Silicon Valley Beckons, But (Some) Aussies Prefer A Blended Approach

One of the most balanced articles I’ve read on the “should I stay, should I go – to Silicon Valley” debate was published today in Business Review Weekly.

Well done Jess Gardner – solid research.

This part of her article resonates most for me and it’s solid Cannon-Brookes advice:

Atlassian’s path shows it is possible to build a successful global operation from scratch in Australia but Cannon-Brookes says the company has also benefited from a blended approach. He has spent about two years in total, out of the past six, at Atlassian’s San Francisco digs (the company also has an office in The Netherlands and developers in Poland).

“I would definitely tell them [start-up founders] to spend time in the US,” he says. “It doesn’t need to be a pitchforks at 20 paces kind of a thing. We definitely gain as entrepreneurs, as a business, a tonne from having spent a lot of time there .?.?. I’ve learned a lot but that doesn’t mean that I don’t bring those learnings back and apply them down here and vice versa.”

Entrepreneurs: Be inspired, travel and do great things!

His point is that in the early stages, entrepreneurs shouldn’t regard the decision as a prerequisite step on the start-up path.

ASIC Pours Cold Water On Crowdfunding

Australia faces a particularly acute dilemma. Entrepreneurial fervour is at its zenith. However, sources of funding for such activities remain in short supply.

In other parts of the world, solutions are being found. Crowdfunding is performing a critical role in democratising funding for interesting, creative products that may have had difficulty getting off the ground through more traditional forms of financing such as bank loans, angels or venture capital. The United States is embracing this by passing legislation to empower such activities.

But in Australia what do the regulators do? They issue a warning that crowdfunding could lead to fines and jail time?

Brilliant marketing move! If crowdfunding wasn’t already on every Australia entrepreneur’s mind before, it sure is now.

Social Business School: Harvard Points The Way

Social business, the birth of a new industry? I called it in September 2009 and since then social business has risen like a star. Sure, it has a long way to go before it becomes pervasive, but watching Harvard Business School transform itself into a Social Business School is surely a major milestone on the industry’s journey.

If you’ve read my submission to the Australian Federal Government on Entrepreneurism and Venture Capital, you’ll know I’m a huge fan of immersion-style, experiential learning. One of my key tenets is to call for the establishment of a Conservatorium of Entrepreneurship. Harvard is already moving down this path, as this article in Fast Company highlights. Well worth a read.

WeTeachMe: A Case Study In Pure Unadulterated Hustle

I often, make that very often, get approached by startup founders. I can divide them into two camps. Those who are true entrepreneurs and intuitively know how to hustle and those who are wannabe entrepreneurs.
The first camp understand that they have limited resources and find a way to routinely make things happen somehow, on the smell of an oily rag, or by pulling the proverbial rabbit out of the hat. These kinds of true entrepreneur I am always happy to hunker down with and find ways to work with them.
The other camp are usually stuck on a bitch train about how hard it is to get funding, how but for the fact that they haven’t got any capital they are going to grow this killer business. They then look at me dolefully expecting a handout. The conversation usually stops right there.
I want to illustrate what I mean by profiling a group of startup founders who are truly showing entrepreneurial gutspa and an ability to hustle themselves to success.
Exactly twelve months ago, WeTeachMe, a marketplace for real life classes, came out of Australia’s first Launch48 event.
Now a noted graduate of the Launch48 program, WeTeachMe’s quick rise from unknown to one of Australia’s most written about startups in 2011 is an interesting tale in the art of hustling by its four founders; Martin Kemka, Demi Markogiannaki, Cheng Zhu and Kym Huynh.
How WeTeachMe is generating seed capital for their startup
WeTeachMe contacted me after pulling off a sold-out event called Melbourne Startup and Business Speed Teaching.
The team, in between giving away new iPad 3s and Apple TVs (obtained through sponsorships), sold enough tickets to generate enough seed capital to keep their startup alive.
Here’s how one of the founders Kym Huynh describes it:

The entire team lived off our savings and maxed out our credit cards until we realized that our strong networks in Australia could be monetized in a big way. By taking advantage of the exploding startup scene in Australia, the hunger for startup education, and the increasing desire for a more connected startup community, the team organized a startup and business education event that doubled as a valuable networking opportunity for not only startups in Melbourne, but also startup-centric institutions that wanted to connect with each other.

 

Through key sponsorships with Optus, Ninefold, esc and York Butter Factory, WeTeachMe created an event that was not only a valuable marketing catalyst for itself, its sponsors and visitors, but also a way to net WeTeachMe the funds to keep them alive.
With demand now for the same event in multiple cities, WeTeachMe is working on systemizing its event-management operations to generate a constant flow of capital whilst it works on building up it’s platform of knowledge-transfer.
Lessons learned
According to Martin Kemka, one of the most valuable lessons learned was always be daring enough to go for the pure unadulterated hustle.
It’s one thing to say, “Where there is a will, there is a way,” but another thing to go out there and put it into practice. The team didn’t want to be another startup that complains about how difficult it is to raise capital. We wanted to take matters into our own hands and do something about it. The need to stay alive was also very motivating.
According to Demi Markogiannaki:
We’re a strong team, and not only do we know what we have been capable of doing in the past, we know what we can do in the future, and to what extent we are willing to go to make things happen.
I love their story and look forward to bringing you more of their tales of entrepreneurial hustle!

The Science of Startups and the Symbiosis between Entrepreneurship and Venture Capital

It’s been a really interesting week in Sydney. On Friday afternoon the latest cohort of Startmate startups strutted their stuff in a demo day to a capacity crowd at DLA Piper’s offices in the city.

Yesterday, Eric Ries spoke to another, much larger, audience on his Lean Startup theories. The auditorium at the Australian Technology Park hasn’t buzzed like that since the heady days of 1999!

Eric’s thesis that we should be measuring and managing startups in a much more sophisticated way totally resonates with me. I have been calling for a science of startups for a while now and in fact included this as one of my main points in a submission I put forward to the Australian Federal Government earlier this week. They had put out an Issues Paper calling for submissions (I understand this was targeted at certain people and organisations) on the state of entrepreneurship and venture capital in the country.

My submission (you can read the entire thing here) spoke to the establishment of an Australian Centre for Entrepreneurship & Venture Capital (ACEVC). This Centre will include an Entrepreneurship Conservatory that is focused on developing a results-based set of training programs for upskilling entrepreneurs using a real time, interactive pedagogy that will form the basis for a ‘science of startups’.

I also call for a VC College that can provide real life experiential training on the job for successive generations of Australian venture capitalists – an initiative designed to build up a true venture capital industry.

I believe that ACEVC is transportable to many other geographies so for all metarand readers from other parts of the world than Australia: feel free to adopt these ideas for your own country.

Besides Eric’s push for lean startups another great evangelist for the science of startups is Steve Blank with his recently released book, The Startup Owner’s Manual. I highly recommend both books for entrepreneurs.

Should/when ACEVC gets up and running, it will draw heavily on the the great work Eric and Steve have done so far to codify the science of startups.

 

 

 

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!

 

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!

 

It’s Obvious: A Rising Tide LIFTS All Boats

As followers of my posts will well know, I am a big fan of Ev Williams and the Obvious team, from the days when Twitter was a side project all the way through its massive growth.

So when they announce a new partnership I take notice – big time. Lift sounds really interesting and I’m looking forward to hearing and exploring it in more detail in due course.

My main inspiration for this post, though, were the comments made by Obvious regarding their ongoing journey in crystallising out their engagement model. In my view, these terms should be adopted by all companies as their core mission statement:

It’s important never to delude ourselves into thinking that technology changes the world. People are responsible for change – technology just helps out. At Obvious, our goal is to foster systems that help people work together to improve the world.

If you aren’t improving the world, get out of the way and let those who are do their work!!!