James Tynan shares his unpopular views on startup accelerators
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James Tynan is Principal at Square Peg, which is currently Australia’s largest independent Venture Capital firm with $1.6 billion under management and offices in Sydney, Melbourne, Singapore and Tel Aviv. Prior to taking this role, James was CEO at Startmate, an organisation of investors and mentors that runs two accelerator cohorts a year. In his conversation with Adam, James discusses his experiences being exposed to the startup ecosystem in Silicon Valley, and shares his opinion that, with some notable exceptions, startup accelerators are generally terrible business ventures.
Square Peg: https://www.squarepegcap.com/
James on Twitter: https://twitter.com/jamestynan
Adam Spencer: Hi, I’m Adam Spencer, and welcome to Day One, the podcast that spotlights Australian startups, founders, and the organizations that empower Australian entrepreneurship. We go back to the beginning to tell a story of Australia’s most inspiring founders and how they built their companies. You’re listening to a special interview series as part of a documentary W2D1 is producing about the history of the Australian startup ecosystem. On the episode today, we have-
James Tynan: Hi, I’m James Tynan. I’m a principal at Square Peg. And Square Peg is… Well, I guess Square Peg’s currently Australia’s largest independent VC and probably Australia’s one truly global VC. We’ve got offices in Sydney, in Melbourne, Singapore, and Tel Aviv. Strong relationships on both coasts of the US. We’ve got about 1.6 billion Aussie under management, have returned 650 million to investors and have invested in Australia’s biggest startups like Canva and Airwallex and ROKT and some big international successes like Stripe and Fiverr. And I think that probably the thing that we talk a lot about internally at Square Peg and the way that we see ourselves as different is the level of commitment that we make to our founders. We know that money is obviously very important, but the most valuable resources is time and effort. And that’s kind of where we put our focus.
Adam Spencer: How would you describe the role of a VC?
James Tynan: Yeah, I mean, it’s a really good question. I think that it varies at different times and with different startups. I think VC is in some ways a really kind of relationship-based cottage industry. And my sense, when I think about the role of VC, obviously, money is a huge part of it; making sure that startups have the rocket fuel they need. But I think beyond that, really what it’s about is establishing excellent trust based-relationships between investors and founders, such that the kind of surface area that you can see of a business and where you can help is increased. And so to me, it’s really all about kind of building those trust-based relationships.
Adam Spencer: What made you want to become a VC?
James Tynan: So what happened with me was kind of interesting. I loved the idea of being a VC, but when I had my first business, and I started in the year 2000, and the idea of VC in Australia wasn’t really around. And I certainly didn’t feel like it was a very realistic… I remember talking to someone when I was at McKinsey and saying I eventually wanted to invest. And they were like, “Yeah, but realistically, what will you do?” And so it went off my radar for a while and I was founding businesses, I was scaling businesses. And when I came back to Australia, I was so excited by what was happening with the ecosystem. And when I took over Startmate, it was partially to build up this thing that I thought was really special, but needed some love and support to really bring it to the level that it needed to be.
James Tynan: And it was partially because of that. And partially because I thought, “Wow, what an incredible way to use my operator skills and also be exposed to the investing side.” And I think that what happened when I got sick… I was really ill while I was running Startmate for a little while. And when I came back, I had such limited energy, such limited kind of capacity, that I had to, for the first time in my life, really aggressively prioritize to only be doing the things that were really giving me energy back. And when I looked at what those things were, it was all about finding great founders, working with great founders, having conversations with great founders, helping great founders.
James Tynan: And I realized, “Oh, this whole time I’ve been thinking of myself as the center of the universe, the guy who’s going to come in and fix this business, or take this business to the next level, whereas really, everything I’m really enjoying is when I’m on the sidelines and I’m helping, and I’m being in service to somebody else and someone else who’s really great and on their own life’s mission.” And so that was when I realized, “Oh, this is what I want to do. I want to be the guy helping and supporting these incredible people.”
Adam Spencer: When would you say you…? And go back as far as you want, before we have all this vernacular about the ecosystem.
James Tynan: Well, it’s weird because I started a business in the early 2000s and was bootstrapping it, and there just wasn’t anything like what there is today. And we were all… I think there were a bunch of people doing really interesting things. What I was doing was not particularly interesting, compared to what the other success stories like Atlassian and Campaign Monitor and those types of folks were doing. But everyone was building in their own separate little pockets. And I didn’t really know about any of what was going on.
James Tynan: I was really looking to the US and was honestly a little bit disgusted with Australia. When I was having fundraising conversations, it was kind of, “What rich guy do you know who is somehow in your network who’s going to offer to buy 50% of your business for very little money?” It was like that. And so I left Australia and didn’t really look back. And meanwhile, people like Paul Bassat and Niki Scevak are kind of putting their money and time where their mouth is and really building something of an ecosystem here. Then I was in the US for six years, and it was only when I came back that I was really exposed to something that I think you would call an ecosystem.
Adam Spencer: That’s a unique perspective that you have, having been here in the early 2000s when really, there was nothing; maybe something left over from a previous generation of tech startups before we even understood them to be tech startups. And then coming back in… When was it, 2016?
James Tynan: Yeah, I came back in 2016 for a visa, and it was weird. It was like, Nick Crocker invited me to come to the Sunrise Conference. And I think in the course of a day or two, I’d met the founders of Canva and Culture Amp and SafetyCulture.
Adam Spencer: Wow.
James Tynan: And the folks from AirTree and Blackbird, obviously. And I went back to the US with my visa… I was looking around for my next thing at that point… But I realized, “Wow, maybe my next thing could actually be in Australia.” I’d always completely… I had discounted Australia as a place where I might work because the work that I really liked was all in the Bay Area. Yeah. It was a really interesting time gap to have left and come back six years later and have such a different perspective.
Adam Spencer: That’s the first time anyone’s mentioned the Sunrise Conference in any of these interviews. Can you just give me a little explanation of what… I mean, I know what that is, but just for the audio, can you give me a little explanation as to what that is?
James Tynan: So the Sunrise Conference is Blackbird’s conference where they pull together a whole bunch of folks, particularly founders, and they have a lot of founders presenting; a lot of founders, investors, people in the ecosystem joining, and it’s all really in support and celebration of the growing Australian, and now I think Kiwi, businesses.
Adam Spencer: So 2016, you come back, visa, you went to the conference, met all these amazing people, did that plant a seed in your head of where you wanted to go next?
James Tynan: Oh, absolutely. I mean, the thing that I haven’t told you is that we also had a two-year-old at the time. So I was running a big chunk of Khan Academy, which at the time was the world’s largest edtech. And then my wife was running comms for Medium. We had a two-year-old and the idea of being able to be in Sydney, which was the city where both of our parents were living, was really very enticing as well. But honestly, we just completely discounted it because we just didn’t realize that there was really a startup ecosystem. I didn’t realize… My first exposure to Canva was one of my team members using it at Khan Academy. And I only then realized it was Australian later. So you can see how unplugged I was from what we now call the ecosystem. I really didn’t know.
Adam Spencer: So was it 2018 that you come back to us?
James Tynan: Oh, I should say, by the way, it was actually 2017. I got my years wrong.
Adam Spencer: Oh, right.
James Tynan: I was just looking it up on my calendar. Sorry. It was May 2017 when I went to the Sunrise Conference.
Adam Spencer: Right. And so that’s when you come back to the country, got your visa. And then you went back over to the US, did you?
James Tynan: Back over to the US. And then we kind of just managed our exit. So I kind of wrapped up at Khan Academy and my wife Kate kind of wrapped up at Medium and we kind of plotted our return back to Australia. And I basically… We started doing a little bit of work with Startmate, with some other people here and there. And then I ended up taking over Startmate formally, beginning of January 2018.
Adam Spencer: Who was CEO before you took over?
James Tynan: There wasn’t really a CEO. So Nick Crocker was running it with one of his mates, Oscar, who basically… Startmate had traditionally been always run on the side. So Niki started Startmate, and then later started Blackbird. And Startmate had always been this kind of seasonal thing that popped up once a year and that folks kind of did on the side of their other job. And I think Nick, credit to Nick for… He was the first one to go and get a little bit of funding from… I think Launch Vehicle was perhaps the first funder. I think I’m getting that right. And he decided, “Oh, well, I’ll take it to Melbourne, so it’ll be a twice a year thing.” And he brought in Oscar to help kind of run that process.
James Tynan: And I think that by the time I came in, we were very stretched. We were running the accelerator twice a year on this kind of shadow staff where Nick was obviously continuing his activities as a partner at Blackbird. And I think when I came in, it was really about taking this thing that had been this side project and saying, “Well, what if it was its own entity that could really… What would it take to really build a platform for Startmate to be its own entity and to grow?” And that was what I kind of went about doing.
Adam Spencer: And so early 2018, you’re CEO of Startmate. Can you kind of give me a bit of a snapshot of what the community looked like from your perspective at that time? Both people, individuals that kind of people looked to, or just people that had a bit of a profile, but also organizations and maybe other programs that were visible in the ecosystem in Sydney.
James Tynan: Yeah. So I’ve got a couple of impressions, and hopefully they won’t be too controversial. I have a bit of a weird perspective because I was coming back from the US and had been exposed to some really fantastic startup networks. And I just felt that when I hit Australia, there were a lot of great founders getting advice from a lot of people who had no business kind of giving that advice because they hadn’t themselves been involved in scaling a technology business. And for whatever reason, I was just fired up by that. I thought, “We’ve got to change that.”
James Tynan: And when I looked at Startmate, I saw critical mass. I saw actual density of people in the network who had that type of experience; both in the alumni, who were really scaling, but also in some of the original mentors and folks like that who were still scaling their businesses. But like Mike and Scott from Atlassian, those businesses had kind of reached exit velocity. And so I think one of the things that I wanted to change about the ecosystem at that time was, I wanted to create enough density inside some of these networks, such that there would be no reason ever for founders to have to listen to someone who hadn’t been in the trenches building and scaling a technology business.
Adam Spencer: Apart from Startmate, who were some of the other movers and shakers that were kind of really pushing the community or ecosystem forward to make people really pay attention? Apart from Blackbird, obviously.
James Tynan: Well, I mean, I think the big names that I remember, the things that I remember being interested by, were you had the Australian businesses that had reached exit velocity; Atlassian and Seek were two that kind of come to mind. But then what I found really exciting was that there was this next tier of emerging unicorns that were really kind of traveling very, very quickly. And of course, Canva was the leading candidate there. But then underneath Canva, you had the kind of Culture Amps and SafetyCultures and those types of businesses that were growing and scaling really, really quickly and were clearly on a path toward becoming really big themselves.
James Tynan: And then you had this next tier, which were the kind of very, very early emerging folks who had somehow… through their own genius, but also from downloading some of that DNA from the earlier group… had managed to kind of create this founders-helping-founders circle of life that was starting to happen inside Startmate. Where you had people like Rory from Propeller who were very, very early in their journey, but you could just tell that they knew what they were about, and they were kind of getting after it. And I think that those three tiers to me suggested that, “Oh, we’ve now got…” The path up the mountain is becoming clear. Even though your path will be completely different from anyone else’s, if you’re really serious and you’re really talented, you can now see, from really just starting to a company like Propeller, all the way up to a company like SafetyCulture or Canva, all the way up to a company like Atlassian. And of course, it’s funny talking about that now because all of those companies are now much bigger than they were then.
Adam Spencer: What did you bring across with you from the Silicon Valley ecosystem back to Australia? Is there anything that you kind of brought back or noticed that they’re doing really well that you want to try to make happen here?
James Tynan: Yeah, absolutely. I mean, one thing I brought back was all of my own personal contacts and connections that I always wanted to leverage in support of Australian founders. But the other thing that I thought, just on a more meta level, was the contrast between the two networks really made me think about where the power of networks comes from. And my own little kind of formula that I thought about as I was kind of building and growing Startmate was that the power of the network was really a function of A, the number of people in it, multiplied by B, how much those people have the capacity to help, multiplied by C, how willing they are to help and how fired up to help they might be.
James Tynan: In the US, you had a enormous number of people. And I think that the magic of Silicon Valley is that they are actually incredibly willing to have a conversation and to help you. And their ability to help, just in terms of the amount of capital they could bring to bear, the amount of expertise they have… The number of just talented people in the network there is so huge that I think that that network is obviously unparalleled. And so, as I was thinking about what we needed in Australia, it really kind of came down to, well, the number of people we’ve got to grow, we also need to grow our internal capacity to fund and to support startups with fantastic talent. And then we also need to maintain this kind of an intrinsic willingness to help and to create a culture where folks are always reaching out that hand to founders helping other founders, but also operators helping operators and basically creating an ecosystem of reciprocal and joint support.
Adam Spencer: Jumping to present day, what gaps do you think there are in the ecosystem today? Where could we make the biggest improvements?
James Tynan: Yeah, so it’s a good question. I think the ecosystem from when I left was just these little… It wasn’t an ecosystem; it was little kind of pools of talent. And it’s now joined together into a network, so I think that’s really great. But I think there’s a lot work to do, in terms of increasing the gravity of that network, such that smart people choose to start or build their careers inside the startup ecosystem rather than in more traditional businesses and professions. I mean, that was why I created the Startmate fellowship. I felt like there was this huge opportunity to create a new rite of passage for smart people in Australia, and to kind of build a bridge from different careers and pathways into the startup ecosystem. So I think that’s probably the biggest area that I think we need to continue to build.
Adam Spencer: Do you have any unpopular opinions about the ecosystem, not necessarily negative ones, but just something that you firmly believe needs to happen or doesn’t need to happen, and no one just seems to be on the same page?
James Tynan: I think that accelerators are generally terrible businesses and generally not a good idea. I think Startmate is an exception. But I think that I remember when I was running Startmate, Australia just seemed to be this land of accelerators. And I remember looking around and saying, “This is unsustainable.” These accelerators only tend to work when they reach critical mass and have enough successful investments; enough equity in those investments that those equity positions can then turn around, usually like six, seven, eight, ten years later, and fund the continued development of the accelerator. And I saw so many of these accelerators popping up everywhere and was just wondering whether whoever was funding them, whether it was government or others, and it was usually government support, whether that support will continue long enough-term to enable those accelerators to be a success.
James Tynan: And the combination of that being unlikely and also a lack of density in some of the areas or locations that some of these accelerators were being set up suggested to me that they weren’t going to last. And sure enough, I think over the past few years, I think there’s been a real narrowing down of accelerators in Australia. And I don’t necessarily think that’s a bad thing. I guess my unpopular opinion… maybe a little bit un-Australian and maybe more of an American opinion… is that we should build for density and increase density rather than trying to build everywhere. I think what we need to do is have really excellent density of our networks wherever we can get it. And then we need to build real excellent on-ramps into that network. So rather than trying to create a network or an ecosystem, startup ecosystem, in every different city or town, what we really need to do is build some really excellent Australian networks and then build excellent on-ramps to those networks so that you can get into them from anywhere. But that we’re not necessarily trying to build them everywhere. If that makes sense.
Adam Spencer: Yeah. Are we talking physical density, like precincts? Yeah. Physical infrastructure? Or is there another way to build density?
James Tynan: I think the physical side is really, really important, but I don’t think you need to build it everywhere, so long as you have great virtual and digital on-ramps so that people can get access. Honestly, what people are looking for is access to other people. So if you’re in a small town in rural New South Wales… And we had this; some really great teams come from rural Victoria, rural New South Wales, to come into Startmate. What you really want is the ability to be exposed to the people who are going to be able to bring you into that community and to back you. I think that is way more important than having whatever, a government sponsored accelerator office or shared office space, in your particular location. And so I think that access to people beats access to a particular space, if that makes sense.
Adam Spencer: What, if any, advice would you give Tiny Green Gorilla James? And two… It might be the same advice; it might be different… But what one piece of advice would you give a brand-new founder today?
James Tynan: Oh, my goodness. I mean, in terms of going back to my first business, it’s almost impossible. We were doing so much wrong that I just wonder whether any one particular piece of advice would capture it. I think the main thing that I would probably advise that version of myself would be to build for scale. That it’s so hard and so all-encompassing to build any type of business that what you really want to do is be super ambitious and to be building something that is your life’s work and that can really go enormous. And I think that what I was doing was very tactical and transactional and proximate, rather than any of those things. And so I’m not sure I really would’ve understood what I was talking about, but I think that that would be great advice for that version of me.
James Tynan: In terms of how do I advise founders, I mean, today, I don’t really think there’s good generic advice. I mean, I think if it’s generic, then it tends to slide off anyway. And I think the ability to help is a function of trust and a function of actually knowing what you’re talking about, both in terms of the area that you’re trying to advise someone, but also just knowing where they’re coming from and what they’re dealing with, which you only really get if you have kind of a trust-based relationship with that person.
James Tynan: So honestly, I think before advising, I’d just really be trying to listen and connect, and I think that’s probably the most important thing because the answers tend to emerge. I think that one of the things I’ve noticed from coaching or helping founders at Startmate is that sometimes the best answers emerge from them. It’s not that I’ve come in with this great piece of advice that they’ve kind of implemented. It’s much more often that through having a conversation where you’re genuinely listening and genuinely surfacing different issues and reflecting back to them some of their own ideas that they’re the ones who come up with the really excellent next step. So that’s my philosophy on advice. I think advice is a little bit of a tricky one.
Adam Spencer: That’s awesome. I love it. Last couple of minutes here. I want you to just talk about something that’s top of mind that you’re thinking about constantly, but keeping in mind that we’re trying to create a documentary here that will, as honestly and holistically, document the entire history of the Australian startup ecosystem. No small task. And I don’t know if we can pull it off. But we want founders, academics, investors, policy-makers, people from all corners of the ecosystem, to listen to this story. Any one of those categories or everybody; what do you want to tell people?
James Tynan: Yeah. Okay. Here’s one thing that is constantly on my mind: I’m often thinking about how Australia is incredibly lucky, but also very good at taking our luck for granted. And in the startup context, the way that I’m thinking about that is that I feel like we as a society have been very, very lucky to have all of these natural resources that have created this economic boom for decades. And that that, one way or another, is going away. And unless we can use that runway that this enormous economic boom and this fantastic raw talent and educated population and switched-on, technologically literate population… Unless we can leverage that into creating the next generation of global winners in terms of companies, we are going to be on the receiving end of the decades to come. Because the world has changed to the point where we don’t need two Googles and we don’t need two Facebooks, and Australia needs to leverage the runway that we’ve got to create some more global winners like Atlassian and Canva and others and really shift the majority of our economic activity into those types of businesses.
James Tynan: And that time is running out to do that. And that alongside that, we are also faced with a massive crisis in the form of climate change, and that there is a similar and even more immediate challenge to use whatever runway we’ve got to create some of the world’s biggest businesses that can ameliorate, that can address, some of the challenges we’re facing on that front. So I’m often just thinking about shrinking runway and our need to aggressively move our innovation, our financial cloud, and our fantastic raw talent into those areas before time runs out.
Adam Spencer: Thank you, James. Is there anything that I haven’t asked you that you would like to talk about in this series?
James Tynan: No. I mean, one thing that I think you probably do want to talk about at some point is the role of Square Peg in helping build this ecosystem. And of course, I wasn’t there for the early days of it, but I do think it’s something that would be good to follow up on in future conversations.
Adam Spencer: Yes, definitely. If you have any recommendations outside of Paul, in case that one slips through…
James Tynan: I’ll put it this way: I will make sure that you can connect with someone who has the early story. And if it’s not Paul, it’ll be somebody.
Adam Spencer: That’s amazing. I have you on record as saying that, by the way.
James Tynan: That’s totally fine. We’ll make that happen.
Adam Spencer: I hope you enjoyed that interview. More interviews are on the way. Follow the podcast wherever you’re listening right now. Stay tuned for more interviews with many, many more amazing people from the Australian startup ecosystem. Thanks for listening and see you next time.