The Documentary: Part 1

Malcolm Turnbull:

You’ve got to recognize that we’re living in a time of very rapid change. So how do we deal with that? Well, we deal with that by being agile, innovative, and take advantage of these disruptions and rapid changes so that we can stay at the front of the pack.

Adam Spencer:

So what does the future hold for the Australian startup ecosystem? Well, before we even begin to tackle that question first we need to go back to day one.

Hi, I’m Adam Spencer and over the past 12 months with the support of major sponsors, NYOB, AWS Startups, Investment New South Wales, and CSIRO. Along with our other sponsors and partners, my team and I have conducted more than 150 interviews with amazing people from all corners of the Australian startup community. We’ve spoken to founders.

Cameron Adams:

Hey, I’m Cameron Adams. I’m one of the co-founders and chief product officer of Canva.

Adam Spencer:

Investors.

Rachael Neumann:

Hi, I’m Rachel Newman. I’m one of the founding partners of Flying Fox Ventures.

Adam Spencer:

Academics.

Allan O’Connor:

My name is Allen O’Connor, I’m with the University of South Australia.

Adam Spencer:

Policy makers.

Malcolm Turnbull:

Yeah. Hi, I’m Malcolm Turnbull.

Adam Spencer:

All with a single goal in mind to tell the history of the Australian startup ecosystem. We’ll kick off our story and after these messages from our sponsors.

The story of the Australian startup ecosystem is more broadly the story of how technology shapes our world. In the 18th century, the industrial revolution dramatically reshaped the way our societies live and work. In the 20th century, the development of modern computing and the internet would usher in the information age. And once again with new technologies came great change. Small teams of innovators could reshape the world with a speed and at a scale never before seen. Larry Page and Sergey Brin, to give a classic example, started working on Google from their dorm rooms in the nineties. And would go on to revolutionize the way information is accessed around the world. We call these teams of innovators, startups, but what defines a startup. According to Pete Lead, author of the Startup Guide and lecturer at the University of Sydney, the answer may not be so obvious to everyone.

Pete Lead:

I run some startup classes at University of Sydney and I start the first class by asking people, “Well what is a startup?” And most people don’t even have a guess at what a startup is, or they say it’s just a company that’s just starting or it’s a small business. So when we’re in the ecosystem, we think we know what startups are and startups are this big booming thing. And I think we forget that most people only see the word startup when it comes up in the news.

Adam Spencer:

The limited visibility of the startup ecosystem throughout the general public is a theme we will touch on throughout the series. In the hopes that this podcast might serve as an introduction to anyone unfamiliar. We’re going to start with the basics. So how do we define a startup?

Kate Cornick:

Startups are technology based companies that are using innovation typically to disrupt markets, to grow globally.

Adam Spencer:

Kate Cornick is the CEO of Launch Vic.

Kate Cornick:

And so when you break that down, we say technology driven and we mean technology in the broadest sense. We say that they’re innovative because they are disrupting typically. And global is really important for us. We don’t believe there are very many startups at all that can function purely on a domestic basis. That doesn’t mean to say that they don’t have a solely domestic focus for a period of time. But we are such a small market in Australia, they necessarily have to be thinking global. This is not about measly bar companies. Great businesses, love them, eat a lot of muesli bars. Your average muesli bar is not a global brand. And so when you add all of that up together, what are we trying to say? We are really trying to get behind companies that have a very rapid growth trajectory, can reach a billion dollar valuation and can hire many hundreds of staff.

Adam Spencer:

Pete Lead’s definition is slightly different. Suggesting that a startup is by definition temporary.

Pete Lead:

The startup is a temporary organization used to search for a repeatable and scalable business model. It’s a temporary organization, so it could be a group of people forming for the first time, it could be part of a larger existing organization say in a corporate setting. It’s used to search. So it’s defined by a lot of uncertainty or a lack of certainty. It’s searching for a business model. Because for me, the super interesting part of our startups is not creating a new product but creating a new business model, a new way that the business works and makes money. And the business model should be scalable and repeatable because you don’t want to just do it one time. You want to be able to grow either into new product lines, new markets, new geographies, et cetera.

Adam Spencer:

There may not be one universal definition, but for our purposes a startup is an organization innovating a new product, service or business model that has the potential to grow into a global company. But this series isn’t just about startups, it’s about the Australian startup ecosystem. So what do we mean when we use the term startup ecosystem?

Tim Fung:

One of the most powerful things about any kind of ecosystem I think, is you need to have proven success and proven experience.

Adam Spencer:

Tim Fung is the founder of Airtasker.

Tim Fung:

If you look at why Silicon Valley or San Francisco is so awesome. I guess you had folks in the sixties building silicon chips and then that experience and that capital got pushed into the next era, personal computing or whatever. And then that gets pushed into the next era of e-commerce on the internet that just keeps compounding.

Adam Spencer:

Silicon Valley may have been the first true starter ecosystem though today there are many examples globally.

Phil Hayes-St Clair:

So in the early or late nineties, early two thousands, the world sort of looked in on Silicon Valley as just being the epicenter for change. It still is to some extent, but it’s spread further around the world now.

Adam Spencer:

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

Phil Hayes-St Clair:

You look at places like the Ukraine, Nigeria, the UK, Belgium, Germany, New York, Massachusetts. There are so many places you can go in the world that are now doing such great work but they all have one thing in common. There is a collection of people that have decided to come together, which is typically the formation of founders and really interesting and productive investors.

James Alexander:

The support programs for early entrepreneurs need to be there. So I call this startup infrastructure.

Adam Spencer:

James Alexander is the co-founder of Galileo Ventures.

James Alexander:

So one, you need support infrastructure and programs that can help people develop the skills and education and knowledge to launch their ventures. And we’re seeing that happen at university level, which is really, really great. But we’re also seeing it happen generally across the market.

Maxine Sherrin:

To me it’s something like a collection of organizations who are supporting startups. And what makes an ecosystem is that there is connectivity between those organizations.

Adam Spencer:

Maxine Sherrin is program director of Spark Festival.

Maxine Sherrin:

So they’re not operating fully independently and without knowledge of each other. In fact, they know about each other so they can, just to give the most trivial example, when someone comes along to your accelerator and they’re not right for you, you don’t just say to them, “Go away.” You say, “Have you considered these guys here?” And in a network system you can do that. Whereas when people aren’t finding out about each other, then you don’t have that knowledge. That startup probably doesn’t have that knowledge and they’re six months behind before they finally find out that this might be a really good idea for them.

Adam Spencer:

So again, while there may not be one universal definition, when we use the term startup ecosystem, we are referring to a community of startup founders and their teams. As well as the infrastructure that supports them. This includes investors, accelerators, and educators working collaboratively in a way that makes the whole greater than the sum of its parts. In this series, we’ll be exploring many aspects of Australia’s startup ecosystem, how it came to be and where it might be headed. And one last note before we dive in. We are aiming to tell this story as holistically and accurately as possible, but we won’t possibly be able to cover everything or fully credit all the incredible people and organizations that have contributed to the growth of the ecosystem in this series. If you’d like the full story, you might like to start by listening to the more than 100 interviews we’ve released as standalone episodes. In this series, we will be presenting a roughly chronological history and telling some of the key stories of Australia’s startup ecosystem.

Hamish Hawthorn:

We wanted to go right back to the beginning. It’s a medical device industry here in Australia. We’re one of the early catalysts for the whole ecosystem we see around us today.

Adam Spencer:

Because there’s no one universal definition of a startup, it’s difficult to point to a specific date or company and say, “This is where Australia’s first startup was founded.” But Hamish Hawthorn, who has been deeply involved in the Australian startup ecosystem for decades. Makes a compelling argument that it began with the Nucleus Group founded by Paul Trainer in 1965. The Nucleus Group would go on to become the parent company of a multitude of medical technology businesses.

Hamish Hawthorn:

So Telectronics was an implantable pacemaker company. The Nucleus Group also was the parent company for Cochlear. There were also a bunch of other companies there Ozonics, is a highly innovative ultrasonic company. ResMed’s another one. These are all fantastic entrepreneurial organizations that are led by outstanding and great entrepreneurs themselves. So all of these businesses were part of the Nucleus Group headed up by a gentleman called Paul Trainor.

Adam Spencer:

Paul Trainor was a true pioneer and could be considered one of Australia’s first startup founders. In 1964, he sold his home and left his secure job working for the medical distribution company owned by his father. He went on to build the nucleus group into a company exporting medical technology globally. When Paul sold the Nucleus Group in 1988 for 180 million, Nucleus dominated the world of Cochlear hearing implants and held 15% of the global market for heart pacemakers. And the group achieved all this without any of the support infrastructure that exists for Australian startups today.

Hamish Hawthorn:

So he is somebody that is somewhat a little known outside of the medical device industry. But he’s definitely the original, the OG entrepreneur, I would suggest. Somebody that was both a visionary, somebody who could really understand the commercialization of technology, who could really build exceptional teams.

Adam Spencer:

The list of Australian companies that were linked to the Nucleus Group includes Telectronics, Cochlear, Medtel, Thalamic, PSG Medical and Ozonics. All of which made important contributions to medical technology in the sixties, seventies and eighties. But the medical technology industry was not the only industry being disrupted by Australian innovation.

Bruce Tulloch:

Fairlight was an Australian company founded by Peter Vogel and Kim Ryrie.

Adam Spencer:

Founded in 1975, Fairlight worked on developing cutting edge audio and media technology, including the Fairlight CMI, one of the earliest digital synthesizers. The Fairlight CMI helped revolutionize popular music and was used by artists such as Peter Gabrielle and Stevie Wonder. Bruce Tulloch co-founder of BitScope Designs worked with the Fairlight team in the mid eighties

Bruce Tulloch:

And a large part of my early career was both working for Fairlight initially and then in joint venture in a company that I set up where we developed audio post production systems for the film and television industry in conjunction with Fairlight. They developed editing systems, we developed dubbing systems, and the highlight of that was we successfully got quite a presence throughout Hollywood, the major film studios. And we secured an academy award in science technology award, in 2001 for as they put it I think, transforming the way Hollywood makes sound for picture. I would consider Fairlight itself back in the eighties, Australia’s first hardware incubator, even though it was a company. The number of founders that have come from employees at that organization, successful businesses since then is quite stellar.

Adam Spencer:

Another company that could be considered among Australia’s first startups is Computer Share, founded in 1978.

Paul Bassat:

Computer share was one company that sort of became the leader in the share registry market globally.

Adam Spencer:

Paul Bassatt is co-founder of Square Peg.

Paul Bassat:

Computer Share was certainly one company that built a successful startup that people knew.

Hayden Williams:

It’s like one of the classic Australian startup stories.

Adam Spencer:

Hayden Williams is a senior product manager at MYOB, which was initially founded as Teleware in the eighties.

Hayden Williams:

We talk about it at MYOB that we’re one of the OG startups. It was the same story as you hear so often. It is just a couple of founders that are starting a business from a garage that are trying to solve a really specific problem that they’re really close to. It grows legs and almost gets away, gets away from them and they’re just trying to sort hold on for dear life. So when MYOB started out, it was very much about enabling small businesses to do accounting. There were a handful of money management products that were out there that universally accepted to be pretty terrible. And really having a real tool that you could use to manage the books was a pretty novel thing in the industry. So that was, I think, the first age of MYOB was very much about that enabling small businesses to do their own accounts which they couldn’t really do before. Certainly couldn’t do easily.

Adam Spencer:

These early Australian startups were pioneers, working in a time before we had anything resembling a startup ecosystem.

Mark Pesce:

I think the idea of a startup wasn’t as easily constrained around a word back in 1982. Yes, there was a young technology business and we would call that a startup today, but back then, I think we just called it a young technology business.

Adam Spencer:

That’s Mark Pesce hosts of the podcast This Week in Startups Australia.

Mark Pesce:

There were pockets of places that you could think of that were kind of startuppy, but there was nothing formal. There was no formal venture capital infrastructure. There was no way really to get seed money or angel money into the country. Even Angel wasn’t really even a word at that point in time. But everything was not just immature, but so immature is to be basically non-existent.

Adam Spencer:

Unlike Australia, Silicon Valley already had a booming startup ecosystem in the eighties. A number of Australians spent time working in Silicon Valley during those early years. And gained a ton of valuable experience that they could then bring back and apply in Australia

Terry Hillberg:

Back in the eighties. The problem was there was too much money and not enough good founders. So the great venture capitalists of that era like Roger Backage would go out and literally create the companies and bring the Australians back home to create them around.

Adam Spencer:

That’s Terry Hillberg, an investor who has been involved in startups in Australia and globally since the seventies.

Terry Hillberg:

A classic story like this, which not many people remember now, there was this guy called John Shine who was a one of the early biotech people in the Valley, a world leader. He was an Australian, so he was bought home to live in Sydney and run a research institute. The CEO that was recruited to run that was a fellow called Brian McNemee. 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 blood transfusion type factory into what is today’s, if it’s not the largest company in Australia is one of the top five companies in Australia.

To give another story, Peter Farrell had been a senior vice president at Baxter International. Had come back to Australia and he figured out that this whole sleep apnea thing was a thing. And so he then created a company around that and lo and behold, some Japanese venture capitalists put some money in and Peter went on and founded ResMed. And ResMed to this day has the single largest concentration of engineers in Australia out the Northwest Park. Is a foundation of the New South Wales economy. And that came out of a venture capital investment they were backing this Australian expat who’d returned to Australia after a stellar career in America. And I can give you 10 stories like that, that occurred in the eighties.

Adam Spencer:

Terry argues that favorable economic conditions and government policies of the seventies and eighties helps start what he refers to as the first great wave of Australian startups and venture capital.

Terry Hillberg:

By the late seventies, early eighties, the so-called failure of the Australian economy to adapt and become a highly value added economy was already an interest of the day. So the Hawk Keen government came in 83 and started putting very significant money into R and D subsidies and subsidies of venture capitalists. And so you had the first great wave of that taking place from 1983 to 1987. And during that period, many of the venture funds that were started and some of the great iconic Australian unicorns were created. Companies such as Cochlear and slightly late companies such as ResMed.

Adam Spencer:

Both the Fraser and Hawk governments, presided over times of high inflation and high unemployment and sought to introduce sweeping economic reforms to modernize the Australian economy.

Alan Jones:

Some of the smart things that early Australian federal governments did back then was relatively smart.

Adam Spencer:

That’s Alan, the nice one, Jones startup investor and advisor.

Alan Jones:

If you wanted to be big IT vendor selling into Australian government, you had to commit to doing some R and D here in Australia. You had to spend a bunch of money on a computer lab, employ a bunch of computer engineers. You’d usually import some senior talent from your headquarters overseas to come and get things started here. You might work with Australian Computer Society, which is the trade union of programmers in Australia to come up with a scholarship system and you’d start recruiting talent at universities. And you’d try and influence the way that universities were teaching their computer science students. So that they were more familiar with because the ecosystem was very, very siloed back then.

Adam Spencer:

But favorable economic conditions would be short lived. On the 19th of October 1987, the global stock market crashed spectacularly. Known as Black Monday or Black Tuesday in Australia, because of the time zone difference, all major world markets declined sharply. With Australia’s market dropping by more than 40%. Investment in Australian startups, which was still in its infancy, was hit hard.

Bruce Tulloch:

We learned firsthand what a stock market crash can do to the owners of business that are fairly highly leveraged.

Adam Spencer:

Again, Bruce Tulloch.

Bruce Tulloch:

Fairlight Instruments as it was then went out of business and I became unemployed. But also it was an interesting insight to see what happens when a company that was very successful, Fairlight was very successful. They had a huge order book that they couldn’t fulfill for lack of capital because the MICs that owned them were struggling from the wake of the 87 stock market crash. And it highlighted to me how closely related market action can have for, should we say high risk investors.

Adam Spencer:

With the local market for startup investments stalled. Some founders looked elsewhere.

Terry Hillberg:

The Australian capital markets have basically collapsed for venture after lapse with Venture after 87.

Adam Spencer:

Again, Terry Hillberg.

Terry Hillberg:

And it turned out that the only place in the world that really wanted to give us a lot of money was in Japan. So I moved to Japan and 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 meant, not many people realized that Apple computer in fact had a venture capital in Australia in the early nineties.

Trevor Folsom:

And Roger Allen, who I think we owe a lot to.

Adam Spencer:

Trevor Folsom is co-founder of Investible.

Trevor Folsom:

He was investing then as Allen and Buckeridge. He was obviously a very successful investor and entrepreneur himself. And he’s still investing today and he’s still a close mentor and friend of mine. And the fact that he’s gone through major changes and challenges in the industry, he’s been incredible.

Adam Spencer:

While there were pioneering investors such as Allen Buckeridge and Roger Allen, venture capital would remain limited in Australia and to at least the two thousands. Matt Barry, founder and CEO of freelancer.com, argues that early Australian VCs struggled to discover and invest in tech startups that would go on to become successful.

Matt Barrie:

The Australian capitalist missed every single major Australian technology company until it would’ve been, I don’t know, I might be corrected here, but I would say the late two thousands in the first decade of the two thousands. Bar one, bar LookSmart. LookSmart, was invested in by Macquarie. But at the time the VCs were very small in terms of their fund size. Maybe a 30, $40 million fund would be about the size most of the funds were captured. So they were part of an investment bank, so Macquarie Bank would have their own venture arm and this that the other. You had Chan, Castle Holland, Aussie Mezzanine Partners, which is Bill Ferris. So Bill Ferris had pioneered venture capital in Australia and he had his own fund. But really up until the dot-com crash, every single major technology company that started in Australia had been missed by the Australian capitalists.

Adam Spencer:

We’ll continue our story after these messages from our sponsors. So to recap our story so far, during the sixties, seventies and eighties, Australia’s first tech startups emerged. Though the term startup isn’t yet in common use. Some Australians are bringing home new ideas from Silicon Valley and economic conditions of the day both help and hinder the development of Australian startups and venture capital. The startups that are able to survive are pioneers working without any of the modern support infrastructure we have today.

And crucially, for the most part, they are still working independently from one another without organized communities. Most people we spoke to for this series agree before the year 2010, there was no start ecosystem in Australia. In the nineties, a new technology was emerging, which not only would enable a new wave of startups globally, but would ultimately impact almost every aspect of modern life. While early versions of the internet had been developed in the sixties, seventies and eighties, the first web browsers as we know them today, weren’t created until the nineties. One of the earliest such browsers was Netscape.

Evan Thornley:

I remember clear as a bell.

Adam Spencer:

Evan Thornley, the internet search company LookSmart in 1995.

Evan Thornley:

And a friend of mine in the New York office of McKinsey said, “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.” 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. It was a blinding flash for me. And six weeks later I left McKinsey and started the business.

Malcolm Turnbull:

I started getting involved in the tech sector in the early nineties.

Adam Spencer:

Before entering politics. Former Prime Minister Malcolm Turnbull was a lawyer and an early investor in internet technology.

Malcolm Turnbull:

The first tech company that I was involved with was a company called Future Technology Resources or for the record, and that was in the early nineties. And we financed that ourselves and ultimately we backed it into a public listed company. But the most significant company was of course Aussie Mail, which Sean Howard founded with the support of myself and Trevor Kennedy. And that was in 94. And at that time there was no money available for tech at all. In fact, we showed Aussie Mail to a bunch of people and the internet was just getting going and they turned it down. We had a very memorable meeting with Kerry Packer in which he dismissed the idea and said the internet, he wasn’t impressed with the internet, it will only be used for gambling and porn. And I must say, when we were got out of the meeting, we looked at each other and said, “Well, even if he’s right, it’s still going to be a pretty big thing, isn’t it?”

Adam Spencer:

Turnbull purchased a stake in the internet service provider Aussie Mail in 1994 for half a million dollars. In 1999, just five years later, he sold this stake for 57 million dollars. An example of the huge growth many internet startups would enjoy in the coming years. But while we take it for granted today, the early internet was often slow, clunky, and difficult to access.

Alan Jones:

Prior to wifi, you had to connect your computer to everybody else’s computer via an 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.

Adam Spencer:

Again, Alan Jones.

Alan Jones:

So offices had them and corporate campuses and maybe universities, but almost nowhere else. So if you and three friends were thinking about getting started and doing your own startup. Almost though, the first thing you had to figure out was like, “Where are we going to collaborate on this from?” You couldn’t just go and sit in a co-working space. You couldn’t have a co-working space, you couldn’t afford to put in enough internet ports in the space unless you were a corporation. And you were paying a big property manager serious money every year to lease a corporate headquarters. And so when we started the Australian Zealand, we actually, we got a favor from APN, the media company, and we sublet one of their meeting rooms. Now from memory for probably maybe almost a year. We’re all working from this little meeting room with a limited number of ethernet ports and cables snacking away from the one meeting room table where we all sat. You had to be careful coming and leaving because you could trip over some of the ethernet cable, bugger up what they were doing

Adam Spencer:

During this period of the nineties while adoption of the internet was growing, but still very limited. Once again, it was the pioneers working without established business models or support infrastructure that found innovative ways to build companies using this new technology.

Matt Bullock:

I had a company called eWAY that I started 25 something, I don’t know, long time ago.

Adam Spencer:

Matt Bullock founded eWAY in 1998.

Matt Bullock:

And that company was a payment company and if you’d bought something in Australia, I probably did the payment. So it was doing six billion a year, 25,000 customers.

Adam Spencer:

eWAY, which Matt would ultimately sell for 50 million dollars, US in 2016. Had humble beginnings.

Matt Bullock:

When I was doing it, there was no real thing as a startup or community or anything. It was weird, it was like when I was at school and I went to Parks High, which is near Dubbo. And there was four, five of us who were into computers and everyone else just thought you were a nerd and weird. And startups that time was the same thing, “You’re going to do what?” I remember at the time asking 10, 15 good friends, “What do you think of the idea?” And they all told me I was stupid like, “You’re going to do what?” Yeah, tough thing to do.

Just to understand that the servers were in my house. I have a 64 KI SDN line. I had a modem that dialed up to the bank, bing, bing, bing sounds for 30 seconds to do the payment. So it was very, very different to what it is now, and you had to build everything yourself. Now you can just get so many things and plug them in and use them and just build something very quickly. But I was the hosting provider, I was everything. It’s just how things used to be. You used to have to just do everything yourself.

Adam Spencer:

Often these new internet startups were disrupting existing companies and over time, entire industries, news media for example, would be turned upside down by the internet, but this disruption didn’t happen overnight.

Alan Jones:

Well, I think that first generation of Australian tech startups were media companies. We put content on pages and sold ads on them.

Adam Spencer:

Again, Alan Jones.

Alan Jones:

The news publishers were really, really cautious about putting any of their precious editorial content on the internet in the early days. The first media licensing deal I think in Australia was one that I did with the Australian. And you need to have some news headlines and as much of the new story itself on Yahoo Australian New Zealand as we could. And what we wanted to do was serve that news, run ads on it, and share the revenue with our news partner. But News Limited would say, “Don’t who the hell we are? We are News Limited, we don’t need any help selling ads. And this content costs a lot of money to produce. You can go jump.”

And we would say, “Yeah, but you don’t understand about these online ads. It’s not like selling print ads, it’s different. It takes different people. You need different relationships with brands. We are going to be much, much better at this.” And they would say, “Oh yeah, come back in three years when you’ve given up and we’ll talk about how little we’ll pay for what you’ve made.” So it was very hard. So I ended up, the first new deal was just the headline and I think the first 250 characters of each story and then the end of the story, there was an ellipsis, dot, dot, dot, and then a link to the full story on the Australian website. So content was really, really valuable and very, very expensive in the early days.

Adam Spencer:

Outside of the media industry, there were other Australian pioneers seeking new business models on the internet. A number of these companies found huge success building Australia’s first online marketplaces.

Alfred Lo:

It was the marketplace businesses that did really well. So real estate.com, carsales.com, and Seek.

Adam Spencer:

Alfred Lowe is co-founder of Harvest B.

Alfred Lo:

They classically took what around the world was happening, they classifieds businesses and put them on online. That was happening the world over. And they’re survived and they’ve not just survived, they’ve gone on to be real pillars for the Australian tech scene.

Paul Bassat:

The internet as a medium was very nascent.

Adam Spencer:

Paul Bassett co-founded Seek in 1997.

Paul Bassat:

There probably were some people I knew that were internet users, but very few. And I wasn’t really in a techy circle if you like. And so when Evan first rang me to say he was setting up an internet company, I didn’t really know what the internet was. And quickly got on the internet and learned a little bit about it. You had a few venture capital funds that did emerge in the sort of mid to late nineties. None of them are still around.

And so that probably reflects the fact that they struggled to back amazing businesses. Candidly, if you look at most of the successful businesses that emerge through that period in the late nineties and Seek was a bit of an exception. Most of those successful companies are either bootstrapped or had quite unusual sources of funding. Real estate.com.au, News Corp bought a controlling stake there. They had Ray White, the real estate agents back them. Car sales was sort of seated out of the Australian Reynolds and Reynolds, brought by Walt Pashowdo and Greg Robacht.

And Greg became CEO and built an amazing business. But they had their own funding, they had some angel investors, they had car dealers, et cetera. What if Graham Wood, I think, was backed by his accountant and the few of his accountants clients. So you didn’t really have regular sources of funding that could both back companies right through their life cycle. But also provide them with the input and advice of people that would have these experiences themselves.

Adam Spencer:

Despite the limited funding available, adoption of the internet continued to expand throughout the nineties and a number of Australian startups built global companies on the back of this growth.

Tim Fung:

If you have a look at seek.com from the first wave of internet, it’s actually like a juggernaut on a global scale.

Adam Spencer:

Again, Tim Fung.

Tim Fung:

I think REA, Realestate.com.au, also an Aussie home growing company juggernaut on a global scale in that space. What I think here is interesting is that Australia’s an awesome pilot market for these kinds of build local, but then go and build it again overseas type models. Being a smaller country, you can sort of build a network effect very quickly, be able to monetize that network effect quickly. And then you can go and invest that into scaling that overseas. And I think we’ve seen that with Seek, we’ve seen it with realestate.com. I think that actually one thing that probably doesn’t get as much of a mention. Because less sexy than the global day one mega companies is potentially the sort of local businesses that can be replicated again overseas.

Adam Spencer:

Seek, Realestate.com, LookSmart Group, Open Telecommunications, Carsales.com, App Unlimited, and Webjet, all Australian startups founded in the nineties. They were innovating new business models and proving to anyone paying attention that the internet was becoming a big deal. The Australian startup sector was growing, but it was still very niche and nothing compared to what was happening in the US. Amazon, eBay, Google, and PayPal were all founded in Silicon Valley in the nineties. And companies like these brought the term startup into the mainstream for the first time. Peter Davidson, an Australian who was one of the first investors in PayPal, told us about his time in Silicon Valley during the nineties.

Peter Davison:

When I talked about business in Australia, a guy like me, people were like, “Ah, settle down, wait your turn. And who do you think you are?” That sort of thing. I walked around Silicon Valley pretending I was a venture capitalist. I was a venture capitalist, but I felt like I was pretending and people just embraced it. I was young, I was ambitious. It seemed that I had money and my friend did. I had a briefcase and it just had an air of like, “Yeah, yeah. I’m not going to laugh at you because you might be the next big thing.”

And it was very, very young, vibrant, and I really, it was the best experience in my life. It really felt, yes, there is another place to be and it doesn’t have to be like where you are right now. And there’s a place that embraces your crazy dreams and where young people are kind of heralded. It was fantastic, man. I know it sounds a bit romanticized and it probably is still in my mind, but at that stage I just was getting doors opened. It was no question of who I was, wait my turn, or whatever it was embrace full, it’s fantastic.

Adam Spencer:

As the end of the millennium approached, the excitement surrounding the internet was reaching a fever pitch. In the US between 1995 and the peak of the.com boom. In March 2000, the NASDAQ stock market index rose 400% with investors scrambling to invest in any.com company. And with so much cash pouring into the tech sector, many startups were running at a huge loss, spending heavily on advertising and promotions and prioritizing growth over profitability. Startup founders, once obscure, were becoming celebrities. And the future of startups was looking bigger and brighter than ever before. On the next episode of the history of the Australian startup ecosystem, the Bubble Bursts.

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