. And I don’t… I said, they’re all mates. Obviously a number of those people are not people I personally know. I’m obviously incredibly proud of Martin Hoskin and what he did coming out of LookSmart, and I think learnt from a lot of our mistakes. He’s done a great job with Redbubble and was I think an important part of the total team that Lee and the guys at Aconex have done really well. So there’s serial entrepreneurship at the highest level, part of at least three unicorn successes. So you got to give a big shout out to Martin for that. Yeah. Those would be the ones at the top of my mind, but I know there’s so many other great companies and great founders out there and great people.

Evan Thornley: Look, I’ll give a shout out completely separate to this, but again, this is why I like people to think more broadly. I came up with a crazy idea of buying ABC Childcare and turning it into a social venture. And I’m very proud of having done so, but the person who really did the work on that was Michael Traill who’d founded Social Ventures Australia. And he really did the real work that turned that idea into what is now GoodStart, which is far and away, the biggest social venture in the country, the biggest early childhood educator in the world as a for-purpose venture. So that’s the sort of thing an entrepreneurship that I think should be celebrated. And I think Michael’s an absolute hero for the work he’s done there. And that’s making a difference in literally tens and tens of thousands of young developing children’s minds at the time that’s most important, the year zero to six. Entrepreneurship matters more broadly than just who’s built the next great tech global SaaS platform, worthy and exciting as those also are.

Will Tjo: Evan, it’s been so good having you on the show today. Thank you so much for your time.

Evan Thornley: No, thank you, Will. Thanks for your interest. And I’m really excited you guys are doing the work now to get a proper history and hopefully for the purpose you’ve done it, which is to hopefully we can all learn from it and set an even better future coming out of it. So good on you for doing the work, you and Adam, thank you.

Will Tjo: Where could the audience go if they wanted to learn more and connect with you?

Evan Thornley: Look, one of the lessons I learned was I thought I was so good after my first success that I tried to do two or three things at once and failed miserably at all of them. So I was humbled back into the idea that maybe I should just do one thing at a time and see if I can at least make that work. So, so I’m all in on my current deal, which is LongView, which is, you know, residential property is a long game. So longview.com.au, you can find me there, Evan [inaudible] longview.com.au, and always happy to talk and if I can be helpful to founders or others that think that they can profit from avoiding the mistakes that I’ve already made, I’ll be happy to share them.

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.

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Credits

Production Credits

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

Special Thanks

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

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Music by Lee Rosevere

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