Michael Batko discusses the four prevalent business models of accelerators
Michael Batko is the CEO of Startmate, an accelerator that has invested in 170+ startups across Australia and New Zealand with a collective portfolio value of two billion dollars. Originally from Austria, Michael had his first exposure to the startup world when he moved to Australia and became the first employee at Mad Paws, a marketplace for pet sitters. In his conversation with guest host Will Tjo, Michael discusses how working in a startup contrasts to a corporate environment, and what he sees as the four prevalent business models of accelerators and where Startmate fits in.
Michael’s profile on the Blackbird website: https://blackbird.vc/team/michael-batko
Mad Paws: https://www.madpaws.com.au/
Will Tjo: Our guest today is Michael Batko. Welcome to the show, Michael.
Michael Batko: Thanks so much for having me.
Will Tjo: Could you tell us a bit about yourself and what you’re currently doing?
Michael Batko: Yeah. I’m the CEO of Startmate. Startmate, we define ourselves as the epicentre of startup ambition in Australia and New Zealand. We started off as an accelerator, and now we have many more programs which we call fellowships for operators as well as investor programs.
Will Tjo: That’s interesting. Michael, what made you get into startups? Have you always been interested in it?
Michael Batko: No. Not at all. Actually, I started in finance myself. My first job ever was as a financial analyst in American Express. And then, I did a bit of consulting. And my first startup actually was when I first moved to Australia. You can hear from my accent that it’s German. I’m from Austria, but I moved to Australia seven, eight years ago. And I actually really wanted to work in a bar and be a backpacker, but it turns out that my first job in Australia would be as the first employee at Mad Paws, a marketplace for pet sitters.
Will Tjo: That’s quite a big difference, working in a bar and working in a startup. Did you fall into it? What drew you to Mad Paws?
Michael Batko: Yeah, totally. Ah, it wasn’t planned at all. Honestly, I posted on a Facebook group and like, “Hey, who’s got a job for me in Australia?” And a friend of a friend of a friend connected me with the founder, Alexis who didn’t even want to hire me. And I actually played a soccer game with the team, and they liked the way I played. So, I actually was then hired as part-time first, and then full-time later. And it was complete serendipity. I didn’t know anything about startups. I didn’t know anything about dogs or cats or marketplaces. And it was completely random.
Will Tjo: Coming from a background, obviously, not working in startups, how did you adapt then, working in Mad Paws?
Michael Batko: Yeah, totally. Oh, it’s so interesting. I think the biggest one was the one around… In a corporate or in bigger companies there’s always somebody who knows the answer or somebody who you can go to mentor you, to tell you how it’s done, and there’s already somebody above you who’s responsible for it, and in startups, it was just such a different attitude where you actually had to have the drive and the hunger to find the answer for yourself. It was the attitude of like, “Well, nobody will tell you what to do or how it’s done right because often there is no right. Because you often are doing things which nobody has done before.” And that kind of attitude was the biggest shift for me. And how did I change into that sphere? Honestly, it just took time.
Michael Batko: It was quite natural, but it took time. And I think one of those pivotal stories from my early journeying at Mad Paws actually, which illustrates the way of thinking, was that… I still remember Alexis gave me an intern himself a hundred bucks on Facebook advertising each end was just like whoever gets the most clicks on this ad will get a case of beer. And that was like the, “Oh, wow, this is very different to a corporate. I have no idea about Facebook advertising and now, I’m just getting a hundred bucks to just play around with it.” And that kind of attitude, that was what shifted my mindset.
Will Tjo: Yeah, absolutely. I mean, one thing that led to the next, and here you are as the CEO of Startmate, one of the most prominent accelerators in Australia. And throughout your time working in the startup industry, how do you think our ecosystem has changed to say over those last seven or so years?
Michael Batko: Hmm. Ah, so much. So much. I’m just trying to think for a structure which I can tell you, or to tell you about the difference. There’s probably two. One of them is on the operator front and the other one is on the VC front. And on the operator front, when I first started in startups in Australia, so that was seven, or eight years ago now. I worked with Mad Paws and then Expert360 as essentially like an operations manager. And there was just no network to ask anybody questions of… Like you said, you were there by yourself, trying to figure things out. And there was no other way for me to talk to other operations managers, or talk to other startups may be outside of the coworking space I was in. And there was just not that much communication, especially somebody more junior in the startup itself.
Michael Batko: The big change from back then to now, it’s just a one-off, so many more support networks exist. I mean, even as part of Startmate, we’ve got, now, fellowships of hundreds of people who all live in one Slack channel who ask each other questions around marketing and operations and hiring, et cetera. And that just didn’t exist seven, or eight years ago. It would’ve been so helpful.
Michael Batko: And the other side of things is maybe that we see front, which I’ve really noticed in Startmate over the last three and a half- four years, where three or four years ago, getting a VC job was pretty much impossible. Because there was literally no VC jobs advertised, just like the number of VCs were actually quite low. There were never any new roles because VCs, even the big ones were a size of five to 10 people. And especially over the last three and a half years, they’ve exploded, just the number of VCs, but also the size of VCs. And there’s never been more roles in venture capital than over the last two, three years. Now, they come out weekly. All different areas, not even just on the investing side.
Will Tjo: That’s very interesting. In essence, it’s almost the density of our ecosystem, the people, support structures, and just in general, they’re all growing since you last worked at Mad Paws. What do you think is the catalyst for this? Why is there such an explosion and interest in startups?
Michael Batko: Yeah, definitely. It’s probably just a long time in the making. It’s those stories, which started 10, 15 years ago, which are finally kind of coming to fruition where the most prominent startups in Australia are now laying the foundation for the second and the third wave of startups with people from Atlassian and Canva, et cetera, leaving the organization, starting their own startups, becoming operators back into the ecosystem. And it’s like fueling each other, and it is attracting a lot more money, which therefore is also attracting a lot more talent, which then is throwing the entire ecosystem together. And the exciting thing is that the startup ecosystem has always been one of, people just paying it forward and helping each other. So, couple that together with a massive growth and suddenly you’ve got massive network effects of people helping each other, and without expecting any feedback, which is just incredible.
Will Tjo: Yeah, absolutely. I’m not sure if you’ve ever dabbled into startups in Austria or perhaps anywhere else in the world. Do you think that we’re on the right direction as an ecosystem in Australia? Or what else could we be doing to improve on?
Michael Batko: Yeah. No, absolutely. I mean, it’s all the right building blocks in Australia. I genuinely think we can be world leaders and are already world leaders in building startups here. It is exactly the right kind of attitude. And we’ve got all the right ingredients from universities, people taking risks all the way, and through to building companies. There’s definitely a couple of things which we can improve on as a country, such as policies and sophisticated and investor restrictions. But no, it’s absolutely on the right path.
Will Tjo: Hmm. So, you mentioned just then that we do have all the right building blocks, like people taking risks outside of university and so on. I think I read somewhere that Australia in terms of startup commercialization is not really punching our weight in terms of OECD countries. I think it was ranked 40 or something in the world, which is pretty low, to be completely honest. Why do you think that’s the case?
Michael Batko: Yeah. The one thing which Australia still needs to change a little bit is the mindset of taking risks. Other countries just have that more inherently as part of their culture. Whereas in Australia, there’s just not the norm yet. This is, for example, actually something that we are trying to address at Startmate with, an initiative we call the Student Fellowship, where students in Australia… I mean, well, actually, when I compare it back to Austria and Europe, by the time you graduated in Austria or anywhere in Europe when you study, you’ve probably done three different internships in three different companies. And by the time you choose your career, you’ve already had so many different touchpoints. In Australia, that’s actually not quite the case yet. Usually, what I see people doing is study law, and then the natural thing to do is do your clerkship. And then you actually end up in exactly the same law firm, post studies. Again, which is like you haven’t even tried that many things yet before in deciding on your career.
Michael Batko: And that kind of change in mindset, of actually trying something that’s not banking, consulting, being a lawyer, et cetera, and going up outside of it is actually something that just needs to change. So for example, what I mentioned there is at Startmate, we do a Student fellowship of now 200 students every six months in their summer and winter breaks who just get to explore startups for two weeks who can actually match to internships at startups. And actually, just building that more risk appetite in a way. And showing people like, “This is genuinely a career path.” And if you can change that, then it elevates the entire startup into the system again.
Will Tjo: Yeah. What you said about seeing startups as a genuine career path piques my interest, because why do we not see it as something that could be a viable career?
Michael Batko: Why exactly? There’s the thing that people still see it as risky or don’t see themselves building one because they don’t have the technology skills or I’m not a developer, et cetera, et cetera. But that perception seems to change. You don’t actually need to be able to code to be in a startup. Actually, startups have so much to give you. So many people see their career as like, “I want to eventually be in a startup. In order to get there, I need to build up my skills first.” And then they go into banking, consulting, and to learn Excel and here and there, and so on. And thinking about it like, “I need to build out my skills first.” But actually, flipping the thinking and being like, “Well, actually, in a startup is when you can learn the most.” That’s actually the interesting mindset changed here.
Will Tjo: I want to touch a bit into more of the owner side. So, you mentioned that at Startmate, for example, you have this two-week program where you expose people to working in startups and so on, would you say that’s a solution to changing this mindset? Or do you think it starts with, I don’t know, government or universities to run these programs? Or how do we start to make effect to these mindset changes and who should do it?
Michael Batko: Honestly, I’m probably not the best person to comment on the large-scale initiatives of governments, et cetera. What I always like to do is play my role of just doing things bottom-up and affecting things that I can affect in a way. And always just a one of staying away from policy changes. Because they can take a very long time. What I love to do is literally affect 400 students a year. And if those 400 students build a hundred companies, that’s a hundred companies per year, which are built, which is a really good starting point. It’s almost like I already am interested in the atomic little units of individuals changing the world rather than trying to affect an entire government’s change. And absolutely, there needs to be changes as well.
Will Tjo: Yeah. I understand your point. It’s when we start to dabble into these large-scale changes, it becomes quite bulky to think about how does in practice that actually works. What you mentioned also is quite interesting because, from your sphere of influence, you just want to say, help 400 people. And then, those people create their companies to help more people. Do you think that there’s a little bit of instability in relying on hope as a strategy to grow our ecosystem? So in essence, we’re hoping that people will go back and give to the community, but what if they don’t? Does that mean that our startup ecosystem is doomed to fail?
Michael Batko: No. I almost don’t see it as hope in a way. I almost see that as a given. There’s almost no way of somebody not to give back. It’s almost like if somebody reaches out a hand to you to help and you change your life, it’s almost inevitable for you to want to give back to the community. We’re seeing time-in and time-out again in Startmate, over the 10 years now where founders go through the accelerator program, get so much help, come back as mentors, invest their personal money back into Startmate and you see the same and things in fellowships. It’s almost like that flywheel which just never stops.
Michael Batko: You probably still remember that person which helped you get your current job, or the job just before that, and you will never forget them. And whenever I ask you for a favor, you will always pay it back kind of thing. It’s those moments which changed your lives, which people just don’t forget, and they will always want to pay it back. Maybe that’s a bit of, yeah, romanticized, well, view of the world, but I genuinely believe in the good of people.
Will Tjo: I understand. The next question I guess is if a new founder or entrepreneur came to you and given all your experiences, your mistakes, wins, what’s one piece of advice you would give them that would help them increase their chances of success?
Michael Batko: I always keep coming back to the same advice here, honestly. And it is always the one, of talking to customers. It’s like people always see fundraising as the goal, or money as the goal or persuading people to come on the journey, or mentoring and getting advice, et cetera. But the only answer, which is right is always the one, of talking to customers. And that’s the best advice I have for any founder. Whatever stage they’re in, whatever problem they have, the answer always lies with the customer. Whether they are at the interview stage, whether they already have hundreds of customers, it’s always the one of like coming back to that, and talking through the problem, and what is the actual burning challenge here?
Michael Batko: And you will always be able to distill it. Ultimately, founders have two problems here. One is the product problem, and the other one is a distribution problem. And both those problems can be solved by customer conversations. On the product side of things, we’ll be able to determine what’s actually important to the customer to actually build. And on the distribution side of it, it’s the same thing of like, if you talk to a lot of customers, you actually distribute your product to the world, and you’re essentially doing sales and marketing already inherently.
Will Tjo: Yeah, definitely. It’s a kill all birds with one stone and you’re constantly bringing your customer into that journey of building your product rather than building a solution to try to fit it into the problem.
Michael Batko: Mm-hmm [affirmative].
Will Tjo: The last question, I guess, is not really a question, but more about a space for you to talk about anything that’s on your mind regarding our community. Is there anything that is currently on your mind that you’d like to get the word out? We’re aiming for this podcast to reach policy makers, entrepreneurs, mentors, investors, and so on. What would you like them to hear?
Michael Batko: Yeah. I think what is on my mind is the future of Startmate itself is probably the biggest one for me. Where what we are landing on in Australia is lots and lots of spaces and communities and accelerators and co-working spaces, et cetera. And maybe the message itself would just be, well, the one of, what we are trying to build at Startmate, or what we are building at Startmate essentially, is the epicenter of the startup ambition.
Michael Batko: We actually want to marry essentially the three key personas of startups in one place, which is founders, operators, and investors. And we’re actually building this place of them all to come together. So, maybe another way to phrase it is the one of, what we’re trying to do at Startmate is reduce the distance between people, and actually just getting them to help each other and bring them closer to each other. And rather just doing this with founders and mentors, we actually do it now between founders and their investors. And once they have money with people they can hire as well with the operators. And if you put those three people in one kind of place, that’s when you have a truly thriving ecosystem.
Will Tjo: Yeah. Absolutely. Something that just popped to my mind when you mentioned this is, the prevalence of accelerators and co-working spaces that has really grown in Australia over the recent 10 years, do you think it can ever be a bad thing to have too many because you’re in essence competing with one another?
Michael Batko: Yeah. I actually don’t see it necessarily as a bad thing on the competition side of things. I probably see a bad thing for founders themselves. Sometimes having too much support can also be damaging. It’s almost like a… Just because you can walk on the power line doesn’t mean you should be walking on the power line. And with accelerators, and too much support and too many accelerators can do is almost help people be on those power lines for too long. What I mean by that is almost like trying to keep startups alive, which could have realized much sooner and earlier that it actually isn’t, and it doesn’t have a place to be. It’s almost just a one of, letting startups die and rise again from whatever next thing is that they’re coming up with. And so, too many accelerators in themselves can actually proliferate just too many companies, which probably just could have gone onto the next journey already.
Will Tjo: Yeah. I understand your point. It’s I guess, throwing money and time at the problem when actually looking at how to solve, so you’re just hoping that the company will succeed when in reality, it really shouldn’t because it’s just being sustained by say, VC money or accelerator money and so on.
Michael Batko: Yeah. The real challenge, kind of with too many accelerators is just with, I always find that an interesting one of, what is the actual incentive for the accelerator program itself? And the incentives usually come from where does the money come from in terms of revenue. And for founders… And that’s the Startmate attitude. The mentoring and the advice which founders get should always be from other founders and people who have been there and done that and have the empathy to help you along the journey. And if that advice doesn’t come from founders, but let’s call it corporate executives or government officials and stuff, well, they’ve actually never been in the shoes of founders and done the real journey which a founder has done. So, I always find the old place. Actually, just keeping that really true to giving founders the right ingredients is super important.
Will Tjo: Absolutely. Do you think that Australia has a lot of founder-led accelerators and mentors because as we were talking about before, we’re only really like the third generation of… The third wave where alumni from Atlassian or Canva are just starting out their own companies and giving back?
Michael Batko: Yeah. I mean, I always see accelerators as essentially four prevalent business models. And the first one is the university back accelerator where usually it’s alumni of the university coming through, and they’re great. [inaudible] and grand funding usually, and very focused on their own alumni. As the second one, which is corporate back accelerators, which again, when you think about where the money comes from, it’s focused on the corporate themselves and creating good outcomes for the corporates rather than the founders. So again, incentive alignment is very important. The third part is actually probably a dangerous one, which is government-funded accelerators, where it is a good gig for two or three years. Well, you have the government funding, but it is a… Accelerators are just incredibly difficult cashflow businesses because you don’t see the cash coming back until 10, 15 years down the line, and there’s actually not much money in the operation.
Michael Batko: So, once you are off the government grant funding, well then, those accelerators just die. And again, left with nothing. And the third model which is back to your question as well is exactly the Startmate model, which is actually a mentor-driven seed fund in a way. So, for us actually, every single mentor is a founder or an ex-founder and they invest $10,000 all the way up to half a million dollars personally, into every single fund that we raise every six months per cohort. And they’re literally personally invested in that fund and in the accelerator and in the success of that cohort themselves. So, the beauty of that is that they have real skin in the game. They actually care about those startups. They’ve been in the shoes of those founders before, and they really have the empathy to give the advice. Yeah, so I’m drumming the Startmate drum here, but it is a very unique business model that even in the entire world, I don’t know any other accelerator which is actually even structured that way.
Will Tjo: That’s amazing. Well, thank you so much for your time today, Michael.
Michael Batko: Thanks so much for having me.