James Alexander shares his thoughts on Governments’ roles in startups

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3:22 James Alexander: My name's James Alexander. I'm the co-founder of Galileo Ventures, Australia's newest VC fund, and I currently invest in the next generation of founders across the region.

3:34 Speaker C: So when you mention next generation, that's not necessarily, you know, millennial-specific or things like that?

3:42 James Alexander: It's not exclusive, but we have a big focus on investing in young first-time founders. You know, we've been and have talked to people that are teenagers all the way up to founders that are what I'll call young at heart.

4:02 Speaker C: How do you define next-gen?

4:05 James Alexander: Yeah, so for us, we have a term called emerging founders internally, and what that means is people that are building their first high-growth, high-tech business, and essentially first-time founders. And emerging founders are really important for Australia because our startup ecosystem is slowly maturing, so I wouldn't say it's early, I actually think there's quite a lot of depth of talent now in it, but on the whole, when it comes to the changing sort of economy and nature of Australia, most people that are starting out are doing it the first time, unlike in, you know, San Francisco where there's quite a lot of heritage.

4:44 Speaker C: Yeah, I get what you mean. So it's pretty much trying to help people who've never done this before get their foot in the door, things like that.

4:51 James Alexander: Yeah, and the other part, the other big focus for us is is the young first-time founders because Australia seems to have a problem backing young people to do big things.

5:00 Speaker C: Yeah, why do you think that is?

5:03 James Alexander: I think there's a couple of reasons. The main reason is probably around we're not used to it. In Australia, if you think about the generation before us, the boomers, they didn't really grow up in an Australia where young people were given the chance to change, you know, create global changing companies. They were used to a very old services-based economy where the firms that dominated were banks and mining companies and consulting companies, right? And these are legacy firms. And so I think, I think when it comes to that kind of expectation, there was no expectation of young people to go out there and create a technology-changing company. Now that's all changed in the last 10 years. And that's spurred by—

5:48 Speaker C: Yeah.

5:48 James Alexander: Recent news like Afterpay, Canva, Atlassian, all founded by people that were under 25 when they got going.

5:55 Speaker C: Yeah, that's very interesting. And I get what you mean in terms of Australia has traditionally always been run by legacy firms, banking, mining, and so on. What do you think was the impetus for this change where now we're starting to see more of those founders?

6:12 James Alexander: Well, I think it's an interesting paradox in Australia insofar that we've never been lack of, we've always been very inventive. So we've never had a lack of inventive and entrepreneurial people. It's just, it's been very difficult for an entrepreneur to found a global business until the advent of essentially software and technology and the internet, right? And so if you look at the first generation of entrepreneurs in Australia, they really started the businesses that we all know now, you know, whether it's retail shops, whether it's, you know, shopping centers or whether it's essentially big consumer-style brands, often in food and beverage, you know, those were the types of companies that you could start and become, you know, maybe become big. But by and large, a lot of it was SME land, which is small businesses. And then with the advent of the internet and software, that kind of changed the whole equation. And the first time we saw that was really in Silicon Valley. And then obviously, that way of doing business has spread all around the world. And so, that spread has happened also in Australia. It's not exclusive to us as well, but it makes a big difference for us because we're so far away. And it's also a big difference because previously it was really hard and most people would just not believe that a small country would produce a big, you know, global company. But what we're seeing now is that's actually possible and that does happen. And that's changing the equation for everyone.

7:36 Adam Spencer: Yeah.

7:36 Speaker C: Yeah, it's interesting when you mention how it's quite hard for people to think about how a small country could produce those large organizations. And do you think that the limitations for Australia has always just been in terms of population?

7:50 James Alexander: It's one of the main limitations, yes. And what I mean by that is when you have a small population, you have less entrepreneurs to pull from by nature that it's small. And we've seen this time and time again in the history of innovation which is concentrated centres of people produce more ideas and more innovation. But equally in Australia, we're not that small insofar that, you know, Sydney and Melbourne, our two largest cities, are on a global scale quite large cities. A lot of Australians forget that. And as a result, they've got very healthy technology ecosystems. And what we're seeing now is the products of that, you know, very globally connected ecosystems. So— Yeah. Australia's, you know, lack of population density, you know, as a whole is made up by the fact that we're very globally connected, we're very well educated, and we have lots of money as a country. And so that's, that's kind of where we have a unique advantage, and, and we see that again in areas that we naturally excel in.

8:50 Speaker C: Yeah, absolutely. So James, I noticed that you've got a very extensive experience and profile in sort of the advisory and teaching roles within the startup ecosystem. And obviously now venture. What drew you to this space?

9:05 James Alexander: My experience with venture is I was an entrepreneur. I would call myself an entrepreneur from a very young age. I had a couple of different businesses when I was growing up, and I was always drawn to technology. So at my heart, I'm a technologist. I love technology in all its forms, and I love what that means for society. And then that drew me to working for startups. So I worked in some startups and with some startups during my time at university, which led me then to start my own incubator, which is the University of Sydney's Incubate program, and that sort of grew over time. So a lot of my experience with startups was just by working with hundreds of founders and learning by essentially working with them. And that's been a really interesting journey, which kind of led me down the pathway of how I best support founders and what I enjoy doing. Which is why I essentially started a venture capital firm.

9:59 Speaker C: Yeah, so from your exposure to, you know, those many different founders and startups, what have been some of your favorites that you've come across?

10:07 James Alexander: That is a hard question. In terms of favorites, I don't know, I guess it depends what you want to, you know, what you want to take away from each company. Because I've helped hundreds, right? And I've directly, and when I say helped, it's not like, oh, I got on a call. No, I directly have supported for months, given money to and backed, you know, hundreds. And so, so it's just different. Every company is different. So I think the takeaway here is— I think the takeaway here is not to try and bucket founders and, you know, the lessons from a company to generalize to everyone else. Every company is unique, and the reason that is is because every person is unique, and the only thing that makes up a company is people. So every company is unique. So the lessons I would take away is that founders come from all walks of life. I've always been surprised by the different types of founders we've seen. A lot of founders are underestimated in Australia because by the very nature that they've never done it before.

11:14 Adam Spencer: Yeah.

11:14 James Alexander: You know, and so we see a lot of that. In terms of some of the interesting companies, you know, one of the interesting ones that I backed very early on at my time at university through our incubator was a company called Abyss Solutions, which was doing robotics. And they've, you know, they've gone on to raise more money, employ people around the world, and they were researchers, right? And so that was really interesting. We backed another company that was doing, you know, mining data, looking at AI and using publicly available data to work out where there might be mineral deposits, which means that you can find some of these minerals easier and with less disruption of the land. And that was really interesting. And that got international investment. I mean, I can go on. I mean, I think the interesting thing for me is the amount of founders that have immigrant backgrounds and the amount of founders that when we started with them, never in a million years thought they would be a founder and ended up being a founder and doing quite well for themselves.

12:17 Speaker C: Do you see any sort of trends on what makes up a successful founder or company from the ones that you've advised?

12:25 James Alexander: Um, yes, there are real— I mean, it's really hard to profile a founder because anyone can be one. And so I think what I would say is My message to all these types of would-be founders and to the market typically is don't try too hard to over-profile what founders should be because when you end up doing that, all you end up doing is limiting who you think should be a founder. So I would say it's really diverse, but some of the personality traits that work really well when you are starting a business, personality traits which lend you to be typically more open-minded, coachable, so you're open to other perspectives, and what I call that kind of like childlike mentality of always questioning and seeking out new answers irrespective of whether you are, you know, whether you're talking to someone who's, you know, a veteran or someone who's fresh out of university. And like those types of character traits are pretty common among some of the best founders I've worked with, but it's really hard to generalize into, you know, an archetype because the reality is different people will bring different, you know, strengths to being a founder.

13:46 Speaker C: Yeah, absolutely. So aside from the openness characteristics, don't try to over-profile because it creates limitations when people don't align necessarily to those characteristics.

13:57 James Alexander: It creates value-laden limitations, and this is where we end up with this whole situation that we see a lot in Australia, which is like, you know, ah, oh, that person can't be a good founder because they're 23 years old. It's like, okay, that's a very, you know, there's a lot of baggage in a statement like that.

14:17 Speaker C: Yeah. So what you mentioned earlier was quite interesting when you said that In Australia, it seems that a lot of our founders who don't have prior experience do get underestimated by virtue of the fact that they've never done it before.

14:31 Adam Spencer: Yeah.

14:32 Speaker C: Then what seems to be the— what's the solution here? Because in San Francisco, for example, does that sort of underestimation occur as well?

14:39 James Alexander: I think it occurs everywhere. Like, I don't think it's unique to Australia, and Australians love to think that every problem they have in the startup land is unique to them. It's not, it's not at all. What I think changes the equation is getting a couple of things. So A, the support programs for early entrepreneurs need to be there. So I call this startup infrastructure. So one, you need support infrastructure and programs that can help people develop the skills and education and knowledge to launch their ventures. And we're seeing that happen at university level, which is really, really great. But we're also seeing it happen, you know, generally across the market. Yeah. The other part is early-stage capital, and that's the part that's changed drastically over the last 10 years. And previously there was no capital available, so by definition, if there's no capital available, it will go to the most mature entrepreneurs because they're the less risky ones from an investor perspective. But as we get more investors, the types of things they back become more diverse. And that's what we see in big cities as well. And so the key here is to encourage, you know, more entrepreneurs to support them, but also to encourage more diverse investors to bring their perspective because diverse investors back diverse types of companies.

16:02 Speaker C: Yeah, absolutely. When would you say that this sort of support infrastructure really started to kick off, or maybe it hasn't at all in Australia?

16:11 James Alexander: It started to kick off really at the turn of 2010 for me. And I know that because I was part of that, right? So 2012, I started Incubate, which is one of the first student-focused university-based accelerator programs in Australia. There was essentially only two at the time. Now every university has something, or every major university I should say, has some sort of program. So it's completely changed in that regard. And so that infrastructure really started around then. Before that, it was very niche. So there were very pockets of really successful entrepreneurs here and there, but you really had to know whose door to go knock on to get the advice. Now it's a lot more visible, it's a lot more accessible, you know, there's a variety of different programs you can access.

17:03 Speaker C: Hmm, I see. So it's, it's, it's been around for quite some time then, at least a decade.

17:08 James Alexander: It started to change in seriousness about a decade ago, and it's grown a lot over the last 10 years, and it's still growing today. And so it's really good to see. So it just, you know, if you think about support, there's different ways to think about startup support. So the broad ways to think about it is one is education, aka, you know, what are we doing to encourage more young founders and teach them the skills? And entrepreneurship education has had a sea change in Australia. The other one is capital. We've seen that increase significantly. We are seeing record levels of funding year on year. So last 3 years, every year's broken the record previously. And then the other component is successful outcomes. And we've seen that as well. And so these are all the signals you want to see basically to encourage a very healthy sort technology ecosystem.

18:03 Speaker C: What would you say that we could still be doing better?

18:06 James Alexander: So, I mean, that's, that's a hard question to answer because it depends where you're sitting from. It's fair enough. But I would say what we could be doing better is backing more young people in Australia to do big world-changing things. That's probably the simplest thing I would say. It just doesn't happen. It's still, it's still not in our culture. Our mentality that that should happen. And I think, I think when that gets more accepted, that's great. And maybe that's something to do with tall puppy syndrome. But the more examples we can see of that, the better we'll be going forward. But overall, I'm very positive. Everything's pointing in the right direction. The changes— everything's going really well. And we've got a really good technology ecosystem in Sydney and Melbourne and emerging across Australia. So it's very positive from my perspective.

19:08 Speaker C: So far we've been talking about the role of private investors as well as universities. Do you think government has a role to play in this?

19:16 James Alexander: Yeah, of course, always.

19:18 Speaker C: And what would you say that from the government perspective that they should be doing?

19:22 James Alexander: Government has a few different levers to pull, um, and one of the most important levers it can pull is strategic funding for emerging technology fields. It's a complete myth that government has no involvement in helping create markets. It absolutely does. The bedrock of almost all the technology markets has some element of government funding in the very early days, and so Some of those levers it can pull is around commercialization funding for what, you know, you might call platform technologies. Very, very important. And those types of funding has to be very big, has to be very strategic, and has to essentially look to pick winners. And that's a complicated thing to ask for government, and not always, they don't always realize that, especially in a country like Australia where government policy and technology innovation has been a constant flip-flop. And so you don't have the same agencies you might want to see in Australia which can keep a consistent investment of dollars into consistent industry verticals, right? And so that's a big problem in Australia because every government that comes in every year flip-flops and changes. And so where I think it could do a much better job is supporting a consistent agenda over multiple different governments. And that's really difficult because it needs to have an agency. And that's what we lack in Australia. We see it in some areas in terms of research funding, like the ISA, but like we should see more of that strategic sort of investment. The other area that we need to see more investment is defense, and that's changing as well. So defense have a big role to play. And then the other areas are sort of what I call sort of general incentives, right?

21:06 Adam Spencer: Yeah.

21:06 James Alexander: And so we've seen some of that happen with organizations like Jobs New South Wales and Startup Vic and in Queensland Advance, the Queensland startup body as well, which name escapes me right now. And those are really positive things as well. And so they're doing some stuff right in that regard, but at a federal level, we've really lacked leadership in technology over the last few years, unfortunately, and that's had an impact. Yeah.

21:32 Speaker C: Yep, definitely. So what I'm hearing you say is that it seems the biggest challenge is just that funding is ultimately tied to election cycles, and every single time there's a new change in government, everything just gets thrown out the window and starting again.

21:44 James Alexander: Yep, that's right. And that, that, that for government, that's bad, um, and I think that's a solvable problem for them as well locally, but they absolutely have a role to play.

21:53 Speaker C: Yep. Do you have any unpopular opinions about our startup ecosystem?

21:58 James Alexander: Unpopular opinions about our startup ecosystem. Yeah, sure. I think our startup ecosystem is much better than we give it credit for.

22:07 Speaker C: Hmm.

22:08 James Alexander: Everyone likes to shit on our startup ecosystem, you know? Everyone thinks we do a terrible job and universities are terrible and the VCs are terrible and the founders are terrible, they don't know what they're doing, and I think that's complete crap and utter crap. My experience is the VCs are best in class, the founders are incredible and ambitious, and the universities do an incredible job supporting entrepreneurs and helping commercialize things. And so I think part of the narrative of Australia needs to change from we're crap and we don't know what we're doing to no, actually we're pretty good and we're doing really well and this is why we will win. And I think when we change that, build that confidence, it's that confidence piece. Australians lack the confidence to play on a global stage. And when we build that confidence as a national agenda, then we will start to help change some of this mentality of, you know, we're too small to do X. And I think, I think when we change that, that becomes really powerful. And just have a look at our finance and our mining resourcing sector. We never think we're too small in resourcing to do, you know, whatever projects we have to do. We're the complete opposite. We think they're the best in the world. And that has a big impact. Same with education from a higher education sector. We think we're one of the best in the world for higher education. And we see that in the way the universities attract students overseas. And so, building that confidence is really important, but unfortunately, it's easier said than done. And I think that that confidence will build over time. So it's just a time question for me.

23:49 Speaker C: Yeah, absolutely. One of the biggest criticisms that I do come across with, you know, the Australian startup ecosystem is it's tied around cohesion and collaboration. And it's almost like when there is funding, it's a zero-sum game. And so all accelerators out there are trying to do the same thing, but it's sort of cannibalizing each other. And so there's never truly one whole ecosystem. And, you know, Queensland's ecosystem is Queensland, New South Wales is New South Wales, New South Wales. Do you think that's as big of a problem?

24:21 James Alexander: No, not at all. I think that's great. I actually think I encourage more competition across the states. So, this is probably my other— this is probably my other differentiated opinion, I'll say. I think a lot of that type of criticism comes from overseas commentators when they look at Australia and go, you're too small, therefore you should have one coherent approach. The reality on the ground is that's not how it is. And the reality is we compete with each other for various projects, for various things, and very, you know, uh, to be the best. And I don't think that's an issue at all. I think where it becomes an issue is not a state level, state-by-state level. I think at a federal level, as I said before, there needs to be cohesion on federal strategic goals because federal government is a different lever to pull than state government. And state governments will always have their own infights. Just look at Miami versus San Francisco. Like, it is— it happens everywhere around the world. There's nothing wrong with it. It's just competition. Um, I think it's the wrong thing to focus on.

25:23 Speaker C: Yep, interesting.

25:25 James Alexander: It's just noise. Yeah.

25:27 Speaker C: So lastly, James, if a new entrepreneur came to you, they've never started a business before, what's one piece of advice you'd give them to slightly increase their odds of success?

25:37 James Alexander: Uh, that's too much advice. Um, I'm trying to think of something that's interesting rather than something that you'll hear a lot.

25:51 Speaker C: Fair enough.

25:53 James Alexander: I would say understand what game you're playing, and what I mean by that is different types of founders have to play different types of games, and so If you're the type of founder that comes from, you know, successful background that's been in the industry, the type of game you play to get going is very different to the founder who's 19 years old, never done this before, but has a lot of ambition and passion. And so I think understanding where you're coming from and therefore what are the things you should do from that position will go a long way in helping you work out what your steps should be. And how that might improve your chance of success. So, you know, a lot of founders kind of look towards Elon Musk or, you know, whatever global entrepreneur they fancy and go, you know, they do these things and therefore I should do these things. It's like, it's great aspirational stuff, but you're not playing the game of a public listed company, you know, CEO. And so I think just understanding that and then understanding therefore what I should listen to as an is it goes a long way.

26:59 Speaker C: Hmm, interesting. So it's just about understanding, you know, your position as a startup founder and then playing your cards to the next steps. So if you're a 19-year-old first-time founder, then you should be playing within that sphere and not trying to emulate someone like Elon Musk who's got multiple companies. Is that what you mean?

27:19 James Alexander: Yep, that's right. You play a very different game to someone who's, very successful, a billionaire, and has done it a few times. And I think a lot of people forget that, and it's just like, no, no, no, you know, you gotta know where you're coming from and therefore what you're doing, 'cause that will help you open up the doors you need to open up.

27:35 Speaker C: Yeah, it's not a magic pill. You can't just copy paste what someone else has done.

27:39 James Alexander: There's no such thing as a copy paste in startup land, unfortunately.

27:48 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.