Evan Thornley discusses the evolution of the startup ecosystem

0:00 Adam Spencer: Let me tell you about our partner, Teamified. If you need to build a top-notch team quickly, Teamified is your go-to solution. They not only provide fractional CTOs, they can also do contractors and even remote team members tailored exactly to your needs. And whether you're looking for expertise in the Philippines, India, or Sri Lanka, Teamified has you covered. What's amazing is that Teamified uses a blend of AI and human expertise to cut hiring times by 50%, cent. The platform handles everything from automated onboarding to day-to-day management and even performance tracking. You can also handle rewards and recognition, buy equipment, and order training all through their platform. Simplify your hiring process and get the best talent fast with Teamified. Check them out now and transform your team. Go to dayone.fm/teamified. That's dayone.fm/teamified. Thank you, T-E-A-M-I-F-I-E-D, and get started today. Hi, I'm Adam Spencer, founder of the Day One Network, which is bringing the history of the Australian startup ecosystem to you. I believe in founders. It's why I do everything I do at Day One and our media company, W2D1 Media. And that's why the Day One Network exists, to create helpful content for founders. We've got some great shows in development, but a large part of what we do couldn't be done without support from our partners and sponsors. And I couldn't be happier than to be working with NTP, who get community better than any other technology recruitment company out there. A Newcastle company like mine, NTP are invested in seeing the growth of the local tech community in Newcastle, Sydney, and more broadly Australia. So thank you, NTP, for helping us bring helpful content to founders and the startup community in Australia. Back to the interview. Hi, I'm Adam Spencer, founder of the Day One Network, which is bringing the history of the Australian startup ecosystem to you. I believe in founders. It's why I do everything I do at Day One and our media company, W2D1 Media. And that's why the Day One Network exists, to create helpful content for founders. We've got some great shows in development, but a large part of what we do couldn't be done without support from our partners and sponsors. And I couldn't be happier than to be working with NTP, who get community better than any other technology recruitment company out there. A Newcastle company like mine, NTP are invested in seeing the growth of the local tech community in Newcastle, Sydney, and more broadly Australia. So thank you, NTP, for helping us bring helpful content to founders and the startup community in Australia. Back to the interview. 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 the 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 Cho.

3:19 Evan Thornley: Hi everyone and welcome back to the Australian Startup Series interviews. Our guest today is Evan Thornley. It's so good to have you on the show today, Evan.

3:26 Adam Spencer: Thank you.

3:27 Speaker C: Thanks very much, Will. It's good to be here.

3:28 Evan Thornley: To start us off, could you just briefly introduce yourself and what you're currently up to these days?

3:32 Speaker C: I'm Evan Thornley. I'm the executive chair of Longview, which is a startup in the residential property investment space, building a funds management platform for residential property. So that's my 14th startup.

3:47 Evan Thornley: Wow, 14.

3:48 Speaker C: Some of them have worked, most of them have worked, a few haven't.

3:55 Evan Thornley: I'm sure there's a lot to unpack here during our interview, but I want to take the audience right back to the beginning. Evan, would you say that you've always been an entrepreneur? Take us back to even university days.

4:08 Speaker C: Yes, actually. I did my first startup business when I was a full-time law student at Melbourne Uni and I was very involved in student politics. I was president of the student union at the time and then one of the co-founders of the National Union of Students. This is like, we're talking Stone Age here, okay, so 1987. And I thought that the student movement should have its own independent income so that the political fights that always seem to sink the student movement wouldn't be quite so impactful. So I set up the business arm for the student movement and we set up a chain of computer stores on campus and a whole bunch of other things. So yeah, so I ended up building a business with about $1 million a year of turnover, which was a decent amount in those days, and about 9 full-time staff.

4:58 Evan Thornley: Wow.

4:59 Speaker C: Yeah, that was age 22.

5:01 Evan Thornley: What drew you in? Was it just, I guess, problem opportunity identification?

5:06 Speaker C: Yeah, well, you don't know what you don't know, right? So you see a problem and something needs to be done about it, so you get about doing it. You know, look, I grew up in a single parent family on welfare and mum struggled a fair bit to sort of be on top of things. So I pretty much had to bring myself up. So I was pretty much used to the idea that if something needed to be done, you needed to do it yourself because no one else was gonna do it for you. So I saw things that I thought needed to be done and so set about doing them.

5:34 Evan Thornley: And what led to Looksmart? Looksmart is wildly famous. It's one of the most classic stories in Australian entrepreneurship, one of our first NASDAQ-listed companies.

5:45 Speaker C: Yeah, yeah, I think the first sort of classic startup that got to a NASDAQ listing, certainly. And look, I was a McKinsey consultant at the time, so I was a bright young thing traveling the world trying to solve the world's biggest business problems. Problems with a very high-end management consulting firm. And McKinsey, you're very good at understanding the economics of a business and quickly getting across the operations of businesses in a lot of different industries. So taking those analytical skills, I looked at what was happening in the very nascent internet. This is Mosaic days, right? Mm-hmm. And it seemed to me that in a world of infinite information, search was going to be the power position and all this is obvious now, but it wasn't in 1995. And that the business model was likely to be direct marketing and tied to what people were searching for. And so that's where I guess, you know, as a McKinsey consultant, you've got to figure out where the money is and where it isn't. That's where I thought the money would be in the internet. Yeah. And so I thought if I went and did that and it worked out well, then I might be able to do what I really wanted to do, which was to own newspapers and sort of be a left-wing Rupert Murdoch. So that was the initial motivation. And 6 weeks after my twins were born, I left McKinsey and started LookSmart in 1995. So ancient history.

7:25 Evan Thornley: That's absolutely amazing. There's a couple of things that I want to unpack there. The first one is you mentioned that you applied your analytical skills learned from management consulting and you saw that search was going to be a bit the big thing, and obviously advertising revenue was how it was all going to piece together.

7:43 Adam Spencer: Yeah.

7:43 Evan Thornley: Although I'm cognizant that there is like 1,000 kilometers between, you know, seeing that and not seeing that. How did you know?

7:50 Speaker C: Well, it's an interesting question. I don't want to sound cocky, but I guess over the years I've come to realise that I seem to be one of those people who's pretty good at following the bouncing ball and seeing where it's going to go. What's the old Wayne Gretzky line? Don't skate to where the puck is, skate to where the puck is going to be.

8:09 Evan Thornley: Hmm.

8:10 Speaker C: I'm not sure what leads you to sort of have that trajectory view of the world rather than a static view of the world, but it's just always been the natural way of seeing things to me. And so, look, you always go back to first principles. Like I said, in a world of infinite information, search would have to be the power position, right? And then, well, what's the revenue model going to be? I don't think it's going to be subscriptions. It's probably going to be advertising. And you know, that evolved, right?

8:44 Adam Spencer: Yeah.

8:44 Speaker C: And I always thought it was gonna be more direct marketing than advertising per se, sort of more direct marketing than brand advertising because it was so targeted. And it took a few years for us as an industry to really make that happen in terms of search-targeted marketing and keyword-driven marketing. But that was a correct kind of analysis. I was doing some work with a direct marketing company at the time, so I probably, to be fair, had that hammer in my hand at some point, but I knew all of the challenges in traditional direct marketing, in direct mail and similar. And it was sort of pretty obvious that the interactive world was going to be a much, much better, faster, more malleable, more targetable mechanism for direct marketing than something like direct mail. So you could sort of see that coming. So I guess your brain connects a few dots from different universes together and you form a picture, and that, that I guess is what happened.

9:37 Evan Thornley: Yeah, it wasn't something like a black and white formula that you followed to the T. It's just something that you saw a little bit of connection from everywhere. And then that's how you knew.

9:47 Speaker C: Yeah, but look, I think that's where most insight comes from, right? It's the basis of intelligence really is the ability to connect seemingly unconnected data, you know, and look for patterns and follow trajectories.

9:58 Evan Thornley: Yeah.

9:58 Speaker C: Those are all the sort of generic mental processes I think you go through. Yeah.

10:03 Evan Thornley: So the other thing that I wanted to ask you, you mentioned like nascent internet and that really piques my interest. What was it like creating your own startup back in 1995? Like in terms of support structures?

10:15 Speaker C: Well, I mean, let's be clear about where we were, right? I mean, Mosaic arrived and that was the first HTML browser. So prior to that, those of us who were on the internet were on proprietary platforms that were all Unix-based platforms. So the original CompuServe and stuff like that where you were typing Unix command lines into things and trying to find stuff, right? So I remember clear as a bell I'd read all about Mosaic, but I hadn't actually seen it. And a friend of mine in the New York office of McKinsey said, oh, I've got— and then it was renamed Netscape, right? So I've got Netscape on my browser. I'm sorry, I've got Netscape on my computer. Do you want to see it? And I said, oh yeah, I've heard all about this thing. I really want to see it. And he was a British guy. His name was Richard Blue. And, you know, he fires up his Netscape 1.0 browser and, you know, 5 seconds later we're searching for apartments to rent in London. Point and click. And I just, the light just went on and I said, "Wow, this is gonna change the world." Like the usability of that point and click interface, HTML interface of the first browser compared to the sort of really clunky, very technically complex environment that online services had been to that date. Just, you know, it was a blinding flash for me and 6 weeks later I left McKinsey and started the business. So, yeah, so I mean, when you say what was, I mean, you know, there was no internet ecosystem. There weren't any internet companies. I mean, Netscape was the first internet company because they were the first browser. So, you know, then you got the first of the directories and search engines starting with Yahoo and gradually that evolved out of the US and obviously there was nothing in Australia. So there was no ecosystem.

12:05 Evan Thornley: Could you tell me a little bit on your perspective, or what was it like at the height of the boom?

12:10 Speaker C: Yeah.

12:11 Evan Thornley: Like in terms of, you know, there were crazy valuations everywhere. Everyone was just getting into tech stock. As long as it had .com in it, it would be, you know, it would raise millions.

12:20 Speaker C: Yeah, look, I think I referred to Silicon Valley at the time as the wealthiest insane asylum on earth. You know, there was just money sloshing around in the streets. I thought it was nuts at the time, and it was. But the valuations seemed insane, but the great companies, as it turns out, were very good value buying at that point. Right? So the valuations weren't insane for the winning companies. They were actually undervalued. I think what it took a long time— and it still takes a long time. You still see these fashion trends in the capital markets and in venture capital in particular. It took a long time for people to become more discerning about which companies were actually going to be the winners, which ones had real business models, which ones had credible management teams, which ones had a definable path to victory and some sort of sustainable competitive advantage. And so it was an undiscerning market that threw money at everything. And then when the crash happened in 2000, when the tide went out, most of the rubbish went out with it and a smaller number of us survived. And then the truly great companies went on, the Amazons and and eBay and then shortly thereafter Google and others, you know, went on to become immensely valuable and their valuations then looked trivial compared to where they are now. So yeah.

13:45 Evan Thornley: What was it like running LookSmart in the wake of the bust?

13:49 Speaker C: Oh, look, you know, tough. I mean, we January 8th, 2000, I think it was, we sacked 162 people in one day.

13:57 Evan Thornley: Wow.

13:58 Speaker C: That wasn't the happiest day of my life. But as I said to the team at the time, you know, we either lose 162 jobs now or we lose 600 jobs a few months from now. So those are our choices. And what was astounding to me was that some of the bigger and best-financed and allegedly best-run companies didn't take any corrective action in light of what had happened. And so You know, some of the companies you've never heard of now, like Excite@Home or Webvan, you know, I think in both cases they had $1.25 billion of capital in the bank, but they were burning it at a quarter of a billion a quarter. So they had, you know, 5 quarters of burn left. Right. So you would have thought they would have pulled the aircraft up and gone over the mountain. But no, they just flew at full speed straight into it. So sure enough, 5 quarters later, they both went broke. So while it was fairly obvious, I think, to any sensible person that the world had changed and that you needed to, you know, survive a nuclear winter, it was remarkable to me that some people, people who should have known better, just sort of were in complete denial. They just wanted the party to continue and were sort of unable to comprehend that the world that we had known had changed.

15:15 Evan Thornley: Hmm. What was the decision that led to you leaving LookSmart and then your brief stint in politics?

15:21 Speaker C: Yeah, look, I guess I'd done what I'd set out to do and the company was based in the US and it was really a family decision. We wanted our children to grow up in Australia and it wasn't practical to stay on as CEO of a, you know, NASDAQ-listed tech company in California. From Australia, certainly not in those days. So, and to be honest, you know, I'd made more money than I ever imagined I ever would. And I still had a burning desire to fix the Australian Labor Party, which in retrospect was one of my more foolhardy aspirations.

16:00 Evan Thornley: Hmm. This next question, I'm cognizant that it could be quite difficult, for lack of a better term. So feel free to skip it or tell me that I'm out of line for asking this.

16:10 Speaker C: Oh, look, you'll have to do better than that. I used to say in my all-hands meetings, meetings, you know, there's a bottle of wine here for the person who asks the first question and there's another bottle of wine here for the person who asks the most difficult question. You know, it's the difficult questions are the good ones. So fire away.

16:26 Evan Thornley: Yeah. LookSmart is a search engine. It could have been Google. What went wrong?

16:31 Speaker C: Oh, look, so many things that I, you know, I think as a first-time entrepreneur, there's many things that you would have liked to learn from your subsequent life. Look, I think the first thing I would say is, you know, we started out looking at the world as it was in 1995 and there was a split between keyword search and category-based directories. And Yahoo was the leading category-based directory and things like AltaVista were the lead keyword search engines. And we first set out to build a much better category directory than Yahoo, which we succeeded in doing. But it's also clear that as the volume of information grew, category directory became unwieldy and the keyword search was the only practical way of running things. So, you know, so I think we were playing down the wrong fairway there. We realized that and therefore morphed into looking at the revenue streams and had it and became one of the pioneers of, you know, what's effectively Google AdWords as a revenue model, right? So keyword-targeted search terms. So us and a company called gotocom were the sort of the two pioneers of that. And then as Google came along, they adopted that revenue model and It seems to have worked out okay. So, you know, so we had to pivot at that point to make the best of a situation where it was clear we weren't going to be the leading player in search. So we had to sort of pioneer a different approach to the revenue. And then, you know, we went, we didn't have the venture to compete with the big brand building players. So we had to syndicate our product through other people and white label our product to others. And so we built a syndication-driven business.

18:03 Evan Thornley: Hmm.

18:03 Speaker C: So, you know, I think we made the right responses to where we were. But, you know, the entire world of search, I'll get a bit technical with you for a minute, was driven by search algorithms that were driven by proximity and frequency of the search terms in a document. And Google had the profound insight that it was more about the relevance of the document rather than proximity and frequency. And, and that using an analogy from academic citation analysis, the real way you find out which documents are relevant is by which other documents link to them. And so they've built a link topology ranking algorithm, and that of course was a revolution, you know, was a technical revolution in search. And they quite rightly deserved to win at that point. And, you know, some of us did try to buy them, but sadly that wasn't the case.

18:56 Evan Thornley: Thanks for sharing that insight. I'm interested to hear, so You've pretty much been in the whole startup ecosystem for the better part of the last 2 decades. And I'd love to get your insight on how that has changed over the last 20 years. Has it been what you expected it to be, more or less?

19:13 Speaker C: Yeah, well, I think you're right in saying 2 decades, 'cause the first 5 or 6 years we were there, there was no ecosystem. So let's start the clock at 2000. Well, we were already a public company by then. Oh, look, I mean, you know, in Australia in particular, there has, you know, one has developed, you know, I mean, there was really nothing. There was no, even the basic stuff of who are the lawyers who know how to, you know, knock up a stock option plan, you know, where are the venture firms? You know, there was one venture capital firm in Australia in those days, which was a small outfit called Allen Buckridge. You know, there were a couple of lawyers or accountants who'd had some experience of stuff in the US. You know, there were no incubators, there were no serious venture firms, there was none of it. There was nothing here. You know, the entire ecosystem has been created in 20 years. And it's fantastic to see, you know, it's absolutely fantastic to see. And at the same time, obviously, the technology has advanced to the point where, you know, your capacity to launch something online, some consumer application that's going to be exciting and interesting, with relatively off-the-shelf platform configuration is, it just means the amount of time and the amount of money to actually launch something has dropped by an order of magnitude. And so anyone with an idea can get out there and have a crack and quickly test and learn and see if they've got something or not. Whereas we had to raise some millions of dollars just to be able to build something and hope that— Mm-hmm. It would work with no precedence and nothing to compare to. You know, I mean, you look at your average sort of new SaaS platform play in Australia and you know what all the metrics are that you need to hit, you know which players are doing well and badly. You've got a whole ecosystem from, you know, way pre-seed angel through to, you know, post-public financing. You've got, you know, lawyers, accountants, headhunters, it's an ecosystem. It's still relatively small even compared to somewhere like Israel, let alone Silicon Valley, but it's a functioning ecosystem. And of course, it's birthed some amazing companies, the Canvas and Atlassians and Afterpays and others. And the previous generation, the Seek in particular, I think stand out. So yeah, it's a functioning ecosystem and all of that's happened in a relatively short period of time, as you say, in 20 years.

21:42 Evan Thornley: Yeah.

21:42 Speaker C: All of that's come to pass and now somebody who is on to something can have a reasonably clear run through to exploring that and turning it into a serious business.

21:56 Evan Thornley: Yeah. Can you pinpoint a specific year which it all started to kickstart and maybe some catalysts?

22:04 Speaker C: Oh, look, always the biggest catalyst is success, right? And so I'd like to think when we took the company public, when we took LookSmart public in In August '99, that was really the first NASDAQ listing of an Australian tech company. Just before the crash in March 2000, you know, we had a market cap of $14 billion. That was real money in those days. I think we were number 6 on the Australian Stock Exchange by market value.

22:26 Evan Thornley: Wow.

22:27 Speaker C: Obviously that drew a lot of interest from a lot of people. And, you know, the next generation came through after us, the marketplace plays, real estate, car sales, Seek. And so then once those were successful and, you know, Seek's the story I know best just because Paul was originally my lawyer when we started LookSmart. We were mates from Melbourne Uni Law School and he was at Arnold Block Leibler and he did all the early legal work for LookSmart. And then one day he came in and said, "Oh, Evan, I'm sorry, I'm leaving the firm." I said, "Oh, what are you doing?" He said, "I'm gonna go off and be an internet entrepreneur." I said, "Oh, fantastic. What are you gonna do?" And he pulled out, I still have the evidence here, pulled out a business plan for a thing called the Spot, which is in fact what became Seek. And I looked at it and I said, "Phew, taking on Fairfax and the Rivers of Gold in classifieds, mate. It's a big market, but they're going to be tough to beat." And you know, history tells the tale. They absolutely cleaned Fairfax's clocks and built a magnificent company. So I think, you know, I mean, Looksmart was a bit of an anomaly for people, but it certainly got people's attention. And then when material success was then replicated by, as I say, the seeks and REAs and car sales, you know, then entrepreneurs had role models and believed that it was possible to do this stuff from Australia. Certainly, you know, LookSmart listing on NASDAQ, I think really helped people believe that we could play globally and the success of the marketplaces in Australia in particular. And you know, the money people aren't far behind.

23:56 Evan Thornley: Hmm.

23:57 Speaker C: So, you know, our early stage investors made 100 baggers on the deal, right? So, you know, people notice that and many others want to follow. you know, and the lawyers and, you know, associated investment bankers and others, you know, build experience and can then give that experience quicker and easier and cheaper to the next generation. So I think that was the first big turning point, was seeing the early successes. You know, then I do think that just the evolution of technology and the lowering cost of entry has really helped.

24:30 Evan Thornley: Yeah.

24:30 Speaker C: And then you get to a certain critical mass where there's institutional knowledge. Everybody in the system now can understand what's a minimum viable product, when can you establish product-market fit, all of the key metrics, particularly in SaaS businesses. These become known teachable things and then you have a sort of mass education that happens in the community and then you have a flourishing of new players and a sifting out of the success from that. I mean, I think the biggest change was really that entrepreneurs could see that it was possible. And once you believe it's possible, especially when you're young and crazy, then you have a swing.

25:16 Evan Thornley: Yeah, I love that. It's in essence shining a spotlight to past founders because that paved the way for the next once the spotlight started to fixate on startups.

25:28 Speaker C: Well, and look, the other thing that happens, and this is critically important, is people that work in those early success stories then know what a successful company looked like. And go off and found their own. And that's happened for decades in Silicon Valley. Most people don't found their first company out of nowhere. Most people who are good founders actually started in other companies. And we saw a lot of that. Obviously, Martin Hosking was, Martin was, I think, employee number 3 at LookSmart and really a core part of the founding team and then went on with Redbubble and his role in Aconex and other things. Similarly, people came out of SEEK and came out of REA. And so you really then get that second generation that flows from that. And then of course you get the founders who've made, and the early venture investors who've made serious money in those early startups are then looking for the next generation of founders and the next generation of companies to invest in.

26:24 Adam Spencer: Yeah.

26:24 Speaker C: And it's often with their own people coming through that they start that. I mean, we used to back back a bunch of our own stuff. I always encourage people if they had a startup, we'd hate to lose them from the company, but we wanted to help them succeed, so we'd often back them in.

26:39 Evan Thornley: Yeah, absolutely. The flywheel, so they say, right?

26:42 Speaker C: Yeah. Yeah.

26:42 Evan Thornley: Do you think that we do have a PayPal mafia in Australia? And if so, what company would you say is the PayPal that led to the flywheel?

26:50 Speaker C: Oh, that's an interesting question. I haven't thought about it in single company terms. 'cause there was so few of us, right? Like everyone knew everybody. So, I'm not sure it narrowed to a single company per se. You know, I mean, obviously a lot of these sort of digital marketing folks did come out of LookSmart 'cause we pioneered that space.

27:10 Evan Thornley: Hmm.

27:11 Speaker C: You know, all the marketplace spaces have now, well, famous last words, have now been taken up. I'm sure that they haven't, but you know, a lot of people learned about marketplace businesses from the three early the three amigos in terms of Seek, REA, and Carsales. I'm not sure that— I'd be interested in other people may have a better vantage point on that question. It's an interesting question. I can't think of a single company that sort of had that type of impact per se, but I may be missing something really obvious.

27:42 Evan Thornley: No, I understand your point and that's fair enough. The next thing that I wanted to ask is a theme that has popped up a couple of times in our conversation so far is the idea of lowering cost to entry. You mentioned a couple of minutes ago that, you know, back then it cost millions to test something that had no precedence, and you'd have to be crazy to, to go off and do something like that.

28:04 Adam Spencer: Yeah.

28:04 Evan Thornley: What would you say are the catalysts that led to this lowering cost of entry? A couple of other guests have mentioned like AWS startups.

28:12 Speaker C: Yeah, I mean, look, obviously AWS is part of that. That's certainly part of it. But, but just, just the whole I mean, just dev generally, right? I remember I left McKinsey the same week as my then boss at McKinsey left and he said, I've got bad news, I'm leaving the firm. And I said, oh, that's funny, I'm leaving the firm as well. I said, what are you going to do? He said, I'm going to go and build this internet directory. And I said, that's funny, so am I. His name was Charles Connor. His internet directory was a local a local business directory and it ended up being a thing called CitySearch, which ultimately got bought by Barry Diller and his people for a couple of billion dollars. But one of the funny things Charles said to me when we caught up a few years later, and this will date me, but he said, "Hmm, Java, great for raising money, bad for building websites." And, you know, everyone was doing their own bespoke development. In those days, and that was necessarily time-consuming and expensive, whereas, you know, you can really plug and play a lot of modular stuff these days and configure it and get yourself a working MVP to test the value proposition with customers. And obviously AWS and everything associated makes that, yeah, you've then got shared infrastructure, so that's quicker and easier and cheaper.

29:35 Evan Thornley: Yeah, I'd love to turn to the ecosystem today. What would you say that there are things that we could still be doing better?

29:42 Speaker C: Look, I mean, I'm a bit remote from the mainstream of it. I think I've been, funnily enough, still just going off and doing my own things. And so I've got observations and I mean, firstly, overwhelmingly, I'm just incredibly excited and proud of where the country's got to and that we have got a viable startup system. And, you know, at minimum Sydney, Melbourne, and Brisbane, and great companies come from other places as well. Seen a couple of great companies from Adelaide and elsewhere. But I would also say, particularly the venture scene, I think is a bit monochromatic. If you've got a global SaaS platform play, then the venture folks are all over you. If you've got the right metrics, they're going to be all over it. And that's fantastic, and it's natural, particularly because Australia is a small domestic market, so global players are important. SaaS models with recurring revenue streams are obviously attractive. But I think that there's a lot of other ways that great businesses start and a lot of other business models that can work, but they're innovative, so you don't have precedent for them, so they're harder to judge. So in a weird way, I think there's a little bit of risk aversion there, or perhaps put another way, there's enough great SaaS platform businesses that why would you go back things that were different to that. So, you know, Afterpay didn't come out of the venture scene here, right? Because that was a different model. So, you know, I think that the Australian venture scene does some things really, really well, but perhaps misses out on a broader range of things that would require some first principles analysis to try and determine whether those models were attractive rather than a sort of more formulaic recitation of metrics, which unquestionably are correct and work, you know, in a particular business model.

31:41 Evan Thornley: How about on the flip side of that? What would you say we do better than, say, other geographies?

31:46 Speaker C: Well, it's a good question. Look, the only 3 geographies honestly that I really know anything about is Silicon Valley, Israel, and Australia. So that's pretty tough competition to say, what do we do better than Israel or Silicon Valley? You know, that's pretty rarefied air. So, well, I'd say, look, let's compare with, say, Israel. And like, you know, Israel is at least an order of magnitude more startup intensive than we are, possibly two orders of magnitude, right? I mean, I think we've put 5 companies on the NASDAQ. 4 or 5 in our 20-something-year history. One department of one university in Israel put more tech companies on the NASDAQ in one year than our country has in a lifetime.

32:37 Adam Spencer: Right.

32:37 Speaker C: The computer science department at the Technion in Haifa did 5 in one year. So, you know, while what we are doing is incredibly exciting and compared to where we were is incredibly heartening, let's not kid ourselves that we're at the world's leading edge. But the flip side I would say is generally Israeli startups tend to sell out early and not go on and build great companies. They tend to sell the technology early, take the flip and move on. Whereas I think, you know, Australia has got a bunch of great companies that have really gone on with it. You know, Atlassian has really gone on with it, you know, and built a great global company. Canva is well on the way to building a great global company. Yeah. You know, so I think that we have— Australians have been willing to go all the way in a way that is less common, for example, in Israel, which is otherwise a, you know, much, much more intensive and vibrant startup scene than we have. So I think that that's something we've certainly done well.

33:46 Evan Thornley: Do you have any unpopular opinions, Evan? Something that you believe is true, others aren't on the same page as you?

33:53 Speaker C: Well, I think I would say what I said about the sort of somewhat one-dimensional nature of the Australian venture scene. It certainly would be an unpopular view and in both the unpopular sense people don't like it, but also unpopular probably in the sense that that may not be widely shared. I mean, I'm always doing completely new stuff that no one else is doing. So sort of by definition it is that. Right. So I mean, just to talk about what I'm working on at the moment, which nobody else is working on to my knowledge, seriously, which just astonishes me, is residential property is the biggest asset class in the country, right? Not by a little bit. The Australian Stock Exchange and every company on it is $3.3 trillion and Australian residential property is $10 trillion, right?

34:43 Adam Spencer: Wow.

34:44 Speaker C: And yet, you know, if you want to buy domestic equities or trade domestic equities or analyze or do anything with domestic equities as an asset class, there is a whole, you know, a whole industry of stockbrokers and analysts and financiers and everything else in domestic equities. And you look at Australian residential property as an asset class and there is literally nothing. There is literally nothing there. Commercial property, which is 1/9 the size, is a whole industry with commercial REITs and a whole bunch of other things. And so, you know, I'd call that a bit of an oversight. You know, there's more funds in crypto, mate, than there are in residential property. And exciting as the crypto stuff undoubtedly is, my unpopular view would be that residential property is somewhat more important and a lot less competitive. So, and there's more crushing social needs, quite frankly. You know, the entire Australian housing ecosystem is a disaster. Yeah. It's the worst country in the developed world to be a tenant. It's one of the hardest countries in the world to save for a deposit to buy a home. And there is absolutely no one that's there to help anybody either to buy their own home or to be, you know, a successful, just garden variety mum and dad property investor. So I don't know, that looks like the biggest of blue oceans I've ever seen.

36:00 Evan Thornley: Hmm.

36:01 Speaker C: And in that sense, it's, to use your phrase, an unpopular view. It must be because basically no one else is doing it. We're about to launch our first shared equity offering to help folks get the deposit they need to buy a home. There's a few other terrific startups doing a similar thing. So I guess in that particular corner, there's a little bit of action, but that's it. So, you know, hidden in plain sight. So I guess I've always been a bit contrarian. So while everyone I know is going to build global SaaS platforms, we're going to focus on the biggest play in the country by a factor of 3 that's hidden in plain sight, which is residential property and fixing the problems that exist in the Australian housing landscape for tenants and potential purchasers and for investors.

36:46 Evan Thornley: Yeah. This is a little bit of an off-tangent question, but how do you make sure that you've struck gold or you're maybe in something that no one else is in that? And maybe you're wrong, if that makes sense.

37:01 Speaker C: Oh, 100%. You worry about it every day, right? I mean, every contrarian who has any sense worries every day, what am I seeing that other people aren't seeing? And anyone who's ever done anything new, if they've got any humility left in them, does that. So you just keep testing that hypothesis and you keep asking and you keep welcoming hard questions and contrary views and testing what you're working on against that and against the facts. So I think in this particular case, I've talked to just about anyone I can think of in the space over the last 5 years that we've been working on this and I'm now pretty comfortable that we're onto something.

37:43 Adam Spencer: Yes.

37:46 Speaker C: And actually it's very validating. We started working on shared equity as a critical affordability tool for young people to buy homes about a year and a half ago. It's been a huge project. And lo and behold, as we were doing it, 2 or 3 other tech startups have come out. People are starting to get funded following that model. There's a bunch of government schemes around and soon it'll be flavor of the month. And so, you know, it's always validating to have competition actually. You know, I remember saying to a fellow I knew in Silicon Valley who said to me, you know, we are 2 years ahead of the competition. And I said to him, well, if you're 1 year ahead of the competition, in Silicon Valley, mate, you're a genius. If you're 2 years ahead of the market, the market might be trying to tell you something. But ultimately, by definition, you have to be willing to pursue something that you think has underlying fundamentals that support your view and that the conventional thinking is not based in underlying fundamentals. So it's usually based in some misunderstanding or some commonly held but ultimately outdated or wrong worldviews or some other form of sort of mass psychological distraction. And you keep testing those underlying fundamentals. You know, it was like I was talking about Luke Smart in search. You always have to go back to fundamentals rather than fashion trends. So if you're worried about what other people think and you're wanting to follow the crowd, then— Yeah. You will never do anything fundamentally new and interesting.

39:17 Evan Thornley: Yeah.

39:17 Speaker C: That doesn't mean that doing something that no one else is doing makes you smart. It should make you extremely cautious and wary and asking yourself the question you just asked me every day. And I guess we've been trying to do that. And so far, we are as comfortable as we can be that we're onto something. And as more competition and the more we've taken the covers off this thing in the last few months and a lot of people seem to be sort of deeply intrigued by why we see the world differently. Differently. I'm encouraged by that. But, you know, the market will speak in time and we'll be right or we'll be wrong. And if we're wrong, hopefully we'll see that first and change.

39:54 Evan Thornley: Yeah, that's a good segue into the next question, which is reflecting on, you know, your experience, your wins and your mistakes. What would you tell a new entrepreneur to help them increase their chance of success? Is it that be willing to have a crack and test and validate, right?

40:09 Speaker C: Oh, look, all of that is absolutely true. And I still go back to You know, team is everything. Getting the right founding team and building that team as a team that has the right diversity of experience and mutual respect and has all the bases covered between those first, you know, 3 to 5 people is hugely, hugely important. So yes, the idea is obviously important and testing the idea and validating that there are real customers who will pay you money for that is absolutely essential. But often they won't with your early ideas. But if you've got a good team, that team will take up that data and take up that challenge and keep pivoting until they've found something. So, I'll back a team over an idea all day long. I think my favorite, I used to probably spend more time with young founders. I guess there were less mentors around a decade or so ago. So I used to have people every second day come and ask me for help and I'd always try and make time for them. Thankfully, there are many others that take up that burden now and I'm back doing my own stuff. But the second thing that I always got people to focus on, which was never top of mind for any of them, and this is not so much a key to success, it's a key to avoiding failure, is that governance matters. Boards and board structures and board personnel really matters. A good board really improves the likelihood that you can take something from good to great, but a bad board will almost always kill you.

41:41 Evan Thornley: Mm-hmm.

41:41 Speaker C: And it's just the last thing anyone thinks about in the early stages of a company. But very quickly, the structure of that board and who you put on it and how that board works becomes important. And it inevitably becomes most important in two critical situations, either when something goes wrong or when things go staggeringly right.

42:00 Adam Spencer: Right.

42:02 Speaker C: And dysfunctional boards in either of those situations can kill you. I've seen, the number one reason I've seen startups fail is they run out of runway, but a very close second is problems at the governance level, either disputes between founders, disputes between founders and venture, disputes between venture and venture. And all of those human elements and the structure and who's ultimately legally got the power to determine the direction of a company, That stuff really matters. And it's probably the one sort of piece of advice I've given almost every entrepreneur I've met that they've almost never gone, "Yeah, yeah, no, we thought a lot about that and this is what we've done and this is how it works." And they've always gone, "Oh, well, I hadn't really thought about that." And yet the number who come to me and say, "Oh, I've got this, we've got this nightmare on my board," and, you know, or between us founders or, you know, And I think they're the first person who's ever had a problem, you know, in the power structure of the company, who gets to call the shots. And yet it happens, you know, all the time. So that's probably the one sage piece of advice I'd give everyone. It's not a sexy topic, but it really matters.

43:13 Evan Thornley: Mm. So Evan, as you know, what we're trying to do on this podcast is to document as historically and accurately 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, academics, and policymakers. Is there anything that we haven't discussed today that's always top of mind for you?

43:32 Speaker C: Oh, look, when you say policymakers, here's the thing. And as someone who's been very active in political life in a range of different forms, as well as in startup life, one of the things I'd say about Australia as a nation and Australia as a polity is that almost every problem we have in this country, the dialogue about what to do about it usually starts with somebody saying the government oughta. Do this or that. And that includes, you know, how do we build a better startup ecosystem and how do we fix all these things? And I would say broadly speaking that government is spectacularly irrelevant to 99% of this stuff and that we would all profit by wasting less breath on debating what governments ought to do to make us into an innovative economy. It's a peculiarly Australian obsession. Which certainly doesn't exist, for example, in the US or for that matter in Israel. Although I might say if any government's actually done a good job of helping formulate an ecosystem, it probably is the Israeli government. But Australian governments will never do anything in that form anyway, regardless of who's in power. So I just think it is a massive distraction.

44:42 Adam Spencer: Mm-hmm.

44:42 Speaker C: And all the people that have spent years trying to get governments to put money into this and money into that I mean, yes, there are a few things that obviously really matter. You know, it's very important that you have a tax system that doesn't create cash tax liabilities for non-cash rewards in terms of stock options, for example. Clearly that stuff's got to be right. But so, you know, that would be the one thing I would say. And, you know, the Tech Council and folks doing important things and no doubt will be representing our community on important issues. And it's great that people do that. And— Yeah. Are of service there. But I just wouldn't get too ambitious about what you're going to get government to change its position on. And even if you did, whether it would have any material impact on the outcome.

45:28 Evan Thornley: Why is that? On both tangents, why is this a uniquely Australian obsession? And secondly, it seems like, yeah, why should government sort of stay out?

45:37 Speaker C: Because government is a slow-moving bureaucracy. That's, you know, it's an organizational model that's a Weberian bureaucracy from the 1930s. It's 100 years out of date. So why would you expect something that's working on a model that's 100 years out of date to be relevant to stuff that's meant to be at the cutting edge?

45:54 Adam Spencer: No.

45:55 Speaker C: I mean, it's just, it's completely antithetical. It's an organizational form that is the complete antithesis of a startup in every possible way, structurally, culturally, and in every other way. So it's not because people working in government are bad people or politicians are crooks or this party or that party's doing the wrong thing. There's very decent people in public service and doing the long march through the institutions to try and make the country better. And I commend it, and many of them are friends of mine. But the idea that that organisational model can do anything useful for something that's moving as fast as we're moving is just laughable.

46:33 Evan Thornley: Yeah.

46:33 Speaker C: I'm sort of confused as to why people think it would be otherwise. But because our answer to every other problem in this country is the government order, I guess when we get to challenges for startups, we start out with the government order. You know, I'm trying to think of anything material that governments have done in the last 20 years that have really changed the answer. And I'm struggling.

46:55 Evan Thornley: How about the National Innovation and Science Agenda introduced by the Turnbull government? Would you say that moved the needle somewhat?

47:02 Speaker C: Oh, look, you know, I'm not close to the specifics and there may be worthy things that have come out of it. So I don't, and I'm not trying to poo-poo these things. So look, I don't know specifically at that level. I mean, look, I recall there was a government scheme and this is, you know, 10,000 years ago, okay, in Looksmart days and they invested in a whole lot of startups. And one of the, what they did was the private equity firm that put early money into Looksmart was sort of, you know, a bit worried about the risk profile. So they laid some of that risk off and took some of the government money in exchange for a portion of their shares. Mm. And as it happens, of the, I don't know, 30, 40, 50 companies the government put money into, the only one that made anything was that share in Looksmart. Fortunately, it was a 100-bagger, so it actually paid for the entire thing and the scheme came out in front. And I remember being at a dinner in New York when Prime Minister Howard was there and he sort of pulled me aside and said, "Well, thanks to you guys, this thing's not been a complete train wreck." And so, you know, even at that time I was sort of like, I'm like going, this is probably not the most useful space for governments to be trying to intervene. So look, I thought some of the policy settings in the Turnbull agenda were good and hopefully they've made differences at the margins. And again, the last thing I want to do is criticise the good people who are working hard to try and make sure government policy is as good as it can be.

48:32 Adam Spencer: Mm-hmm.

48:32 Speaker C: That's important work and it's great that people are willing to put that effort in and then make those changes. I'm just saying, if you calibrate that as, one of the levers of change for our ecosystem, I wouldn't calibrate it very highly.

48:49 Adam Spencer: Yeah.

48:50 Evan Thornley: The last question, Evan, and I know that we've mentioned quite a lot of people in organizations already, is who are the heroes in the ecosystem that you know, or in your personal journey that you'd like to shout out?

49:02 Speaker C: Oh, look, they're just mates of mine. So, you know, look, Bassett, You know, Brother Bassett has been remarkable, right? Because I'm talking about Paul, but I'm a huge admirer of Andrew's as well. But Paul's done it twice, right? He and Andrew and Matt built SEEK into a truly great company, a wonderful culture. It's still a wonderful organization. I did a startup a while back, which unfortunately didn't make it, but which SEEK backed. And I've never worked with a better strategic partner. They were just fantastic. And it was a real credit to them that that company, which is now large and successful, still has such a fabulous culture. But Paul not only was obviously central to that magnificent success, but then has gone on to really lead in the venture world through Square Peg. And so, I think to do that twice is astonishing and a great credit to him. I think what Nicky Skevak's done and the way they've built Blackbird is fantastic. The way that the venture scene has developed and the Blackbird and Airtree and Square Peg guys and Danny Gilligan's a good mate of mine at Reinventure who's one of the people I probably rate the highest that I've ever worked with. And so, they've built a real venture community here that's had extraordinary success and they've had extraordinary success because they've helped other entrepreneurs become incredibly successful.

50:27 Evan Thornley: Yeah.

50:28 Speaker C: That's the stuff that matters, not what governments do. So I think all of those people are heroes. Look, I don't know much about Canva, but that founding team have done an incredible job and it's really just such a great global platform. And obviously the Atlassian guys. And you talk about, again, I've sort of poo-pooed government. You want action on climate change, here's Mike Cannon-Brookes from Atlassian. Shutting down coal-fired power stations by buying the bastards, right?

51:02 Adam Spencer: Mm-hmm.

51:02 Speaker C: Like that's heroic stuff that should get a shout out for sure. So it's exciting to see people who take their success in the business and continued success. I mean, what a great company. And then take some responsibility to try and really shape the nation and the world on things that matter. And nothing matters more than climate change. So look, I'm sure all of those are, fairly familiar heroics. And I said they're all mates, obviously, a number of those people are not people I personally know. I'm obviously incredibly proud of Martin Hosking and what he did coming out of LookSmart and I think learned from a lot of our mistakes, has done a great job with Redbubble and was, I think, an important part of the total team that Leigh and the guys at Akonex have done really well. there's serial entrepreneurship at the highest level, part of at least 3 unicorn successes. So you got to give a big shout out to Martin for that. Yeah, those would be the ones at the top of my mind, but I know there's so many other great companies and great founders out there and great people. I'll give a shout out completely separate to this, but again, this is why I like to think people to think more broadly. I came up with the crazy idea of buying ABC Childcare and turning it into a social venture, and I'm very proud of having done so. But the person who really did the work on that was Michael Trail, who'd founded Social Ventures Australia, and he really did the real work that turned that idea into what is now Goodstart, which is far and away the biggest social venture in the country, the biggest early childhood educator in the world. as a for-purpose venture. So that's the sort of thing and entrepreneurship that I think should be celebrated. And I think Michael's an absolute hero for the work he's done there. And that's making a difference in literally tens and tens of thousands of young developing children's minds at the time that's most important, the years 0 to 6. So, you know, it's— entrepreneurship matters more broadly than just who's built the next great tech global SaaS platform, worthy and exciting as those also are.

53:20 Evan Thornley: Evan, it's been so good having you on the show today. Thank you so much for your time.

53:24 Speaker C: No, thank you, Will. Thanks for your interest, and I'm really excited you guys are doing the work now to, um, to get a proper history and, and hopefully for the purpose you've done it, which is to hopefully we can all learn from it and set an even better future coming out of it. So good on you for doing the work, you and Adam. Thank you.

53:41 Evan Thornley: Where could the audience go if they wanted to learn more and connect with you?

53:44 Speaker C: Oh, look, one of the lessons I learned was I thought I was so good after my first success that I tried to do 2 or 3 things at once and failed miserably at all of them. So I was humbled back into the idea that maybe I should just do one thing at a time and see if I can at at least make that work. So I'm all in on my current deal, which is Longview, which is, you know, residential property is a long game. So longview.com.au, you can find me there, evan.thornley@longview.com.au. And always happy to talk. And if I can be helpful to founders or others that think that they can profit from avoiding the mistakes that I've already made, I'll be happy to share them.

54:35 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.