Markus Kahlbetzer explores support opportunities for government and universities
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Markus Kahlbetzer is CEO and founder of BridgeLane, which labels itself an “alternative investment company” and aims to bring innovation to more traditional industries including agriculture and real estate. Markus also founded Tank Stream Labs, a technology focused coworking space and community hub in Sydney. In his conversation with guest host Will Tjo, Markus discusses how he has seen Australia’s startup ecosystem evolve and grow over the last 10+ years, as well as what he sees as opportunities for government and universities to support the startup ecosystem to a greater extent than they do currently.
Tank Stream Labs: https://www.tankstreamlabs.com/
Markus on Twitter: https://twitter.com/mkahlbetzer
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. This episode was conducted by guest host Will Tjo.
Will Tjo: Hi everyone, and welcome back to the Australian Startup Series interviews. Our guest today is Markus Kahlbetzer. Welcome to the show, Markus.
Markus Kahlbetzer: Thanks Will.
Will Tjo: So to start us off, could you introduce yourself and tell us what you’re currently working on?
Markus Kahlbetzer: My name is Markus Kahlbetzer. I’ve been involved in, I guess, the startup ecosystem for well over a decade now, and currently the CEO and founder of BridgeLane, which is the same place I’ve been for the last 13 years.
Will Tjo: What did the ecosystem look like when you first started about 10 years ago?
Markus Kahlbetzer: Yeah, so I mean, I probably started it in 2010 and … well between 2010 and 2012. It was definitely a lot smaller as obviously everybody would know. There were a few co-working communities. One would’ve been Fishburners, BlueChilli as an incubator, a few VCs, Blackbird I think had just gotten started six months prior and a few other VCs that had been around the market for a while, but not many of the current players.
Will Tjo: Yeah. And I’d love to walk through your journey over the last 10 years because I know that you’re also the founder of Tank Stream Labs, was it?
Markus Kahlbetzer: Yes.
Will Tjo: Yeah. Could you tell me a bit about that?
Markus Kahlbetzer: Yeah, so Tank Stream Labs started in 2012, we had just had our 10 year anniversary, and that was on the back of meeting two other founders that I had met through a previous company we had backed named Amaysim, which was a mobile virtual network operator that launched, and then they subsequently went out to found Airtasker, Tim Fung and Jonathan Lui, and we had an empty floor in our building here in Bridge Street and decided that it was a good idea to populate it. We had made a small investment in Airtasker and they had a lot of inquiry about filling up the space from other like-minded individuals who were trying to get their own gigs started. So we turned that into something more formal, and it’s grown now from being a little corner on a small floor to over 8,000 square meters of co-working space with 800 plus desks.
Will Tjo: Wow, that’s amazing. Markus, would you say that you’ve always been an entrepreneur?
Markus Kahlbetzer: Yeah.
Will Tjo: Even towards university days?
Markus Kahlbetzer: Yeah, I think so. Yeah.
Will Tjo: What attracted you to this space?
Markus Kahlbetzer: Well, I’ve been involved in the family business for my entire career, and I think probably just my generational, I guess, age with regard to the rest of my family, I was probably a bit more keen to look at innovation and startups. I’ve always had a bit of a curiosity around it and always keen to prove that I could potentially build something myself. I’ve been not only an investor, which is probably what I’m better known for, but more so as well as a founder and entrepreneur building startups myself, which I’ll get to later on in terms of what are some learnings and what are some main take on points.
Will Tjo: Yeah, absolutely. When you first delved into the ecosystem back in 2010 to 2012, after being in the family business, did you find that there was a lot of support structures that you were able to rely on and in essence penetrate the ecosystem without much difficulty?
Markus Kahlbetzer: Well, I think it was so small, it didn’t take much to get involved, I mean everybody was after funding essentially. There weren’t many investors, and there were some structures that were in place, which are still in place today, and that probably said namely the ESVCLP structure, which is capital gains tax concession. I think many people have talked about that, especially on your podcast as well. So that was around R&D tax concessions, which we’re giving you back almost half of the money that you’d invested in R&D back. So there were some government structures which were financial and helped startups get off the ground, but really it was funding and there was a lack of funding from, I guess, professional investors that was always still relying on family and friends. And I guess there’s fairly low barriers to entry in that space, and it didn’t take long to enter by meeting a few individuals and networking and was able to get yourself launched relatively quickly as an investor.
Will Tjo: Yeah. Do you think there is still an absence of funding even today?
Markus Kahlbetzer: Yeah, I definitely think so. And I think it’s more a function that we’ve grown quite considerably over the last decade, and obviously we’re in a very different position to where we were, and it’s great to see so many different success stories coming, different sizes, different I guess sub sectors of the innovation space, but fundamentally, I think that they still exist today and the funding gaps at the early stage to support the ecosystem is still there. Whilst we have plenty of funding later stage through bigger investors, bigger VC funds, which have grown as well as institutional capital, which is starting to enter the market, we still have this gap potentially at the back as a proportion of total funding early stage seed and Series A is smaller today proportionally to the total funding in the market.
Will Tjo: Yeah, it sounds like it was never a startup problem or a founder problem because we have an abundance of those, as you mentioned, the growth over the last 10 years. But why hasn’t the funding matched in tandem? Why has Australia not provided that funding?
Markus Kahlbetzer: I mean, I think the funding has … undeniable that it’s grown extremely quickly, and now I think there’s lots of examples, but I just fundamentally think as investors continue to make gains and that they are trying to invest across the full spectrum from seed and even pre-seed all the way to late stage rounds and growth rounds. But fundamentally, I think the quantum of money is still going to those later stages more from the support from, again, institutional and professional pension funds or future funds, so forth are investing in those later stages, even from, I guess international VCs as well. They’re not participating early on, and I think we need more support at that earlier stage so that we can continue to prop it up and continue to have more and more positive success stories coming through the market.
Will Tjo: Yeah, I hear you. It’s later stage startups that are essentially taking the line share of the funding available
Markus Kahlbetzer: As a proportion, yeah. Absolute terms, both sectors have grown quite a bit.
Will Tjo: Has it been what you expected to be the growth over the last 10 years?
Markus Kahlbetzer: No, probably not. I mean, I was just looking at our pitch deck for Tank Stream Ventures Fund one, which was launched in 2014, and we had in there that some of the success stories were Seek and BigCommerce and Xero had IPOed and a few others, and Atlassian was about to do an IPO in NASDAQ and it had a 1 billion plus evaluation to it, so that was 2014. If we look back to say, pre COVID and even the last two years through COVID, I would’ve never thought that those companies themselves would’ve evolved, but have obviously a huge quantum of other players that weren’t even really being named six to eight years ago that are now bigger than those, and some of the biggest startups in the world in terms of being unicorns and Canva being probably one of the largest unlisted startups in the world. Well, unlisted tech companies in the world.
Will Tjo: Yeah, that’s absolutely amazing. I mean, the growth that we’ve experienced, I think it’s really funny-
Markus Kahlbetzer: And it’s less than 10 years ago, right? It’s six, eight years ago.
Will Tjo: Yeah, it feels like an eternity ago, but at the same time, it feels so recent.
Markus Kahlbetzer: That’s right. That’s right.
Will Tjo: Shifting gears a little bit, what would you say that we do really well compared to other geographies?
Markus Kahlbetzer: Yeah, I think that’s hard. I mean, we’ve always picked on ourselves in terms of what we don’t do and how we should continue to improve ourselves to continue to be better. But generally, I mean, I do think those support structures that we have in place from the capital gains tax incentives on the ESVC is always something that when we spoke to foreigners, they were quite surprised that we had that in place. And I think that’s been great to see and see it continue to be important, at least to the venture capital environment. There’s a lot more things that can be done, but I also think that just the drive, the Australian drive to want to succeed.
Markus Kahlbetzer: And I think early on, we talked about 10 years ago, we used to say that there was a real, I guess, animosity towards failure and people didn’t come forward with it and so much so forth, but I think we’ve been able to evolve as an ecosystem and as founders to be able to adapt, take those things in our stride and continue to evolve, I guess, as a society and as a culture. So now we’re not so shy about giving it a go.
Will Tjo: The role of government seems to be a theme that regularly pops up with other founders that we’ve interviewed. It seems like, from what I’m hearing, that you are really, I guess, happy with the ESVCLP structures. Is there anything else that you believe the government should be doing from a policy perspective, or do you think that their support is sufficient?
Markus Kahlbetzer: No, no. I definitely think there should be more done, and I think it has been mentioned as well on your podcast that I think the capital gains incentives have been great, and whilst they are great, there’s a lot of individuals out there who are amazing investors and maybe not amazing fundraisers, but they can do wonders for startups if they are able to get in early. And I think an incentive is to let these people who are taking significant financial risks and even time to be able to get capital gains concessions on those investments. Whilst that may not help early stage venture funds in terms of having other people being able to compete … well, not invest in their fund because they don’t need to anymore from a capital gains point of view, they would be able to provide a lot of expertise and I guess solidify the mentorship or advice that a lot of these investors tend to give to startups when they’re seeking those very early rounds. So basically more support from the individual investors.
Will Tjo: Do you have any unpopular opinions about our ecosystem? Something you believe is true, but others aren’t on the same page?
Markus Kahlbetzer: I probably have to say, yeah, this is one, maybe with a caveat on it, but I think the ASX has actually done a pretty good job of trying to get tech startups exited and to the market. Having said that, I think the lines share, the ones that you do see go through probably aren’t ready and potentially hurt the ability for other startups to exit or use the ASX and obviously the public market to access equity. I think some of them just aren’t ready and tend to burn through a lot of mum and dad’s money and make poor investment choices when the reality is the ASX could be a bit more of a guardian on that. So that’s just from the exit point of view.
Markus Kahlbetzer: I think a lot of people tend to think that you need to go to the US and pretty much find either investors to continue to back you over there, which it’s no longer the case. You can find plenty of investment here, whether … in case you want to stay private and so forth. But if there is the opportunity to make an exit as a founder or as investors or access a different market, I think the ASX has done a relatively good job.
Will Tjo: Yeah. Could you tell me more about what you meant by the ASX acting more of a guardian?
Markus Kahlbetzer: Oh, well, I think they need to have a bit more regulation in terms of what’s able to be listed or what should be listed. They do have a lot of obviously thresholds that companies need to cross from being a widely held register to minimum requirements from a financial point of view. But I think some of the businesses just … those are things that you can get around, and I think some of the businesses might be flawed or just not ripe enough to take it to that point. The last thing you want to do is really at least as a small cap or micro-cap, and once you get to that stage, it’s pretty to come back. So I think we could be setting the companies up or not accepting them and telling them to stay private longer to be able to achieve a positive outcome when they do get there.
Will Tjo: Yeah, absolutely. I’m not sure if this is the right take on this because for context, one of the challenges that I hear other entrepreneurs mention on this podcast is when our founders decide to exit overseas and sell to overseas companies, that means the talent pool, the resources and so on, just go overseas. Do you think exiting via the ASX could be a potential solution to that?
Markus Kahlbetzer: Yeah, I think so. I mean, I’m not so sure that when they do exit overseas that the talent pool necessarily leaves. There’s plenty of examples where the talent pool has partially stayed here. If not, maybe they’ve grown whilst they’ve sought extra funding or exited, and that extra funding has allowed them to grow their teams, and maybe they’ve grown their teams internationally. But I guess the support that’s provided today in Australia from our education sector in terms of the quality of it, as well as people wanting to stay here has probably changed, and I think it’s in a much better position. But yeah, definitely. I mean, I think if companies can fund themselves here through the ASX or through larger funds or international funds looking towards Australia or pension funds here supporting us, then I think absolutely that’ll keep everybody here for longer and continue to evolve that ecosystem and those people that stay here and hold senior jobs in companies that are growing and becoming bigger, then they come back and it turns into, I guess, the full circle.
Will Tjo: Yeah, absolutely. I like what you mentioned about how our talent pool doesn’t necessarily go overseas just because we do have quite a good magnet in keeping people here, whether it be lifestyle or education.
Markus Kahlbetzer: That’s right. That’s right. I mean, it’s pretty hard to find somebody that says they don’t like living in Sydney or Melbourne or Brisbane or wherever they are.
Will Tjo: Yeah. So Markus, as you know, what we’re trying to do in this podcast is to document as historically as possible the history of our ecosystem just so that we can look to the future and we’re aiming to reach all corners from founders, investors, policy makers and academics. Is there anything we haven’t discussed today that is always top of mind for you that you want to bring to their attention?
Markus Kahlbetzer: Well, I’m not sure what’s been talked about or not before, but I think again, this extra support from all kind of facets of the ecosystem. So that’s, government, education providers, so universities and the private sector being VCs and larger startups. And I think that all needs to be tied together a bit better. And I think maybe universities are the one that’s missing in that link to the degree when you compare it with the US and maybe what Stanford has meant to Silicon Valley and other universities in Australia in the US to their, I guess, sub ecosystems. That’s probably the main thing.
Markus Kahlbetzer: From advice, I guess from my point of view is I think we’ve gotten to the point where we have a lot of founders who are becoming investors, founders who have succeeded, founders who have failed, investors who have succeeded, investors who have failed. And I think that’s extremely important for us to continue to evolve. And I think whilst failing is not something you can congratulate people for, it’s good to have. And I think we’re now at that point where we have a lot more diversity within our ecosystem, and it’s really, I guess, healthy. It’s healthy and provides so many more experiences, I mean we all know, we learn much more through experiences than through education, and I think that’s critical. No, I’m not sure if I’ve answered that one correctly, but I think that’s pretty much it.
Will Tjo: No, I like it. My question, when you described having universities being tied together, I suppose what you’re referring to there is collaboration between universities and startups right?
Markus Kahlbetzer: Absolutely. Yeah.
Will Tjo: Why do universities not collaborate as much with startups compared to, as you mentioned with the United States, with Stanford University?
Markus Kahlbetzer: That’s a good question. I think part of it’s they don’t move fast. We don’t have as many universities. They’re definitely large and they’re large institutions. And just as we were talking now, I mean, I guess this whole, we keep talking to when will the ecosystems start and so forth. I mean, I think it’s the next wave of the ecosystem that we’ve been talking about just now. I mean more in terms of web 0.2 rather than there’s always been innovation, but I think this web 2 or say 2014 to now, 2012, 2014 to now, the universities just haven’t been able to move that fast and to be able to take stock of where they could be helping more and so forth. And they’re still quite fragmented. Different faculties don’t necessarily talk to each other, and it’s up to the university to pull all that together and then come back to the market somehow to help.
Markus Kahlbetzer: But I think there are changes that are taking place, and I think there’s some larger venture investors that are trying to close that gap as well through programs that they’re trying to facilitate. And I think that’s just a matter of time rather than an error or anything on behalf of anybody.
Will Tjo: Yeah, absolutely. Lastly, Markus, if a brand new founder or entrepreneur came to you, given all your wins, your mistakes and your experience, what would you tell them to increase their chances of success?
Markus Kahlbetzer: Yeah, I mean, I think it’s what I mentioned earlier. I mean, I’ve been a founder, I have started startups myself and been an investor as well. And I’ve had failures on both and more failures as a founder. And I think just being able to live through those experiences and realize that they’re all learnings is important. But then I also think focus and I think trying to really nut down what you want to achieve is extremely important and be determined and motivated on that goal rather than trying to juggle many things. Sometimes I say that I’m a jack of all, master of none, but I think when you tend to focus on trying to master something and be really good at it, then you have obviously much greater chances of success. So I’d say those two things. One is learn from your experiences and whether they’re positive or negative, that’s fine. And really focus when you think you’ve got something you want to do to be determined and motivated and really nut it out.
Will Tjo: Yeah. I love that. Markus, it’s been so good to have you on the show today. Thank you so much for your time.
Markus Kahlbetzer: Thanks a lot Will.
Will Tjo: Where could the audience go if they wanted to learn more and connect with you?
Markus Kahlbetzer: They could go on Twitter and Kahlbetzer is my handle there. LinkedIn and BridgeLane has a website, bridgelane.com.au. Plenty of information on there.
Will Tjo: And what’s next for you and your journey?
Markus Kahlbetzer: So right now we’re doing a new fund. So it’s, I guess our BridgeLane Ventures Fund III, which is a combination of BridgeLane and Tank Stream Ventures, which was our subsidiary. So we’re bringing that all under one name to make it a bit easier to understand, and that’s where we’re going to be headed for the rest of the year.
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.