Alfred Lo compares startup ecosystems in different nations
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Alfred Lo is co-founder and Chief Commercial Officer at Harvest B, a tech startup developing a plant-based meat ingredient system. Previously Chief Investment Officer at Cicada Innovations, an incubator for Australian tech startups, Alfred has more than a decade experience acting as an advisor, mentor and board member for many early-stage technology businesses. In his conversation with Adam, Alfred discusses how Australia’s startup ecosystem compares to other nations, and why he believes “What role should government play in the startup ecosystem?” is a tricky question to answer.
Harvest B: https://harvestb.io/
Cicada Innovations: https://www.cicadainnovations.com/
Alfred Lo: Hi, I’m Alfred Lo. I’m one of the co-founders of an alternative protein startup here in Sydney, Harvest B. I’ve been involved in the Australian startup scene for a better part of over a decade now, maybe 12 years. A lot of people know me as a venture capitalist. I used to run Optus’ venture capital fund and AMP’s venture capital fund. Prior to that, I was actually a software founder, but I’ve jumped back on to the operator side of things with Harvest B. But better part of 10 years in investing both institutionally and also as an angel investor, a small-time angel investor.
Adam Spencer: Before I ask that question when you really got involved, I’m just curious to understand, what was the motivation or thing that pushed you to jump back from the venture capital or investing side of things to become a founder again?
Alfred Lo: I think I’m really proud of the work that I did as an investor and being part of what is a very new industry of venture capitalists in this country. For me, it was a juncture in my career. I was actually, my last role before Harvest B was as a chief investment officer at Cicada Innovations, which is a deep tech incubator.
Alfred Lo: And when I left there in 2019, I thought about, could I do more work as an investor or could I jump back in the operator seat to work on something that I really enjoy and really, I think, will have a profound impact to the economy and I can look back on as being really proud of? And given what’s happening with climate and sustainability, alternative protein was an area which I thought the skills and experiences I have, be able to gain as an investor would really be well placed in doing something in this space. That’s why I founded Harvest B.
Adam Spencer: What was your first exposure to the Australian startup ecosystem?
Alfred Lo: It’s interesting, I finished my MBA at AGSM in 2004, and I had come back from international exchange at NYU-Stern Business School, and a lot of the people doing MBAs, they want to go off and join a big consulting firm like BCG or McKinsey. I really wanted to join the tech scene actually as a VC, but 2004, 2005 wasn’t really, you wouldn’t call that the heyday of Australian venture capital.
Alfred Lo: It was a wasteland to not pull punches. It was really a vacant period in the Australian tech scene. We were still reeling from the dot com blow-up from 2000, 2001. There were very few startups, tech startups that you could really call on. There was certainly not really any investment scene. And that was probably my first foray into trying to get into the tech scene some 15 odd years ago. And I started, actually instead of getting a job in VC, I got into an operator role, running a climate tech, a water purification business.
Adam Spencer: When you say you didn’t want to follow that, I guess, traditional path to consulting firm after your MBA and getting to the tech scene, why? What attracted you to the tech scene?
Alfred Lo: Well, I think I traditionally used to come from big corporate. I spent six years at PwC. I cut my teeth there as a cadet, a chartered accountant by training. Had a lot of clients in the big end of town, but I think those industries and those firms are really important, but I’ve always had a real technology bent to myself. I majored in information systems back in my undergraduate. I’ve always loved technology. It’s come easy for me.
Alfred Lo: And I was naturally seeing the things that are happening overseas in Silicon Valley and frustrated that why isn’t it happening here? And I think trying to get involved, trying to build something here, play a small part, I think you need people to start doing things locally for us to build into a community. So, I’m fascinated by the speed of things that happen in tech. I’m a very curious person, and I think there’s wonderful things that happened that are created in our tech community and in our tech ecosystem, generally creating better futures and better standards of living for everyone. So that’s why I wanted to build a career in tech.
Adam Spencer: I think you said, was it 2004, 2005, when you entered the scene, and as you described it, this barren wasteland. Was it just that dot com bust that destroyed the investment scene in the Australian startup ecosystem or it didn’t really exist at that point?
Alfred Lo: Yeah, I mean there was… I think even the current, I guess, generation of VCs when they started, I’m talking about the ones that started in early 2010s, they really struggled with the scar tissue of that period. There were Australian funds. There were Australian institutional investors in the tech scene, the Australian tech scene and the global tech scene. But certainly, I think the view was that the Australian fund managers from that dot com period didn’t return capital.
Alfred Lo: And there were a lot of front page disasters that happened in Australian tech, and that memory was very profound, the impact of that happening, but it was a different time. The Australian tech scene was structurally very different then to what we’ve built now in this era.
Adam Spencer: Yeah, can you just name a couple of those front page disasters?
Alfred Lo: I think LookSmart was one that sort of burnt bright and then crashed. Look, you can really put on one hand the survivors of that era, the Australian survivors on that era, there were maybe not even on one hand. Sausage Software was another one that burnt bright and then didn’t go anywhere. I think it was the marketplace businesses that did really well, so realestate.com, carsales.com and Seek. They classically took what around the world was happening, the classifieds businesses and put them online. That was happening in the world over. And they’ve survived and they’ve not just survived, they’ve gone on to be real pillars for the Australian tech scene.
Adam Spencer: What do you think happened? Was it just those case studies that people pointed towards to start kicking off the venture capital asset class again or was it not until the 2010s when it really started to get going?
Alfred Lo: Yeah it really… you had a few players pop up, and total respect to them, but really delivering outperformance and numbers, I don’t think really any of them did that. And it would be hard-pressed for me to say that, for anyone to say that, there was an industry. There wasn’t a VC industry in Australia in that period of time. There were a few players around. I think Southern Cross Ventures, Starfish. There were a couple of others, but frankly, there weren’t that many startups to invest in. Certainly when you compare it to 2021, it’s unrecognisable. It’s so different.
Adam Spencer: You were in Sydney in 2005. Is that right?
Alfred Lo: I was.
Adam Spencer: Talking about the startup community in general, if that existed at all, could you see any grassroots kind of movement?
Alfred Lo: I mean, at the time I was head-deep in the business I was in. As I was mentioning before, it’s a deep tech company working in water purification technology. I mean, I didn’t even think of it as a startup, but it was, but that goes to show the vernacular was very different then. There wasn’t really a community. Certainly you wouldn’t read anything in the newspapers about startups or tech. It was something cute. It was not treated seriously.
Adam Spencer: Yeah, when did you start to notice something resembling a community emerge?
Alfred Lo: Yeah, that’s interesting. I think later in that decade, 2008, ’09, ’10, around then, you started to see a change. We had gone through the GFC at that time. I think whenever there’s an economic crisis, it tends to correlate to something happening in tech, an opportunity generally happening in tech.
Alfred Lo: And I think around that period of time, it was the advent of the iPhone as well. I think that changed the game a little bit more. I think mobile networks, ubiquity of broadband connectivity brought change as well. And what I mean by that, I think it democratised a lot of access and distribution of apps. Price points changed. You could be a software developer anywhere and be a hit on the app store and then go big. You didn’t have to be in the Valley.
Alfred Lo: But I started to see locally in Australia, I think there did start to become people coming together, community forming. You had folks like Phil Morle and Mick Liubinskas at Pollenizer at the time being early pioneers, being a startup studio. You also had the folks at BlueChilli doing their thing. And you start to see an emergence of people coming. I remember after leaving that deep tech startup, I had a software startup, and I used to go to these things called Jellies.
Alfred Lo: I don’t even know if they’re still happening around, but it would be people that would, often individual folks who are working on their own thing or maybe they’re a developer contracting out. And they would, rather than working from home, they would go to somewhere to offer up their office for the day and you’d hold the jelly there. You’d co-work together then. Because don’t forget, at the time, there were no coworking spaces, and there weren’t really coworking spaces until 2011. So I think that was a real point of inflection for our community when we started to have places to come together, physical places to come together regularly.
Adam Spencer: Have you had much exposure to innovation or startup ecosystems in other parts of the world?
Alfred Lo: Yeah, I spent a bit of time in America. I spent a lot of time when I was with Optus with SingTel Innov8, their corporate venture capital fund. I spent a lot of time in Southeast Asia and their tech scenes in the Philippines, in Indonesia, in Singapore, in Thailand. So yeah, I have spent a bit of time seeing other communities.
Adam Spencer: Drawing on that, is there anything you can point to that makes our ecosystem stand out like a unique difference or a unique advantage?
Alfred Lo: All ecosystems are very different. The Australian one, how can I say we’re different? We bring a definite Australian flavor to it. For the good and the bad, the classic Australian, not too serious attitude, she’ll be right attitude, the mateship aspect. We also suffer from some Australian traits of ours. We’re often not ambitious enough. Often we’re not classically the best sales people. We’re not pushy like you might say the Americans are. Not pushy, but you know what I mean? Like the salesmanship, we can push harder there.
Alfred Lo: We sometimes suffer a little bit of, in the past, of just being safe on our own shores, not pushing out overseas, bit of the Goldilocks, not too small – the market is not too small that you have to go out and it’s not too big either. It’s just right. And I think that’s probably a comment on the whole Australian economy.
Alfred Lo: But yeah, the Australian startup scene is, we’ve been able to develop a real product focus excellence, I think, compared to the rest of the world. And I think, in the time that, the 20 years of our ecosystem being around, we’ve been able to show that we know how to build a great product. I can point at Atlassian and Canva are great examples of that. Every ecosystem is a little bit different and they’ve got their strengths and weaknesses.
Adam Spencer: Talking about weaknesses in present day now. Are there any gaps that you can see today, things that you would like to see improved on?
Alfred Lo: Yeah, well, there’s always gaps. It doesn’t matter which market it is. I think even if you’re in the Valley, there are gaps. I think there are things around seed capital that we could get improved on. We’ve had a real run on investors, I think money being put into the asset class of venture capital and early stage tech investment, which has been really great. But I think we’re going from … You think about in 2012 and you probably had funds under management, less than $100 million, maybe probably even under $50 million. And now we’re in the billions of dollars in 10 years’ time. That’s amazing.
Alfred Lo: But I think a lot of that capital is highly concentrated now. We’ve got a few funds that hold most of the funds under management and it’s an increasing gap between the next tier below. And I think part of a healthy ecosystem is a good spread of risk capital amongst multiple managers. I hope that we’ll see that happen. I think there’s also still challenges that we have with deep tech innovations and getting funding in this country. I think getting software investment much easier these days and much better understood by the investor community compared to science and deep tech related, and potentially more capital intensive spaces, which are still venture-backable but just not well understood by investors.
Alfred Lo: They’re just two examples of gaps, I think. We talk a lot about Australian founders needing to level up, be more ambitious. I think in the last 10 years, we’ve gone to show that that’s happened. But I think what’s probably not often spoken about is the counterpoint. I think we need better investors too. And I say that being a former investor as well, from a former investor’s perspective. I think there’s not enough spoken about the caliber of investors. How do they get better? How do we create better investors in this country that understand risk, understand spaces?
Adam Spencer: Yeah. I wanted to ask you that. How do we do that?
Alfred Lo: It’s a great question. I think it takes time to build, I think, and it takes a curious mind. And if you’re a VC, if you’re an early stage investor, you should be a curious thinker, but I think there’s no prescription on how to do that. I think a lot of it comes with experience like doing things. I think we’ll get more depth in the types of people getting into VC that bring their body of work, their body of experience to that role.
Alfred Lo: At the moment, we generally have a generation of generalist investors as opposed to investors who have deep domain expertise in one particular thing. And that’s because the market has been quite, it’s been too thin to create that depth of subject matter expertise. It generally comes over time. As your market increases, your economy increases. The niches become big enough for one person to become really good at to really know something.
Alfred Lo: And I think we’re getting to that point with the Australian tech scene we’re not just some cottage industry. We’re an ambitious industry with a lot of players and a lot of sophistication, and we’re attracting more international people as well to our community, which only accelerates our level of knowledge and sophistication. I think that’s probably the single most thing that will accelerate our ecosystem, is how we get more surface area with international founders or investors? That will only improve how we do things better.
Adam Spencer: Do you have any unpopular opinions about the ecosystem, something that you firmly believe but people just aren’t on the same page with you about?
Alfred Lo: I have an unpopular opinion, which I don’t know whether people disagree with it, but often unpopular opinions are things that people don’t talk about. I think one that comes to mind is there are too many deep tech founders that optimise for grants rather than investors. We’ve always had really great academics and researchers and deep tech minds in this country. We punch well above our weight in that space. We talk about how we suffer from not being able to commercialise technology. And it’s true, right?
Alfred Lo: But in my time in deep tech, I spent over two years at Cicada Innovations, I met a lot of, let’s say entrepreneurial deep tech founders. A lot of them were optimising for grants rather than investors. It’ll take some time to change that.
Alfred Lo: But you compare it to other markets around the world where deep tech gets well funded. Australia really struggles in that respect. It’s not just the founders’ side of things. I think there’s still a market failing in the investment side of things to fund these types of opportunities and types of businesses because it’s not well understood.
Alfred Lo: And it goes back to the depth of understanding from the investor side of things, but the risk capital probably isn’t there, there’s a market failure. Where there’s a market failure, that’s where the government steps in with their policy. And I feel like grants are really important for our tech community. I think the R&D tax incentive is a wonderful and a very important pillar to what the government does. But yeah, in terms of deep tech, I think I see too many founders optimising for grants and not being commercial and speaking to the investment opportunity.
Adam Spencer: What role do you think government should play in the ecosystem?
Alfred Lo: I can’t envy a policymaker on how to do it because they get sort of clipped over the ear if they do too much or do too little. I think the policy setting needs to be right.
Adam Spencer: Some people say they need to be at arm’s length and really not have much to do with it at all, and other people congratulate what they’ve done.
Alfred Lo: Yeah, I think it’s a misnomer to say that government shouldn’t get involved. You look at the founding of tech mecca at Silicon Valley, there was a lot of government involved in the formation of that sector 50 odd years ago. You look at Israel and their startup nation. If it wasn’t for government policy and their intervention, it wouldn’t be what it is today.
Alfred Lo: Singapore is the same, different to Israel, but they have a tech scene. The government gets highly involved. That’s not to say it’s all good. I think government needs to try things, but it also needs to stop doing things that don’t work. And if you’re going to adopt a mentality like what startups do, make decisions, try things, find out, if they’re experiments, if they fail, stop it, try something else. If it works, great, keep on doing it.
Alfred Lo: I think governments and the bureaucracy find it hard to work on that cadence, to be able to admit that something is wrong, but also to change policy quickly. And I think that’s part of why there’s always friction, because startups move so fast. An individual firm, an individual startup moves so fast, therefore the community moves so quickly.
Alfred Lo: And you can say that about the Australian startup industry. It’s unrecognisable from what it was in 2011 to what it is in 2021 compared to any other sector. You look at mining, banking, telco. They’re all pretty much the same industries, but ours is so unrecognisable, and you need to move quickly to keep up with it. So I think government will always lag, and that’s part of the challenge. How can they help more?
Alfred Lo: I’m a big proponent of, at the core of it is human beings, startups are the embodiment of the knowledge worker, and we need to get the best minds in this country. We need to develop them and we need to bring them in. And I think we have great educational institutions and we develop really great skills. It’s a big industry. It has been a big industry for Australia, education, but we need to bring in more talent. I think that’s one thing government could do. Again, it’s one of those topics which has been politicised, but I wish we would really go hard on being the brain magnet for the best brains in the world. Australia has a lot to offer.
Adam Spencer: In your opinion, what needs to happen next to get us to the next tier to keep building this ecosystem?
Alfred Lo: Yeah, I think we haven’t gone a full cycle yet. And what is a full cycle? I think, if you say 2011, ’12, ’13 was the beginning of this cycle, and if you parlay that to a venture fund’s 10-year fund life. The beginning of the fund, you take the money in from your investors and you invest it. You invest in startups. They build. They have 10 years or five to 10 years to build something significant, and they exit, the company exits through IPO or trade sell, and the money goes back to the venture fund and they get returned back to its investors, and the cycle around again.
Alfred Lo: We’re sort of only getting to that first end of the cycle now if you think about it, right? You’re talking about the vintages of funds of 2012, ’13, like Blackbird’s first fund. You’re talking about AirTree, 2013, ’14, Square Peg around the same time. We’ve been really blessed, I was going to say the word lucky, but it definitely is luck involved, but it’s right time, luck, skill, all of it mixed together.
Alfred Lo: But those funds of that vintage, those Australian funds have been bumper funds. They’re world class. That will mean that they’ll return capital to their LPs, their investors. It’s a flywheel. So, hopefully, we’ll see more capital come back into the market and different options to get capital for founders.
Alfred Lo: And with that return of capital, you’ll get more confidence and conviction of asset class, both by angel investors but also institutional investors, the super funds, endowment funds that this is an asset class that’s worth backing. And we’re talking about small, tiny allocations from their total assets under management, well less than a percent, which is still lots of money. I mean, money doesn’t solve everything. It certainly doesn’t, but it is the lifeblood of this industry, and it will keep that flywheel going. And I think that’s what I mean. We haven’t seen that cycle finish.
Alfred Lo: I think there are more things that we need to figure out. I think our share market and how we list companies, where we list our companies is something that’s not quite resolved yet. Do you list on the ASX? Do you list globally? I think corporate acquisitions hasn’t really been resolved yet in Australia. One thing that’s really not well understood is that it’s important that not everyone is going to be a unicorn, a decacorn. Not everyone is going to list in the NASDAQ. You don’t need to be successful. And we need more exits for founders.
Alfred Lo: And if we can exit to local companies, I think that would be super valuable, but we don’t really see much of that. Australian corporates haven’t been very acquisitive in tech, and I think it’s reflective of the Australian stock market and its ASX 20. It’s very stale, stagnant. There’s very few companies in the ASX 20 that are new companies or tech companies. When you compare it to other markets, we’re still full of resource companies or banks.
Alfred Lo: I think that’s something I think government needs to look at. I know that Australian tech community is always going to be pushing to be a bigger part of the Australian economic mix. And hopefully, one day, we’ll see a lot of new coming startups make that ASX.
Adam Spencer: What advice would you give a brand new founder?
Alfred Lo: As a founder, as an entrepreneur, you only have three things to do, actually just three things to sell. You have product that you have to sell, you have to find customers. You have stock to sell, equity to sell to investors, so you have to pitch that, pitch to be an attractive investment opportunity for investors to buy your stock. And the third thing that you have to sell is vision, and it’s to get employees, to get the best people to work for you.
Alfred Lo: If you can simplify how you think as a founder, as an entrepreneur, there’s only three things that you have to sell. You’re the number one salesperson. And every day, you’re selling one of those. Well, hopefully all three of those things. Everything you should be doing should be focused around selling those three things.
Adam Spencer: What I’m trying to do here is to tell a story in the most holistic and truthful way possible. I want to catalog the history of the Australian startup ecosystem. Keeping in mind now that we want founders, investors, policymakers, academics, people from all corners of this community to hear this story. Pick any one of those or all of them, but what’s something that you think about constantly or that people need to hear from you?
Alfred Lo: I think, there’s so much we have to do. We need more people involved in the startup ecosystem with the right attitude, the right culture. It’s so important that we bring people in, collaborate and build businesses and build, hopefully what will be their legacy but build it the right way.
Alfred Lo: You know, a good friend of mine who I used to work with, Peter Huynh from Qualgro, said to me many years ago, and I’ve said it to many people since, “It’s not what you do, but how you do it.” It’s so important. You know, we can build a teching ecosystem, but if we do it the wrong way with the wrong culture… and that does happen in certain ecosystem. We build this bad culture. One thing we say at Startmate, culture eats strategy for breakfast.
Alfred Lo: You have to build it in the right manner. I think we’ve been so fortunate that we’ve had really good leaders and trailblazers in our ecosystem that have, by and large, turn out the right way, inclusive, and it’s not to say they’re perfect. It’s not to say there haven’t been things that have been called out about how our ecosystem, the things that were wrong about it, but how we go about addressing it.
Alfred Lo: I’m very proud of the tech ecosystem we have built to date in Australia. I’m super proud that I’ve been part of it. And I’m one of a chorus of people, and there’s more and more people getting involved every day. It’s an industry of choice, I’d say, for graduates to go into, and that certainly wasn’t the case when I graduated from university. And that to me means that we’re doing a good job.
Alfred Lo: We are building an industry from scratch. It doesn’t happen often, ever in any nation. All the industries that we know today in Australia, they’ve come before us. They’ve been around, but the tech industry, by and large, wasn’t vastly different. Even if you can call it existent prior to this generation, it was very different. And we have this opportunity to mold it into one that is a way that we want to work, but also one that’s going to hopefully be bigger than mining and resources or banking and finance.
Alfred Lo: Hopefully, it becomes one of our biggest exports this country has ever seen. And that’s why it’s vitally important how we do things, how we treat each other, how we set ambition, how we play, how we collaborate. I think those things are, there’s nothing with this stuff that’s written down. There’s no formula for it. We have to make it up as we go. But it’s one of those things if you get wrong, it’s quite insidious. It can be the death of anything that’s good. I feel like the Australian tech scene is in good hands, but it requires a lot of hard work and consistent work. Nothing should be taken for granted in that respect.
Alfred Lo: But yeah, hopefully we’re attracting the best minds and the most ambitious minds, the most curious minds to work on the most audacious problems to solve. And probably the world has to benefit from that because we can bring to life amazing innovations.