Startup Victoria: supporting successful founders

I’ve been attending Startup Victoria’s meetups for more than 5 years, and have been a paid-up member for most of that time. The event formats and the key personalities have changed over the years, but the mission has always been to help create more founders and better founders, and to support the broader startup ecosystem. At last month’s AGM and panel discussion, the Board announced that the focus has now shifted to “helping founders to succeed”. A subtle change, but an indication that the local startup scene is finally maturing.

As part of this renewed focus, Startup Vic wants more corporates to engage with local startups – as suppliers, strategic partners and potential target acquisitions. Given the challenges startups face in meeting enterprise procurement processes (especially in the public sector…), this will not be easy. The path to engagement with startups has to be considerably de-risked before purchasing managers will get the sign-off to onboard new vendors.

That challenge aside, another observation from the panel discussion of founders and advisors was that Startup Vic needs to connect newer founders with more experienced founders, those who have already taken a startup to scale up to exit. Plus, as a leadership organisation, Startup Vic recognises that more needs to be done to highlight local success stories. That doesn’t just mean the startup community celebrating itself – it means spreading the word publicly and getting more media airtime for businesses that are building sustainable growth in the new economy.

One of the panelists asserted that “some of our politicians would rather have their photo taken with the winner of the Melbourne Cup, than be seen with the founders of Atlassian”. A bit harsh, perhaps – but I know that they mean. Aligning themselves with sporting heroes probably does more for their public profile, compared to hanging out with our key tech entrepreneurs in order to learn what government could do to foster more startup success.

To be fair to the Victorian Government, it has been trying to implement an innovation strategy that brings participants together – founders, investors, incubators, accelerators, etc. This has resulted in: the Victorian Innovation Hub (plus a number of sector-specific tech centres); LaunchVic (to provide grants to projects designed to foster the startup community); and engagement with overseas VC funds and offshore tech companies (to position Victoria as an investment destination, and as a national, regional or even global HQ).

Meanwhile, the panel also debated whether too many local founders are more interested in building a “lifestyle business” for themselves, rather than creating say, a $250m company. This apparent lack of ambition was seen as something of a local phenomena, partly linked to Melbourne’s status as one of the world’s most livable cities, partly linked to a generally benign Australian economy (but with a growing number of stress points), and the usual cultural factors such as the tall poppy syndrome. There are also some structural challenges in the economy (restrictive trade practices, a lack of competition in highly concentrated markets, continued economic uncertainty post-mining boom, delays in rolling out the NBN, a potential credit squeeze…), plus a growing distrust of public institutions and major corporations. This disenchantment and disengagement is not helped by a lack of strong leadership in government and in business – so why would anyone with any sense want to get involved, and hence the desire to take care of one’s own needs first.

Finally, emphasizing the need to re-think the founder mindset and to provide a better foundation for building the businesses of the future, Startup Vic is also committed to both the professional and personal development of founders.

Next week: Blipverts vs the Attention Economy

 

 

Talking Innovation with Dr Kate Cornick, CEO of LaunchVic

As a nice segue to last week’s blog on Techstars, I was fortunate to hear Dr Kate Cornick speak, just before the latest LaunchVic grants were announced. Organised by Innovation Bay, hosted by Deloitte, and facilitated by Ian Gardiner, the fireside chat plus Q&A was a useful insight on a key part of the Victorian Government’s innovation strategy.

launchviclogo innovationbay-feat-800x500At the outset, Dr Cornick stressed that LaunchVic is not an investment vehicle, and it doesn’t fund individual startups. Rather it seeks to support initiatives that help grow the local startup eco-system. (See also my blog on the consultation process that informed LaunchVic’s formation.)

Commenting on why Victoria (and Australia) has the potential to become a world-class centre for innovation, Dr Cornick pointed to a number of factors:

  • A collaborative culture
  • Positive economic conditions (comparatively speaking)
  • Governments (mostly) open to innovation
  • Strong research base

However, a few of the obstacles in our way include:

  • The notorious tall poppy syndrome, whereby Australians are suspicious, sceptical and even scathing of local success – except when it comes to sport and entertainment!
  • An inability to scale or capitalise on academic research
  • Insufficient entrepreneurial skills and experience to “get scrappy”
  • Lack of exposure for highly successful startups (c.$20m market cap) that can help attract more investment

From a startup perspective, Australia also has the wrong type of risk capital: institutional investors are more attuned to placing large bets on speculative mining assets, typically funded through public listings, and with very different financial profiles. (Or they prefer to invest in things they can see and touch – property, utilities, infrastructure, banks.)

So there is still a huge gap in investor education on startups and their requirements for early-stage funding. Part of LaunchVic’s remit is to market the local startup community, promote the success stories, and foster the right conditions to connect capital with ideas and innovation. After all, Australia does have one of the largest pool of pension fund assets in the world, and that money has to be put to work in creating economic growth opportunities.

As I have blogged before, we still see the “expensive boomerang”: Australian asset managers investing in Silicon Valley VCs, who then invest in Australian startups. Although when I raised a question about the investment preferences of our fund managers, Ian Gardiner did point out that a few enlightened institutions have invested in Australian VC funds such as SquarePeg Capital, H2 Ventures and Reinventure.

Dr Cornick also provided a reality check on startups, and added a note of caution to would-be founders:

First, it tends to be an over-glamourised sector. For one thing, founders under-estimate the relentless grind in making their business a success. And while eating pizza and pot noodles might sound like a lifestyle choice, it’s more of an economic necessity. Thus, it’s not for everyone (and not everyone should or needs to build a startup…), so aspiring entrepreneurs would be well-advised to do their homework.

Second, the success of any startup community will be reflected by industry demand. “Build it and they will come” is not a viable strategy. And I know from talking to those within the Victorian Government that unlike their inter-state counterparts, they are not willing (or able) to fund or invest in specific startups, nor in specific ventures such as a FinTech hub. Their position is that industry needs to put its money where its mouth is, and as and when that happens, the Government will look to see what support it can provide to foster and nurture such initiatives – particularly when it comes to facilitating between parties or filling in any gaps.

Third, don’t expect too many more unicorns, and don’t bank on coming up with simple but unique ideas that will conquer the world – meaning, new businesses like Facebook, Uber and Pinterest will be few and far between. Instead, drawing on her earlier comments about research, Dr Cornick predicts that it will be “back to the 90’s”, where innovation will come from “research-based, deep-tech solutions”.

If that’s the case, then the LaunchVic agenda (for the remaining 3 years of its current 4 year lifespan) will include:

  • Getting Victoria on the map, and positioning it as a global innovation hub
  • Raising the bar by educating startups and investors
  • Bringing more diversity to the startup sector, by providing greater access, striking better gender balance, and building a stronger entrepreneurial culture
  • Introducing a more transparent and interactive consultation process
  • Continuing to support the best accelerator programs that focus on startups
  • Making more frequent and smaller funding rounds, each with a specific focus

Asked what areas of innovation Victoria will be famous for, Dr Cornick’s number one pick was Healthcare, pointing to the strong research base coming out of both the Monash and Melbourne University medical precincts. Also in the running were Agriculture, and possibly Cyber-security. (Separately, there is a list of priority industries where the Government sees growth, employment and investment opportunities.)

If one of the biggest hurdles is commercializing research, Dr Cornick suggested that Universities have to re-think current IP practices, including ownership and licensing models, developing better career options in research, and doing more to re-calibrate the effort/reward equation in building research assets compared to building companies and commercial assets.

Finally, Dr Cornick offered an interesting metaphor to describe the current state of Victoria’s innovation potential:

“We have everything we need for baking a cake, but the missing ingredient is the baking powder to make it rise.”

Next week: Gigster is coming to town….