The Documentary: Part 5

Samantha Finnegan:

So obviously 2020 was a pretty awful time. So everybody-

Adam Spencer:

Samantha Finnegan is the founder of Madebox.

Samantha Finnegan:

We’d just come off the back of all the horrible bushfires, which completely decimated a lot of small communities around Australia. And then we go into a pandemic. And with all of the lockdowns that were then hitting multiple states, especially Victoria, I was worried about how all these small businesses are going to survive.

Adam Spencer:

As lockdowns and other measures were enacted throughout the country, different markets and industries were affected in different and sometimes unexpected ways. Some tech companies, especially those providing services on the internet, saw their revenues grow to record heights. However, other companies such as those with business models that relied on bringing people together in physical spaces saw sharp declines.

Melissa Widner:

So we had some companies during COVID that really, really got hit hard.

Adam Spencer:

Melissa Widner is the CEO of Lighter Capital.

Melissa Widner:

We have some companies in the event ticketing space and they were doing really well until COVID hit and then revenues declined. So we have companies whose revenues declined 80 or 90% as a result of COVID.

Adam Spencer:

We won’t possibly be able to cover the many ways the pandemic affected Australian startups, especially given the pandemic and its impact is ongoing and the full story is yet to play out. But we will be taking a look at a few of the key ways Australian startups were impacted, starting with the impacts of frozen immigration.

Rachael Neumann:

If you look at what happened during COVID, we slammed our borders shut.

Adam Spencer:

Rachael Neumann is the founding partner of Flying Fox Ventures.

Rachael Neumann:

It is really hard to get talent in when we have a completely closed border. So again, it just means that we lost a lot of momentum for 18 months not having talent come to Australia.

Niki Scevak:

You do need some level of imported talent and imported executive leadership. And perhaps that is probably the biggest risk area, at least currently with the way that COVID is affecting the community.

Adam Spencer:

I spoke with Niki Scevak, the founder of Startmate and Blackbird in 2021, while immigration was still extremely limited.

Niki Scevak:

That not being present, the importing of talent, presents a risk for those rapidly growing companies.

Adam Spencer:

COVID forced companies globally to reconsider their attitudes towards working from home. Many see this shift as positive, which we’ll discuss later in the episode, but the change also brought new challenges to Australian startups.

Samantha Wong:

So I think COVID and remote work is potentially a solution, but it’s also potentially a threat in that it’s now a global playing field for talent.

Adam Spencer:

Samantha Wong is a partner at Blackbird Ventures.

Samantha Wong:

And so other companies are actively trying to hire in the Australian market.

Matt Barrie:

We will have a challenging environment moving forward if COVID [inaudible] in society.

Adam Spencer:

Matt Barrie is the founder and CEO of Freelancer Limited.

Matt Barrie:

You’re not going to be able to get people in the office to work together that easily. They’re going to be working online in remote locations. Then people are like, well, if I’m working remotely, do I want to work in Sydney or do I want to work in the country or do I want to work somewhere else or do I want to go home to Dubai or do I want to go home to Canada and work from there? And I’m working from home. So there are a lot of challenges moving forward.

Tim Fung:

People are sort of physical beings still.

Adam Spencer:

Tim Fung is the co-founder of Airtasker.

Tim Fung:

And the fabric of sort of the Metaverse and video calling and all that sort of stuff, it’s just not yet able to replace what physical connection does. So we’re in a bloody funny place right now because of the COVID stuff that once things normalize, I do think people are going to want to have a lot more time in physical spaces together. And so I think density will matter again, or bear. It’s not five days a week for sure.

Adam Spencer:

I discussed the importance of co-working spaces with Bruce Tulloch, co-founder of BitScope Designs.

Bruce Tulloch:

Now it’s been really seriously challenged by COVID and the idea of physical co-working spaces is something that needs to be well, reinvented. It’s still very important to have it, in fact, it’s in critical, but then it needs to be tied into a broader online virtual. And that’s why things like The Guild, things like Venture Cafe and other online resources becoming more important, but they’re still very fragmented.

Mick Liubinskas:

Looking much harder in COVID.

Adam Spencer:

Mick Liubinskas is the CEO and co-founder of Climate Salad.

Mick Liubinskas:

The way we did it with Colonizer [inaudible 00:05:23 Meridian??] And Startmate was just get people on planes. The amount of times I’ve taken people massively, reluctantly to the US and then have them two weeks later be like, oh my goodness, why didn’t I come here earlier? I haven’t been to the US for two years now. And that’s negative, right? Because it helps you go and get to that much significantly bigger market. And for Climate Tech, Europe is massive because it’s the more advanced. Asia is big opportunity for Australia given the proximity. But getting on a plane I think solves a big part of that. And there are Australian programs, federal and state level, which you can offset your cost. But again, if you can’t just get on a plane cause of COVID, that doesn’t really help that.

Danielle Owen Whitford:

If you look at COVID and the impact it’s had, not in so much in the startup space, but in the corporate space you’ll see that the impact for women has been more significant.

Adam Spencer:

Danielle Owen Whitford is the founder and CEO of Pioneera.

Danielle Owen Whitford:

Women have lost more jobs. Women have picked up the bulk of the family duties, which has had some impact. I know some customers we’re talking to are particularly concerned about how women will go back to the workplace if they have the bulk of the family carrying responsibilities and they need to get back to the office. They’re worried about how women are going to juggle that.

Rachael Neumann:

With COVID women who sometimes tend to have lots of demands on their time during these lockdowns and have been forced to take the lions share of duties at home.

Adam Spencer:

Again, Rachael Neumann.

Rachael Neumann:

Whether that’s homeschooling or looking after parents, family, and just the energy and time and physical space is just not there to start companies. But I’ve asked my peers and we are all consistently seeing the same thing that just the number of female founders that are coming through the top of our funnel has kind of dried up. So what’s unfortunate is that I think that we were making some really good progress and I feel like we have gone back five or six years in just the numbers that my peers and I are seeing. Now I hope that with schools back open and hopefully they stay open and with a return to normalcy, hopefully we’ll see that change. But the problem is that I invest in the super early stage. So that means that if companies right now, if women aren’t starting the companies, we’re going to have an impact of that missing birth rate for a few years down the track.

Annie Parker:

In the pandemic, the statistics got really difficult for women particularly, and I imagine other underrepresented groups, but it’s very hard to find the data.

Adam Spencer:

Annie Parker is executive director at Tech Central at the Greater Cities Commission.

Annie Parker:

Because VCs started to kind of go, well, instead of doing lots of smaller deals, I’ll do smaller amounts, but I’ll do them bigger. And of course when you’re doing bigger deals, you want even less risks. So if you want less risks, you’re going to go to, well, I want to invest in something that’s probably got a founder at the helm of it who’s got three or four laps around the block, perhaps has got a couple of successes under their belt. And again, they’re always going to be in the vast majority white guys. We can’t waste any more time. The statistics that came out of the folklore VC report earlier in the week said we increased by one percentage point in the volume of women led companies that Australian BC invested in the last 12 months, 1%, that’s not good enough. But then if you look at the total volume of dollars, it actually went down. So, it makes me wants to cry.

Danielle Owen Whitford:

It’s a very personal issue because every family is run differently and every household will manage themselves in a different way.

Adam Spencer:

Again, Danielle Owen Whitford.

Danielle Owen Whitford:

Most organizations now are looking at some sort of flexible working, so working that enables people to juggle multiple things as we’ve always had to, but it’s almost like on steroids now. So some of the commentary now is talking about people that are working from home and working in a hybrid way will miss out on promotions and maybe miss out on pay rises because they’re not visible. So if we are going to give people the flexibility to work from home, we need to make sure that they’re not then penalized by not being in the office.

Adam Spencer:

The pandemic has undoubtedly caused an enormous amount of grief in Australia and around the world and continues to do so to this day. However many people we spoke to express that this dark cloud did have a silver lining and pointed to various ways the pandemic has positively impacted Australia’s startup ecosystem.

Steve Grace:

So COVID I think changed the way everybody thinks because they were forced into a change that would’ve happened, but it would’ve happened over a period of time. So it was a very violent change in terms of speed of uptake.

Adam Spencer:

Steve Grace is founder and CEO of The Nudge Group.

Steve Grace:

I’m talking about companies that were still using on-premise service suddenly had to go into the cloud because their staff were no longer in the office. I’m talking about people suddenly having to buy things online, nearly everything online. I’m talking about people working from home. These things were happening, but they were really crawling along. And then suddenly over really a period of that first six months, once we kind of got past the initial fear of the pandemic, which I think was very much a case for the first three months, no one actually knew if we were going to survive as a human race almost. I think once we got past that, everyone started to have this ability to think differently because they had no other choice. And when you are violently pushed into thinking differently into the greatest part of your life, which is your work life, you suddenly start to apply that to other areas.

And there was more time trying to work out how to live life, which made them look at everything in their life, I believe. And that accelerated us particularly, but I think the world as well, five, 10 years in terms of what it might have taken us to get where we are now. And look, there was a lot of negative and still are a lot of negative things coming out of that, the mental health issues that have come out of that change and people being forced to do it. But overall, I think it’s been a very good thing, even though there’s been a lot of, I guess downsides to it that have affected a lot of people as well.

Rachael Neumann:

We’ve been busier than we’ve ever been since the onset of the pandemic.

Adam Spencer:

Megan Sebben is the kickstart program manager at CSIRO.

Megan Sebben:

And I think there’s this real understanding now that we need innovation. Innovation is good, it’s important, it’s going to keep us competitive, it’s going to help us solve some of these global challenges. Even if we’re focusing on a local scale, we need to be investing and creating and do doing things differently so that we don’t encounter these same problems in the future. And I think there’s been this real willingness to engage in research and development, whether it be to take your initial business or business idea and maybe pivot it in a slightly different direction in response to current events or perhaps the day-to-day operations of the company were slowed down because of lockdowns and so you’ve actually got time to go and do some R&D on maybe an idea that you’ve had sitting there for a while, but haven’t had the opportunity to explore. I feel like there’s this appetite to collaborate, to work with expertise, to really explore some new and interesting ideas and to innovate.

Rachel Yang:

What we’re starting to see is with the great resignation, as the pandemic has kind of taken over, it’s made people really rethink what’s important and what they want to work on and what motivates them day to day.

Adam Spencer:

Rachel Yang is a partner at Giant Leap and Chair of Startup Victoria.

Rachel Yang:

And I think that we are really going to see the move of employees kind of deciding where they want to go based on that aspect of mission.

Kate Cornick:

We’ve seen that through COVID. It’s been an incredibly tough time for a lot of people.

Adam Spencer:

Kate Cornick is the CEO of LaunchVic.

Kate Cornick:

But we also recognize that more people are stepping up and saying, I don’t want this job that I’ve had or I don’t have that job anymore and therefore I’m going to be an entrepreneur. And also we’ve seen a number of startups do exceptionally well and in Victoria we’ve got a 10.75% growth rate in jobs from the startup community, which is way higher than the broader economy. So the sector is doing well.

Megan Sebben:

Yeah, I think some of the barriers that might have existed previously have been lowered as well.

Adam Spencer:

Again, Megan Sebben.

Megan Sebben:

Telehealth for example, that’s something that was made available during the pandemic and it looks like now it’s here to stay and that’s going to make a significant impact in the lives of a lot of people who maybe struggle to have access to a regular GP. And whether it be remote or other reasons, these shifts in things that initially were maybe challenging, you’d have to be very committed to want to go down that sort of path to now having more opportunities open up because we know that we need to take new approaches.

Arthur Sinodinos:

So the future is changing around us.

Adam Spencer:

Arthur Sinodinos is the Australian ambassador to the US.

Arthur Sinodinos:

Look at the way the pandemic has accelerated digitalization and the opportunities that, that opens up for us. We’ve got a digitization strategy, but we’ve got to keep accelerating the pace across all the areas of the innovation ecosystem.

Peter Tippett:

The business I’m building could not have existed without the effects of COVID on people’s attitude.

Adam Spencer:

Peter Tippett is a co-founder of BodyMindLife which provides yoga, pilates, and wellness classes online.

Peter Tippett:

Pre COVID, only 5% teachers believe they could teach yoga and wellness online. COVID, now over 90% of them can do it and they believe it can be done. That’s the change. We as a people now accept online, like you and me doing an interview, normally that we would’ve been sitting in a room together face to face and doing this, not doing over an internet connection.

Andrea Gardiner:

But when COVID first hit, I think I wasn’t unlike a lot of people, that I felt a bit like the coyote when the road runner had run by. Just sort of spinning around going, oh shit, what do we do now? How’s this going to affect things?

Adam Spencer:

Andrea Gardiner is the CEO and founder of Jelix Ventures.

Andrea Gardiner:

The US investors that weren’t comfortable investing without meeting people. And I was the same pre COVID. I wouldn’t have dreamed of investing in a founder that I hadn’t met, but since COVID, I’ve invested in plenty that I’ve only met over Zoom. And they’re becoming more comfortable investing in Australian startups that are doing well over Zoom without coming over here. And so the competition’s hotting up.

Ben Hallett:

I think something that’s accidentally worked really well in Australian startups’ favor is the pandemic.

Adam Spencer:

Ben Hallett is the co-founder and CEO of Vygo.

Ben Hallett:

The Pandemic has forced global VCs to now really accept startups from anywhere. It’s all online, so it can’t be this handshake in-person cafe deals that much anymore. So that’s worked really well in Australia’s favor.

Wayne Gerard:

We’ve definitely seen a number of the world’s leading innovative tech companies, attracting staff wherever they’re located.

Adam Spencer:

Wayne Gerard is co-founder and CEO of RedEye and is currently Queensland’s chief entrepreneur.

Wayne Gerard:

Look at Atlassian’s policies on recruiting staff wherever they are. We are definitely going to see this spread of people working all over the place. This morning for example, I was having a conversation with my own exec team talking about our benefits program and our flexible working relationships and we are thinking about how do we let our staff say they want to work from Bali for three months. As long as they can and as long as they’re available then is that an advantage? I think COVID has actually changed the way that we as an industry think about employing people. And I think people in our industry definitely have high expectations around work-life balance, the ability to work remotely and those kind of things.

Colin Kinner:

With COVID we’re seeing a lot of people say, well, I don’t need to and don’t want to be in the city any longer.

Adam Spencer:

Colin Kinner is the founder and CEO of Startup Onramp.

Colin Kinner:

So I think we’re going to see that continued trend of really smart people deciding to be based in regional rather than capital cities.

Darryl Lyons:

I guess definitely COVID has dramatically changed real estate in Cairns.

Adam Spencer:

Darryl Lyons is the indigenous entrepreneur in residence at James Cook University.

Darryl Lyons:

A lot of people are kind of moving up here to work out how good it is and remote work is obviously not a issue compared to what before. So people could create their startup up here, they could have regional workforces with tech talent that they might not be able to source here. It’s a great environment for tech talent to actually move up here. Cost of living is a hell of a lot cheaper. There’s kind of lots of positives and I guess COVID is actually making it a lot more enticing.

Trevor Folsom:

We really expected a whole lot more carnage and crashes.

Adam Spencer:

Trevor Folsom is co-founder and chairman of Investible.

Trevor Folsom:

We invested in companies that are in sport tech and in travel tech. They really relied on events and venues being open and to see them being closed for so long, it’s amazing that they all still survived through that. And so credit to them, all those founders that again showed that resilience.

Adam Spencer:

While the pandemic has certainly brought a lot of grief within Australia and around the world, ultimately people, communities, and companies have adapted to shifting norms and new challenges. In the rest of this episode, we’ll be looking at other developments in Australia’s startup ecosystem in recent years and bring our story finally to the present day.

Chad Renando:

The state of maturity in the innovation ecosystem in Australia is such that back in 2012, 2015, it was all things to all people.

Adam Spencer:

Chad Fernando is the managing director of the Global Entrepreneurship Network Australia.

Chad Renando:

River City Lamps was for anyone starting a business. Fishburners, even Fire Station 101 when I started it, we didn’t have our verticals per se. And then over the next subsequent years you saw things double down into specific industries, into specific community groups, female entrepreneurship, indigenous entrepreneurship, into specific regions and getting out to the regions and into what we refer to as the peripheries. So what we have now in Australia is you have regions that are known for something. You have from health and biomed down in Melbourne and some of the gaming sectors down there. You’ve got FinTech out of New South Wales, a lot of AgTech out of Queensland. You’ve got some space happening down in South Australia as well. Some satellites and some hydrogen up north in Darwin, northern territory and of course resources over in WA. And of course all of them have smatterings of the other bits as well. But we’re really getting to be known for something in the regions. And you also have dedicated programs for people that might have been missed out in the beginning, such as indigenous or female entrepreneurship or youth entrepreneurship or mature aged.

Adam Spencer:

As Australia’s startup ecosystem has grown and matured, different regional areas have developed their own unique identities and areas of specialty when it comes to the types of startups they are producing and supporting. And many people we’ve spoke to saw this diversification as a positive thing.

Wayne Gerard:

I think every organization needs its own identity.

Adam Spencer:

Again, Wayne Gerard.

Wayne Gerard:

That helps that organization to differentiate itself and stand out with its customers, stand out with its investors, stand out from its competitors, et cetera. I feel the same with each individual state’s startup ecosystem. I don’t think you can actually make a startup ecosystem, you can’t force this stuff really. Founders are going to do what founders do and it’s about creating an environment where collaboration happens. And I think all the states are doing that their way.

Each ecosystem kind of develops an identity and gets known for something. And different ecosystems have natural competitive advantages, natural strengths, just like different economies do. You know, there’s an opportunity to continue to better refine what are our natural strengths and what are our natural competitive advantages. And for example, in Queensland we have a stack, startups, innovators, tech companies, whatever word you want to use, that focused on more I guess of the business to business kind of opportunities focused in agri-tech, focused in health tech and biomedical science and devices and things like that. Where if you go to Sydney, you’ve got a lot of fintechs and you’ve got a lot of solutions like Atlassian focused on servicing the IT community and so on and so forth.

So I think that as our ecosystem in Australia matures over the next couple of years, we’re going to see each of the ecosystems kind of find their own differentiation, their own value proposition. And I think that will be really helpful because then if you’re a founder, you can look around and go, well, if I want to do a FinTech for example, maybe the best place for me is in Sydney. Or if I want to do a solution for government, maybe the best place is in Brisbane or if I want to do agritech, maybe the best place is in Toowoomba for example, or Gladstone or Mackay or whatever it is.

Mark Pesce:

I think in 2019 I probably would’ve said look it we’re starting to understand the things that we’re really good at.

Adam Spencer:

Mark Pesce is the host and producer of this week in Startups Australia.

Mark Pesce:

Some of it’s a little FinTech, some of it’s a lot of robots and agri-tech and mining tech and things like that. RegTech, it felt like we were finding things that we were good at and starting to go after them. To expect that we’re going to be good at everything is I think probably not wise, but we’re going to have certain things that we are clearly quite good at and then we’re going to have certain standards like a Canva or an Atlassian or a Culture Amp, things like that. We’re going to have specific instances. Sports tech as well, Catapult who were an early guest on the show. So there’s really good instances of things that Australia, because of its culture and its history are going to be really good at and it makes sense to lean into those things to the degree that we can and it felt like we were getting good at that.

Adam Spencer:

Throughout the series, we’ve already discussed some of these specialist areas, such as in episode one when we looked at the early days of the medical device industry as far back as the sixties. We won’t be able to explore all of the specializations that Australia’s startup ecosystem has developed, but we will briefly look at a couple starting with ag or agritech, short for agricultural technology.

Nancy Schellhorn:

Hi, I’m Nancy Schellhorn from RapidAIM, pest forecast news and alerts. I’m the CEO and co-founder of a startup that helps growers reduce the risk of loss and cost from insect pest. I think for the Ag Tech based, if we just look at what’s happening, I think there’s some really very exciting, Evoke Ag is a great example.

Adam Spencer:

Evoke Ag is a conference and digital platform funded by the Australian government that aims to connect the agri-Food innovation community in Australia and throughout the world.

Nancy Schellhorn:

An event that’s startup focus, that’s innovation focused, that’s connecting Australia to the overseas markets, very new and innovative and exciting.

Darryl Lyons:

Yeah, I see the next decade and two decade is a huge opportunity for Northern Australia. I think there’s a huge untapped potential.

Adam Spencer:

Darryl Lyons who we heard from earlier is also the entrepreneur in residence at the agrifood incubator, Farmers2Founders.

Darryl Lyons:

And I think agritech is going to play a huge part about increasing production in Northern Australia, and also see an area that’s just untapped yet. And that’s around our indigenous entrepreneurial spirit in Northern Australia and how we can start to work out how we can unpack that and then create that and see this huge opportunity to get people involved in that. My grandparents were in Ag and farmers, my parents are my traditional side of the family. I believe that practiced sustainable agriculture for tens of thousands of years on our traditional country. We’ve got such a diverse country with lots of different areas. We have our unsubsidized farming systems, so basically all our producers have been entrepreneurial to succeed over us and a few hundred years in indigenous population had to be entrepreneurial to flourish in some tough environments around the country for tens of thousands of years.

So I think that breeds into that spirit of finding a problem, working out how to solve it. And I guess any application we build in this country is definitely usable right around the world. And I think with our clean food, which it’ll breed more sustainable regenerative agriculture systems, which kind of brings in a lot of clean tech, we can get into a lot of food value adding tech. We’ve put in sustainable, really healthy food which the world wants, the tech required to make all that work is such a huge opportunity for us.

Adam Spencer:

FinTech or financial technology, which refers to companies using new technology to innovate financial services has been a real strength of Australia’s startup ecosystem for years and has produced companies such as Afterpay, Airwallex, and Athena to name a few.

Cheryl Mack:

We do FinTech really well.

Adam Spencer:

Cheryl Mack is the CEO of Aussie Angels.

Cheryl Mack:

And that’s really good for us because we do have a lot of banks and banking and finance tends to be an area that is more widely accepted by the mainstream, which is a good thing. We also have this unique environment where we’re kind of a bubble enough into ourselves that Australia is a fantastic place as a sandbox to test things and to drive new innovations before they can be impacted by other factors that would make it really difficult to establish as to whether this is viable or not.

Lauren Capelin:

The FinTech ecosystem growth is really quite phenomenal.

Adam Spencer:

Lauren Capelin is ecosystem manager at AWS startups.

Lauren Capelin:

When I joined Reinventure, they were the only primarily FinTech focused venture fund and in fact they cropped up in the absence of an appetite for investing in FinTech across the venture capital ecosystem.

Adam Spencer:

Lauren joined Reinventure in 2015.

Lauren Capelin:

There was about 30 companies involved and the regulatory environment was still very challenging and it was through the formation of things like FinTech Australia, which I was involved with, really focusing on building out the enabling environment from a policy perspective, but also just generally gaining the well-deserved awareness of what FinTech founders and FinTech businesses across the ecosystem were achieving. I think FinTech is one of those industry verticals where there has been a lot of success.

Adam Spencer:

We’ll continue our story after these messages from our sponsors. As well as specific industries such as FinTech and a Agritech, another subset of Australian startups we’re going to look at briefly is social enterprises.

Moira Were:

So social enterprise, people wonder what that really means.

Adam Spencer:

Moira Were is a startup founder and mentor with decades of experience and is founder of the Hen House Co-op.

Moira Were:

From my point of view, social enterprises are enterprises doing good and with purpose and can actually align their purpose with a good outcome.

Adam Spencer:

While there may not be one definitive definition of what makes a social enterprise, broadly speaking, we’re referring to companies that have a social good at the heart of their mission.

Phil Ireland:

I think a lot of companies and startups now are driving towards impact and doing things that make the world better.

Adam Spencer:

Phil Ireland is the co-founder and CEO of Home Carbon.

Phil Ireland:

So I actually think a lot of entrepreneurs are socially entrepreneurial and I think even for companies and startups that aren’t doing that, they try and sell themselves as doing that. So I think it’s a big gray area actually.

Adam Spencer:

Because the line between a social enterprise and a conventional for profit company isn’t always so clear cut, some methods of externally measuring the impact that these organizations have been created.

Moira Were:

If you are really doing good as a social enterprise, there are some external ways that can be verified.

Adam Spencer:

Again, Moira Were.

Moira Were:

So some people will choose to get certification through social traders, which you get points according to what it is that you’re actually being able to deliver and get returned into the business. So there has to be some social outcomes for that. And the other one that’s quite well known, B Corps. So in the B Corp you’re trying to do things for Planet Purpose and people, and again you get a certain rating and a classification that you can call yourself a Big Four. Those two external validations are often out there for people to say that’s how they define themselves as a social enterprise. But a lot of people just use that language to describe the way they do business, which is giving a social outcome, a social return, not just a commercial return.

Adam Spencer:

While not all social enterprises are startups, many Australian social enterprises have adopted a startup model. We spoke to founders of a wide range of social enterprises and the extent to which they felt social enterprises were part of the broader startup community varied.

Daniel Flynn:

My name’s Daniel Flynn, one of the co-founders of Thankyou. A social enterprises sales consumer products to help end extreme poverty. I would say when we began years ago, back in 2008, we were just in our own bubble. We saw a problem, a solution potentially using business to help solve a social issue and we just started running after it. And so I would say we didn’t really get too involved with different communities, startup community, even the social kind of enterprise community, which turns out at times kind of sits a bit separate, they’re getting closer and kind of more into woven, which is cool.

But it wasn’t until years later, 2011 from my recollection, we found ourselves spending more time and maybe fitting better in the social enterprise type environment. At the time a group called Social Traders were gathering a lot of people in this space both interested or really well developed or some businesses much further developed than we were. And it did feel quite separate to the traditional startup rounds of funding. Get investors, let’s go like it did feel different. Some maybe good, maybe some not good in that. I would say we felt probably a little out of place at Thankyou in a traditional kind of startup community because simple things, like we didn’t as founders have any equity in what we did. It’s a different concept.

Adam Spencer:

We also heard differing opinions onto what extent social enterprises are adequately supported.

Daniel Flynn:

This idea of social business. It was described early on to us that Australia was 10, 15 years behind the UK and their thinking in social enterprise and their kind of prevalence of it in society and tax law and a whole bunch of other areas that sort of just opened up more and more people getting into the space. And so I would say that there’ve been a few moments where, I wonder if we’re as a far along as a society in Australia as we should be.

Sam Jockel:

I’ve been trying to forge with the work that we’re doing solutions for mental health, community wellbeing and whole bunch of different bits and pieces using a business framework.

Adam Spencer:

Sam Jockel is founder and CEO of ParentTv.

Sam Jockel:

We’re doing some amazingly innovative things, but it’s really challenging because sometimes we have to interact with some of these historical government systems and those processes. I understand why they exist, but there absolutely needs to be more value and understanding put on the work that we’re doing and how critically important it is from an innovative point of view. Because the world is moving so fast and those big legacy systems and organizations, they just actually can’t keep up with what’s needed and they have to learn to trust business and trust innovators more because we do actually bring to the table solutions and our intent is actually really good and a lot more listening needs to happen, and a lot more belief that intent is good as well. And I think sometimes those two things get missed and business has historically been seen as maybe something where someone just wins and they don’t really care about the bigger picture. But I think business is changing and the leaders of those businesses are changing and there is that element there, but I don’t know, there needs to be more listening and more trust, that I know.

Eloise Hall:

There are grants around if you dig for them, but there’s not so much security around I’m going to start a social enterprise and this money is potentially accessible.

Adam Spencer:

Eloise Hall is the co-founder of TABOO.

Eloise Hall:

Very much. You really have to fit the bill and the bill’s very different depending on where, which state you’re from. Even how state governments view social enterprise. For example, businesses who might offer charity discounts, they’re starting to incorporate social enterprises into that, I guess qualification of receiving that discount. So yes, the conversation’s very much picking up.

Moira Were:

So in the probably last five to 10 years, particularly in South Australia, we’ve gotten very strong and it’s growing and growing over time.

Adam Spencer:

Again, Moira Were.

Moira Were:

The way social enterprises and social entrepreneurs in particular are being valued and being supported by the whole ecosystem. And equally startups are looking to the social and environmental spaces for ideas and also for inspiration. And if we look at what’s getting funded and supported and we’re getting into big international conversations about climate, the environmental movement, renewables, startups that are building health and biotech and in the climate space are really taking the world by storm. I’m feeling very optimistic. There’s certainly a public policy and environment is growing in some states more than others. So Victoria and Queensland and a little bit in New South Wales is certainly I think ahead of the game in leading that and investing in particular in Victoria, investing millions and millions of dollars into trying to build a social enterprise sector and to support industry led and community led initiatives to make the economy more just and equitable. We’ve got some way to go here in South Australia, but there are really good signs on the horizon that this is starting to shift.

Adam Spencer:

We asked Phil Ireland whether he felt it was difficult to secure funding for a social enterprise.

Phil Ireland:

In MySpace, which is the climate space and the drawdown space, there is so much capital at the moment floating around to support good climate ideas. A case in point is obviously Mike Cannon-Brookes and their foundation, but there’s a lot of capital there.

Adam Spencer:

In 2021, Mike Cannon-Brooks, co-founder of Atlassian and his wife Annie Cannon-Brooks, set up a 1.5 billion fund to support efforts tackling climate change.

Tim Fung:

The only feedback we’ve ever had or I’ve ever had is that I need to be more impact focused and more climate impact focused because people want to see really tangible long-term impact and outcomes for their investment. I think it might be different for other types of impact, but at this point in time in the climate space, there are people throwing money behind ideas just to reduce emissions and to draw down greenhouse gases out of the atmosphere regardless of long term profitability. I think impact investors are a group of heroes that I think need calling out because the nature of investment is shifting and the way people want to use their capital is shifting. And I think there are some really positive trends and I think some investors are being more courageous than they would’ve been in the past in values driven and I think that’s wonderful.

Dean McEvoy:

I think social enterprises are the table stakes of the future.

Adam Spencer:

Dean McEvoy is the co-founder of TechSydney.

Dean McEvoy:

And what I mean by that is that if you’re a company that’s not actually improving the world in the future, you won’t survive. I think the days of these corporate juggernauts raping the world and milking it for all its profits is a construct that just won’t exist in the future because the great talent won’t want to work for those kind of companies. The great talent will want to work for the companies that are having a positive impact on this world. They’ll divert their energy into those. So if you are not a company that has a positive social impact, you are screwed. And I think that’s a great world we’re heading into. And if companies can’t see and think like that, if they’re constantly making trade offs between how they affect the environment or the people in this world, they’re not going to be the big thriving companies of the future. And the reason why is ’cause the great talent just won’t want to work there.

Adam Spencer:

After the initial shock of the pandemic eased, 2020 and 2021 saw a time of increased tech investment and soaring valuations of Australian tech companies with some calling it a bubble. In 2022, valuations throughout Australia’s tech sector saw sharp declines in what some are calling the tech wreck of 2022.

Peter Devine:

The 2022 tech wreck will have an impact.

Adam Spencer:

Peter Devine is the CEO of Uniseed.

Peter Devine:

I mean we’re already seeing some of that recently with a lot of the downgrade of valuations of large companies such as Canva.

Adam Spencer:

In July, 2022, the venture capital firm Blackbird reduced the holding value of Canva from 40 billion US to $25.5 billion, an enormous 36% decrease. Many other companies have seen similar reductions in valuation throughout 2022.

Peter Devine:

I think that it should flow through an impact on valuations going forward. I think valuations have been pretty high based on the [inaudible] in the startup ecosystem in recent years. So it probably will have an impact, but in some ways that may provide opportunity for investors to get into if the companies have sound fundamentals to invest in them, you make good returns on those. And we’ve seen in the past that after downturns, that’s really a great opportunity for investors to get in and a lot of the big successes come out of that period.

Adam Spencer:

Just like earlier stock market crashes we’ve discussed in this series, like the 2000.com crash, generally the people we spoke to about the 2022 market decline downplayed the impact they felt it would have on Australia’s startup ecosystem long term.

Aaron Birkby:

My thoughts on the 2022 tech wreck, so I don’t think it is a tech wreck.

Adam Spencer:

Aaron Birkby is the co-founder of Tribe Global Ventures.

Aaron Birkby:

I mean by what measure is it a tech wreck? Good companies are still delivering value to their customers. What we are seeing is a recalibration of the investment climate, the economic climate. So what we are seeing are valuations being retraced back closer to more traditional investment valuations. I actually think it’s incredibly healthy that we have this retracement. I feel sorry for venture capital funds that deployed a lot of cash during 2021 because I think they deployed capital at a time where valuations were incredibly high.

So I think there’s going to be some big impacts for venture capital funds. I think there’s going to be a lot of funds that deployed a lot of capital in 2021 that will struggle to be able to show any return or any decent return. But I think that’s healthy. I think this is a healthy part of the life cycle. I actually think times like now are the best time to be investing. So 2022 into 23, 24 are where you want to be deploying the most amount of capital. This is where the companies that are delivering real value will survive. Those that aren’t will die. And that’s actually a healthy process. Failure is not a bad thing. Failure in innovation is a critical element.

Adam Spencer:

We’ll be finishing up this episode by briefly looking at a few of the other notable startups and organizations founded in the last few years, starting with the Tech Council of Australia, which was formed in 2021 and has taken on the responsibilities of Startup Oz, a startup advocacy group we’ve discussed in previous episodes.

Kate Jones:

Now was the time for us as an industry to be taken seriously for the economic contribution we’re making to Australia now 12% GDP.

Adam Spencer:

Kate Jones is an executive director of the Tech Council of Australia.

Kate Jones:

To be at the main table with the prime minister of federal cabinet and the opposition. So it’s a very apolitical body, but it’s a body where we have some of the largest startup companies that are huge success stories now in Australia, including Atlassian, Afterpay, Canva, Culture Amp, Different, and of course the chair is Robyn Denholm, who is the chair of Tesla globally and is based in Sydney. So we are talking about major employers not only in our country but globally that were Australian startups that have been able to scale up and are now global leaders in their tech. So the genesis of the Tech Council of Australia was really about acknowledging that this ecosystem had matured enough in our country that we actually needed a body that was advocating at the highest levels for the right regulatory framework, the right policy settings to create more opportunities for more startups and that pipeline of growth over the next 10 years to keep those jobs here in Australia and to create opportunities for the next generation.

Sarah Pearson:

When the tech council is a great example of entrepreneurs jumping in and saying, okay, so we can see a gap here.

Adam Spencer:

Sarah Pearson is an investor, board director and advisor.

Sarah Pearson:

Government’s not doing everything we’d like them to do. So let’s set up the tech council and work with a whole ecosystem and they’ve got a whole bunch of really great partners that they brought together to try to drive some policy changes. I think that piece is really good.

Adam Spencer:

As well as those already mentioned, some of the notable startups and support organizations founded between the start of 2020 and today include Harvest B, the Guild of Entrepreneurs, The Studio Founders’ Program, Flying Fox Ventures, Aussie Angels, and Playful Purpose. Next episode, we’ll be looking forward to the future, but first let’s take a moment to appreciate how far the Australian startup ecosystem has come in a relatively short amount of time.

Rachael Neumann:

There has just been an exponential growth phase for Australia.

Adam Spencer:

Rachael Neumann is the founding partner of Flying Fox Ventures.

Rachael Neumann:

And what I see now is incredible talent, more private capital than we’ve ever seen before. Lots of entities, whether that’s corporates or universities, overseas organizations trying to get involved. And what we’re also seeing is second time founders recycling back into the ecosystem either as mentors or investors. I always say it’s never been a better time to start a startup or invest in a startup in Australia. And I just feel like every day it gets to be more and more true.

Peter Bradd:

Well, I think it’s really important to sort of go back to what it was like in 2011 and 2012.

Adam Spencer:

Peter Bradd is the CEO of the Beanstalk Factory and was the initial CEO of Fishburners.

Peter Bradd:

In terms of the timeline, Fishburners, which is a co-working space, we registered Fishburners in September, 2011 and again, we launched Startup Oz in 2013, and at the time that we launched Startup Oz, they leveraged PWC to write a report. In that report, the headline statement was, the Australian tech startup sector has the potential to contribute 109 billion or 4% of GDP to the Australian economy. The Australian Tech Council, their report when they launched. So this is in 2021, so only eight years between these two reports they report.

The Australian tech sector has become a critical part of the economy contributing 167 billion to GDP, which is 8.5% of GDP, not 4% as PWC had predicted. Right? And they’re predicting it could employ over a million Australians by 2025, not 2033. And so I remember being around when that PWC report was written and I was the CEO of Startup Oz and I was talking to media about it, and this is the figure that we would, I’d get on Sky News and I’d talk about the potential. And if you look at the potential of 4% versus 8%, 109 billion versus 167 billion in half the time, I just think it’s been an outstanding, amazing success story of what we’ve been able to do. I just think it’s sort of phenomenal.

Adam Spencer:

The growth of the Australian tech sector, especially in the last decade or so has been phenomenal and has massively exceeded the ambitious expectations set by the Startup Oz report of 2013. The tech sector is now Australia’s third largest industry and companies like Atlassian, REA, Computershare, Cochlear, SEEK, Canva, Afterpay, Airwallex, Culture Amp, and car sales are all worth billions of dollars. And they all begin as startups. While global companies like these are flagships for Australia’s tech sector, as we’ve seen throughout the series, the Australian startup ecosystem is made up of so much more than just its biggest successes.

Tim Fung:

When you kind of think about the startup ecosystem now people mention Atlassian, they mention Canva, they mentioned SafetyCulture.

Adam Spencer:

Again, Tim Fung.

Tim Fung:

But actually there’s this whole long tail of people who are building some really cool stuff and contributing to this ecosystem in various different ways. Some of those companies didn’t scale, some of them completely went kaput, others just became small businesses, et cetera. But I think it is worthwhile sort of recognizing all of those smaller companies and stories that sort of contributed to this because it isn’t just like Canva and Atlassian and SafetyCulture equals startup an ecosystem. It’s all the people that are out there giving it a crack. The $25,000 angel check, hiring two people, doing some interesting stuff, maybe selling their company to somebody else rather than scaling it into some big thing. And actually I find that that’s why the co-working spaces are this kind of great, almost like central hub of life. And when you go to these co-working spaces and you go to the Thursday night [inaudible], that’s kind of really the beating heart, I would say, of the startup ecosystem in Australia.

Adam Spencer:

After five episodes tracing its history. In our sixth and final episode, we will at last be turning our eyes forward and tackling the question, what does the future hold for the Australian startup ecosystem?

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