Australia’s Technology Prowess: The Internet and Beyond

 

Asher Moses has written a wonderfully inspirational piece in the Sydney Morning Herald regarding the rise and rise of Australian entrepreneurial talent. In it he explores how well some of the Internet-focused startups born in Australia are doing in sourcing Silicon Valley venture capital.

It is a great story and touches on much of my experience over the past 15 years. Australia and, closer to home – Sydney, has an incredible wealth of entrepreneurs. But in Asher’s story there is also a hint at the dark side. Let me paint the picture in three ways:

1. Financial arrogance

While I was living in Silicon Valley I assisted a startup to raise its first round of funding from a tier one VC firm, in two weeks and right in the middle of the GFC. Fast forward to today and as Asher has eruditely pointed out, tier one VC’s from Sandhill Road are currently falling over themselves to get the attention of Australia web startups.

Against this backdrop, picture me meeting with a senior executive at one of Australia’s most successful investment banks in the past fortnight. In that meeting I was told how incredibly hard it is to find funding for technology businesses, how no-one is investing in this space in Australia and blah blah. Can you see the disconnect here?

I personally believe Australian ‘investors’ have a heightened level of financial arrogance driven by an absolute ignorance of technology and also tainted in their financial risk profiling by resource-based investing (mining etc).

As long as this position remains I can fully understand why Australian entrepreneurs are US-centric. For Australia though this amounts to a major loss as we are not only losing talent in droves, but also access to ROI as our entrepreneurs grow great businesses with other people’s money!

2. Technological bias

For as long as I can remember Australian government granting schemes and venture firms have had a bias against Internet-related companies. They have preferred to back biotech businesses and other science-heavy companies that are notoriously hard to scale globally and which usually have a hard time getting international attention due to the tyranny of distance.

It is heartening to see this position starting to shift and that web-focused ventures are in fact now getting more access to schemes like Commercialisation Australia.

3. Web-centrism

While I am ecstatic about Australia’s well deserved recognition (finally) for great entrepreneurial talent, I am somewhat concerned that we get seen as only producing web-centric talent and intellectual property.

The Australian Federal government pours some $9.8 billion into public research and there is incredible technology floating around within the countries 43 universities and even more public research institutes (by contrast the US only has 41 universities). However, most of this never sees the light of day. It gets locked up in over-protective tech transfer quagmires and/or stuck in the valley of death between research proof of principle and commercial proof of concept due to a massive lack of funding for this gap.

In contrast, in the UK companies like Imperial Innovations and the IP Group, and Allied Minds in the US, are absolutely going gangbusters building businesses around research intensive technologies and assisting IP through the valley of death.

Australia desperately needs a similar business and it is on my to do list for 2012 to see that one forms. We need to not only continue to support our web-centric entrepreneurs, but also inspire generations of Australians to become tech entrepreneurs in areas that can have major global impact such as energy and health!

 

Fewer, Deeper: Utah Points The Way To Successful Technology Commercialization

I’ve been tracking Utah’s meteoric rise up the technology commercialisation charts for some time now. In 2010 Utah State University reached the number 1 spot in terms of tech startups created. MIT came in at 2nd spot.

But it’s not all a numbers game. According to Robert Behunin, their VP of Commercialization & Regional Development, their focus is “fewer, deeper“.

Full-scale commercialisation efforts at USU may result in fewer companies spun-off from university- developed technologies, but those companies to come out of USU have industry support, by way of partnerships, and capital raised.

He says they seek good science and good solutions that have a relevant place in the market. It’s a program in which everybody wins…

They are currently pursuing close to 60 active commercialisation projects and have a pipeline of 40 earlier stage projects.

Very impressive!

The key take out for me is that they are focused. Rather than working on a myriad of low impact activities in a process heavy, reactively-driven way, they are focused on fewer, higher impact projects that can link them much closer together with the demands of industry in a symbiotic partnership from which all players can create and extract maximum value.

 

 

Top Four Factors Driving Innovation: For Sydney From Jerusalem, via Auckland

Professor Sir Peter Gluckman, the Chief Science Advisor to the New Zealand Prime Minister, gave a talk on Monday, 5th December titled Innovation through science: the pathway to economic prosperity–a conversation with Auckland.

Much of what he has to say about Auckland could very easily be transposed and repeated largely and boldly in capital letters about Sydney.

His talk is about innovation, of the science and knowledge and based variety,  and how it can be used to boost the economy of a particular city or region through the creation of a well-developed ecosystem.

He defines innovation as being about using knowledge, research and experimental data to generate a product or service which has impact, generally by way of producing something to sell.

He points out that there are two myths that need to be overcome when discussing and developing a thorough understanding of innovation.

The first myth is that innovation is achieved by individuals working as backyard inventors. He rightly points out that the bulk of innovation emanates from multidisciplinary interactions. The reason for this is that innovation is first and foremost about doing things differently and as such requires a major shift from reductionist linear thinking. Such shifts mostly take place when disciplinary boundaries are crossed.

He points out that one of the attractions of big science projects is that they can become the nucleus and focal point for disparate disciplines to work together, leading to great new ideas. He uses the World Wide Web and wireless broadband as examples of incredible innovations that came out of such big science projects.

The second myth is that innovation takes place within a linear process moving in an orderly fashion from basic research to applied research to development to sales that is predictable in direction and time and readily divisible into these four categories. He very correctly points out that in science-based innovation, at least half the products that are developed and sold originate in research in an area of activity well away from that that started it.

He points out that science-based innovation requires at least two major components–firstly a sufficiency of ideas flow and secondly an ecosystem that’s allows the market and scientist to get close together. Statistically, he states that the Israelis believe that they need to evaluate at least 100 ideas that are thought to be of value in order to see one that actually justifies investment. As he says, this gives you an idea of the ecosystem we have to build.

And this is where we can start transposing because he points out that the Israelis don’t have any more researchers than New Zealand, just a better linked up system. The same can be said about Australia.

There are, of course, other components required to create a complete innovation ecosystem, as he points out these include access to capital, to professional expertise in capital raising, in IP management, experts in dealing with regulatory affairs and skills in managing an innovation company–as these are markedly different to the skills required to run a property investment company or, equally relevant to the Australian context, a mining, professional services or agricultural company.

He pauses for a moment to reflect on how New Zealand came to be in the position that it is in. He feels that their failure to move as far as other small countries in developing a knowledge economy is  partly a function of their cultural history. Australia has been called the lucky country and he could very well have been speaking directly about this country, as opposed to New Zealand, when he states: we have been a lucky country, able to live off of farming. Of course, in Australia we would add mining to this picture.

He feels that the lack of a sense of crisis and urgency led to an undervaluation of the role of intellectual activity and science, and contrasts this to countries like Israel and Singapore where a real sense of crisis led them to invest heavily in knowledge and science and science-based innovation. They had to use the only natural resource they really had–the combined intellectual horsepower of their well-educated populations.

We do not yet have a sense of acute crisis but things are starting to change. We cannot get rich by carrying on doing what we do now, and yet there are enormous demands for a better social system, for higher wages, for a cleaner environment. Clearly we have to be richer to achieve these things. And what is our unexploited asset–the very asset other small countries have recognised–we have a good education system and we have clever people, we have a stable society, we are corruption free–we are good place from which to make new knowledge, protect it, exploit it and export it. Even if we were in better shape than we are, there is another reason to invest more in the knowledge economy–we need to diversify, since diversified economies are more robust.

Ditto Australia.

He repeatedly used the term ecosystem in his talk. He did this intentionally. In Australia, as in his country, they have a habit of believing in single interventions rather than integrated systemwide approaches.  He notes that in every country that they looked at as a potential comparator and which has done well, that country has both recognised and acted on multiple points across the whole system simultaneously.

This is a point I have repeatedly made about Australia as well. We have had some great programs over the years but these have been provided from the stance of a single intervention strategy rather than viewing the ecosystem as the complex system that it is.

MULTI-LAYERED INNOVATION ECOSYSTEMS

This part of his talk is music to my ears:

Key to all of what I have been saying is a need to have a multi-layered innovation ecosystem. It has many components. It has to have local government committed to promoting, encouraging and if necessary, part-financing an “innovation city”. It needs the development of technology parks clustering academia and entrepreneurs along with support services. It needs institutions–hospitals, universities, technical institutes–to cooperate rather than compete. It needs venture capital. It needs a commitment to work together and to attract the best and brightest to want to live in Auckland (transpose SYDNEY). We cannot leave it all to central government even though their role is critical–the evidence is clear, local government must play a role.

 We have several academic precincts and we need to work out how to integrate and use each to maximal advantage without destroying their individuality.

WHAT WILL DRIVE MORE INNOVATION?

Four things matter, according to the Israeli experts he has spoken to, in driving more innovation. These are education, basic research, a holistic approach and a risk-taking attitude.

He goes on to talk about the Israeli model for incubators that are owned jointly between investors and the local authority or between the local authority and the local university. He points out that this model is based on a high ideas flow, and aggressive culling, high levels of investment and international management and technology input from the start. New ventures are supported with loans, not grants, to encourage entrepreneurial activity – written off if the product does not make it. Auckland has to work as “Auckland Inc.” to attract more risk capital to Auckland. It is uniquely placed to create an environment for this type of innovation.

Again, ditto Sydney.

KEEPING IT LOCAL

Much like Sydney, and the rest of Australia for that matter,  Auckland suffers from a major brain drain. All too often  we/they lose great entrepreneurs and scientists to other parts of the world. Recognizing this he highlights that while it’s one thing to build knowledge-based businesses, it’s quite another to keep them locally. Essential to doing that is to create an environment that keeps the R&D function in our city.

We have to build a city and a country that really values knowledge and science and entrepreneurship. We need technology parks, we need an intertwining of researchers, in the public and private sector, we need a world-class university and a vibrant knowledge-based ecosystem.

Spot on, and ditto Sydney.

The investment needed is partly fiscal, but so much more of it is psychological and motivational. Let us do the things that enable Auckland to brand itself as a city of innovation; a smart city in a smart nation.

Well said, Sir Peter!

At one point Sydney seemed to be heading in the right direction. We had a focus on brand Sydney, but I think we’ve lost the way – let’s focus laser-like on Sydney Inc or we will soon be shown up by our southerly neighbours!

 

Living in a Post-Geographical World: Address is Approximate (Hat Tip to Steve Jobs)

My family has been travelling since the 1670’s when two Du Toit brothers left France as part of the great French Huguenot movement. They went to Holland, which had recently begun colonising the tip of Africa. Recognising opportunity, they led a movement of settlers and arrived in Cape Town in 1676. The result was a wonderfully rich cultural mix (and some great wines) in the Franschoek region of the western cape of South Africa.

Fast forward a few hundred years and we dispersed to the UK and Australia when crime became all too pervasive. I’ve since also lived in the United States, and regard Sydney and Palo Alto as the closest things to home.

Like many others who have had similar experiences I consider myself post-geographical. It’s not where I am physically that matters, but what my mindset is, who I am interacting with and what I am aiming to achieve.

That’s why this video by Tom Jenkins resonates so much with me.

I love the vision he portrays and his message also talks to what Steve Jobs said many years ago in an interview, namely that the world we live in is made up of man-made constructs and constraints. That the people who created them are no smarter than you are and once you realise this you need never be constrained by them – create your own world, wherever you are!

Address Is Approximate from The Theory on Vimeo.