Episode 2 begins in the aftermath of the dot com bust. We explore the story of LookSmart through the lens of its co-founder, Evan Thornley and the tough choices he had to make. Up until this point, founders largely worked in isolation, however, they began to meet up more frequently after the bust, often in pubs or cafes, thanks to community groups like Innovation Bay. Conferences such as TinSHED and Web Directions would shine a spotlight on the fledgling startup ecosystem. We tell the story of some of Australia's first high growth startups in the early 2000s. The likes of Atlassian in 2003, Campaign Monitor in 2004, Red Bubble in 2006 and many more. Startup infrastructure followed shortly after and we saw the country's first incubators, accelerators and co-working spaces emerge.
Just as things were finally looking up, another economic crisis had gripped the world once again. The Global Financial Crisis in 2008 undoubtedly caused a lot of grief, however, Australia was spared the worst of it. We highlight how the GFC held some unexpected benefits for Australian startups. As the end of the decade approached, new inventions like smartphones and social media and the mainstream adoption of Wi-Fi would come to touch every aspect of our lives, laying the foundation for a new wave of Australian startups - some of the most disruptive that Australia and the world would come to see.
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Alfred Lo: 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.
Adam Spencer: That's Evan Thornley, co-founder of LookSmart.
Alfred Lo: When we took the company public, when we took LookSmart public 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.
Adam Spencer: LookSmart was one of the many companies that had grown grew incredibly fast during the dot-com boom of the late '90s, but in April 2000, the bubble was about to burst.
Alfred Lo: We sacked 162 people in one day. 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.
Adam Spencer: Hi, I'm Adam Spencer, and this is episode 2 of the history of the Australian startup ecosystem. We'll continue our story after these messages from our sponsors. We're picking up our story after the dot-com crash, which wiped around $5 trillion from the US markets by 2002.
Hamish Hawthorn: But yeah, around the 2000s, tech kind of died off in a big way.
Adam Spencer: Matt Barry is founder and CEO of Freelancer Limited.
Hamish Hawthorn: Because you had the dot-com crash and everyone was making fun of startups. You had Dot Bomb and all that. The Startup: The Movie came out, all the ridiculous ideas. People were ridiculing Pets.com. So it really died away for quite a number of years.
Adam Spencer: Australia wasn't spared either, as described by former Prime Minister Malcolm Turnbull.
Cameron Adams: You know, the tech wreck knocked a lot of confidence out of investors in the tech sector in Australia.
Adam Spencer: And so it took a while to build up again. Many had predicted the internet would dramatically alter every aspect of modern life. Modern life, and during the dot-com mania, investors scrambled to buy into this dream. After the bust, it seemed to many that this dream was dead, but ultimately the dot-com bust would prove to be merely a speed bump in the trajectory of tech startups and the internet.
Alfred Lo: 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. 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, you know, went on the, you know, the Amazons and Ebays and then shortly thereafter Google and others, you know, went on to become immensely valuable and their valuations then looked trivial.
Evan Thornley: Yeah.
Alfred Lo: Compared to where they are now. So 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, you know, which ones had a definable path to victory and some sort of, you know, sustainable competitive advantage.
Adam Spencer: For many years after the dot-com crash, economic conditions for Australian tech startups were very difficult.
John Allsopp: It was a wasteland to not pull punches.
Adam Spencer: Alfred Lo is the co-founder of Harvestbee.
John Allsopp: It was really a vacant period in the Australian tech scene.
Adam Spencer: We were still reeling from the dot-com blow-up from 2000, 2001. There were very few startups, tech startups that you could really call on. There was certainly not really any investment scene. Despite this, there were still many people excited by the potential of the internet and other emerging technologies.
Cameron Adams: The web had basically gone into hibernation.
Adam Spencer: Cameron Adams is the co-founder of Canva.
Cameron Adams: This big promise that was the internet hadn't really materialized and lots of companies had dissolved and vanished. But what was left behind was a really strong technology base and I think it was a great playground for engineers, technology-minded folks who just wanted to poke around and play with things.
Adam Spencer: In the past, many of these technology-minded folks had worked in isolation from one another. But during the 2000s, they started to meet up much more frequently.
Malcolm Turnbull: We started doing in-person workshops and started doing them right around 2000, right around the dot-com bomb.
Adam Spencer: John Alsop is co-founder of Web Directions.
Malcolm Turnbull: And that was the first time almost literally I'd met anyone who did what I did. I mean, I knew people online. I went to New York and met a couple of people there, but I basically didn't know anyone in Australia. And there were no meetups, there was none of that stuff. Right? So if you knew someone, you knew them kind of online. So we put this word out and a half dozen people— Peter Oddery, who was at Whistle Loud, amazing designer who was Fairfax at the time, Tim was one of the founders of BuildKite, Tim Lucas, and a couple of other people— we all had a beer at the Beach Road Hotel in Bondi. And that was sort of what it was. It was like people knew, oh, let's get a coffee, let's have a beer.
Cameron Adams: I think the earliest memory I remember of catching up was with, you know, Mick Lubinskis and Marty Wells. They used to put on this night called Stirr.
Adam Spencer: Dean McAvoy was the founder and CEO of Spreets and is currently a non-executive director of Tech Sydney.
Cameron Adams: You would catch up with a bunch of other geeky people like us who were doing weird stuff. Mike Cannon-Brookes turned up one time. I think Scott Farquhar turned up another time. And you just caught up for beers, but sometimes they played these like weird games. I remember one game particularly where you threw random words and put them up on two whiteboards. It was like banana and truck. And then randomly you picked two names out of the hat. You were split into teams, you had to come up with a business based upon those two names. So we were like, we're Banana Truck, and we were like, we're a fruit delivery service. And you had to get up and do the pitch at the end, and whoever gave the best pitch won free beers at the bar or something. So, you know, there was some educational component and sharing component, but probably sitting around a table with a bunch of entrepreneurs now that are worth billions.
Adam Spencer: I asked Ian Gardner, co-founder of Innovation Bay, about what the startup landscape looked like when he moved to Australia in 2002.
Ian Gardiner: I mean, the whole thing started when I moved to Australia. I'm Scottish, you might notice. I basically fell into running a startup, and I didn't know anyone, so there was a group that was around when I came to Australia called internet.com, and it was awesome. Like, Mike Walsh, who some of you might know as a sort of futurist and speaker, he was running it at the time, and they were putting on events at Cafe Sydney in Sydney, so I turned up kind of fresh off the plane from Scotland, and I was going to these incredible events and this beautiful morning on the outdoor deck at Cafe Sydney overlooking the harbour and the bridge. And I'm like, this is the best, and meeting some great people. And then about 2 months later it went bust because it was kind of, you know, the whole thing was at the end of the dot-com boom. And then there was no community, so I didn't really have a group, you know, and I wanted to find one, but I couldn't. So I guess it was the founder in me, it's like, well, shit, I should go and launch one. So Innovation Bay came about as a result of that. Launched Innovation Bay along with Faidan Stowe. And it was a community group for startups. And, you know, the first few events were just, you'd call them meetups now. We met in a bar, you chucked some money in a hat to cover the catering, and we just heard from a speaker. So, people came to hear the speaker, but they also came to meet each other. And I guess, by extension, we started building the community just off the back of that. It was scratching our own itch. But those early days, ecosystem, community was not a word that was part of the vernacular. And for, you know, me and Faidan, when we were doing this, it was more about just, I guess scratching our own itch. Like, we were tech founders or in the tech community, and we wanted to hang out with like-minded people, and that was our way of doing it. And we didn't really think about what it was or why we were doing it. We just did it because we— it felt right and it felt good and we enjoyed it.
Adam Spencer: Thanks to community groups like Innovation Bay, as well as informal meetups at pubs and cafes, Australia's tech startups, which had up until this point largely worked in isolation, were starting to build communities. There were also some more high-profile events held in the 2000s that helped grow the fledgling startup ecosystem.
Hamish Hawthorn: Yeah, Sydney was taking off 'cause you had the Olympics, 2000, and so it was exciting. We were finally becoming a world city.
Adam Spencer: Again, Matt Barry.
Hamish Hawthorn: There were some VC funds that were trying to get going, and at this point in time, there were no real successes, not like it is now, but the guys who really got everyone excited, I think, were the Tin Shed guys. So, Jannes Hooker, who's actually who's actually now the CEO of LJ Hooker, he started a thing called Tin Shed, and Tin Shed was like a clone or compatriot of Garage.com, which was basically a startup incubator sort of thing, early-stage investor. And so with Viv Stewart, Janus Hooker, and a bunch of other guys, they ran a massive conference. I remember it being run, it was about 2,000 people, and you had, it just got everyone super excited. It was like this brand new thing to Australia where, wow, there's all these guys starting tech companies, and there's people who fund your ideas, and that was, I think those guys really lit the flame flying in Australia. That conference was in Sydney, it was around 2000, and that was the thing that really got people super excited.
Adam Spencer: John Allsopp, who earlier told us about meeting up with other founders at the Beach Road Hotel in Bondi, helped launch the first Web Directions Conference in 2004. This was an event for people developing products on the internet at a time when this was still a relatively new field.
Malcolm Turnbull: It was sort of a place where a whole bunch of people who'd been doing web-related stuff got together and realized— and they can meet people doing what they do because back then probably even the biggest organizations might have maybe 1 or 2 people doing web stuff. We had a couple hundred people turn up including— I mean, one thing I always remember is one of the founders of Campaign Monitor. Young folks don't know, they were one of the first really early success stories of kind of Australian web startup world. This is before they even were— they were an agency that had built the software to do email marketing. Yeah. And I remember one of the founders coming up to me, he said, "Oh, this is so great. There's all these people doing stuff like us." And I'm like, "Wow." And he said, "Oh, we're looking to hire someone, right?" So, and I thought, "Wow, this is real. People will have real jobs in this industry now." And I remember a few years later joking to him, I just should have just taken a job with him instead of trying to bang my head against the wall and do the conferences for the last 20, well, nearly 20 years. I would like to think without being too conceited that Web Directions really did bring together people at a scale that hadn't been. And not just from Sydney, people were coming from Melbourne and even Perth. It was like, people coming from all over Australia. Maybe even a couple from New Zealand because, you know, if you did this stuff, there just wasn't anything else like it.
Adam Spencer: Nicky Shevack, co-founder of Startmate and Blackbird, shared with us his perspective on the state of the Australian startup ecosystem during the 2000s.
Mick Liubinskas: You had a bunch of successful companies. So Atlassian was created in 2003. Campaign Monitor, Halfbrick Studios, Redbubble, Akynx, these are all companies that were already successful in 2009, 2010. Even though you had great startups, you didn't really have great investors or you didn't really have great other parts of the ecosystem alongside those companies. But really the essential ingredient is successful companies, and certainly there had been many in Australia. They were disparate, they weren't talking to each other, the sort of circle of life the magic of Silicon Valley when someone creates a company, invests and helps the next generation, that moment hadn't happened.
Adam Spencer: As well as the startups Nicky mentioned, Kogan, CultureAmp and GoGet.com were all high-growth Australian startups that were founded in the 2000s, leveraging software and the internet to grow at a staggering rate. Kazaa really became one of the first high-growth startups in Australia's history in my reading of this Phil Maul, who today is partner at Main Sequence Ventures, told us about the rapid growth of one such company, Kazaa, which was founded in 2000 and purchased by an Australian firm in early 2002.
John Allsopp: That company very quickly exploded because it was an alternative to a very popular piece of software at the time called Napster, which was one of the file sharing applications. And that company, Napster, was being sued by the entertainment industry, and all the consumers moved very quickly over to Kazaa, and Kazaa moved very quickly to Australia. And before I knew it, I was the chief technology officer of Kazaa. It was growing like the clappers. At one stage, it was 80% of the world's internet traffic, because these are the days before YouTube and high bandwidth internet websites, and, and Kazaa was really how you shared videos of your party at the weekend and things like that. And that business became enormous, not by today's standards, but by the standards of those days, you know, having millions of users on it at any one time, tens of millions of customers altogether. That was a real roller coaster, and that all happened out of Military Road in Cremorne. in Sydney.
Adam Spencer: It was during the 2000s that we also started to see what could be considered to be Australia's first startup incubators, accelerators, and coworking spaces. While these concepts were in their infancy at the time, each would go on to become an important part of Australia's startup ecosystem. Dean McEvoy told us what he sees as the differences between the three.
Cameron Adams: An incubator is an entity that goes and actually builds your technology startup. So you might go with just an idea and they'll provide the technical resources and sometimes some of the marketing resources to sort of bring your idea to fruition. An accelerator takes an existing team that has the capacity to build and provides advice, mentoring, and guidance to accelerate the trajectory of your startup. And a coworking space is simply just an office space that allows, you know, collections of people who are building startups to live together, share off each other, and work off some shared knowledge. So that's probably the difference between an incubator and accelerator and a coworking space.
Matt Barrie: My name is Hamish Hawthorn. My first formal role in the startup ecosystem was when I joined ATP Innovations.
Adam Spencer: ATP Innovations, now known as Cicada Innovations, was first founded in 2000.
Matt Barrie: This was a startup incubator. The original founding members of this organization were the University of Sydney, the University of Technology Sydney, and UNSW. They came together with the New South Wales government to redevelop what was at the time a derelict industrial site. The Australian Technology Park is what came out of this. And so from this, there was the formation of a startup incubator.
Adam Spencer: ATP Innovations specialize in deep tech, a term used to describe companies developing new products based on science scientific discovery or engineering innovation. An example would be the Nucleus Group of companies we discussed in Episode 1, which developed pacemakers and hearing implants. These types of companies generally require lengthy research and development and large investment before they turn any amount of profit, which makes them different from software startups, which generally require far less development before they're able to bring a product to market. It was primarily these types of startups that ATP was created to support.
Matt Barrie: This incubator followed a very traditional model of what incubators were like in the early 2000s, a physical space. We had a building called the National Innovation Center that was based at the technology park. It was divided into a bunch of different spaces, not simply the coworking spaces we see around us today, but also things like clean rooms. We also had laboratories for medical device biotech companies. We also had manufacturing areas for particularly the photonics industry, which was a great strength and catalyst for the Australia Technology Park coming into existence.
Adam Spencer: Also in the year 2000, i-Lab was established by the Queensland Government to support early-stage technology companies. Both of these organisations could be considered among Australia's earliest startup incubators, though in the 2000s these concepts were still very much in their infancy.
Matt Barrie: In 2005 was a very different environment to what we see today. Even in 2005 it was still quite a unique thing to talk to somebody about being entrepreneur or working in a startup company. It wasn't something that really had any distinct identity yet. To be honest, entrepreneur still had a somewhat negative connotation back in 2005, 2006. If you called yourself an entrepreneur, it generally meant that you were somehow shonky in some way. It was generally that you had ripped somebody off.
Adam Spencer: Author and podcaster Mark Pesci, who moved to Australia in 2003, shared his perspective on the startup landscape during the 2000s.
Mark Pesce: When I came here in 2003, this was after the tech wreck, right? The tech market had completely imploded. And it wasn't until you start to see companies like Facebook emerge in that sort of post-tech wreck landscape that people start thinking about startups again as, I guess, viable business opportunities, maybe a way to think of it. And that was the period of time that I think Australia needed to be able to start to put some basic elements in place about how do you nurture at least the very first ideas. You also have like the 500 Startups and the Y Combinators also coming out of America, so you have these different models of how you can nurture many startups into being.
Adam Spencer: Y Combinator, an American tech startup accelerator founded in 2005, had great success supporting many early-stage startups. Polynizer, founded in 2007, was one of the first Australian organizations which aimed to emulate Y Combinator's model. Phil Maul told me how he came to co-found Polynizer after his time at Kazaa.
John Allsopp: It was my first taste of operating a digital business at scale, and that's where I met Mick Lubinskis, who was also working at Kazaa. We learned so much about building business businesses and technology, you know, on a world stage. And we also learned about the bad things that happened because we were sued by all the big movie studios and all the record companies. And so there were lots of challenging times there as well, but we came out knowing a lot and feeling excited about the digital universe that was unfolding. And Mick and I wanted to do that again. Looked around for startups, couldn't find any. And decided we'd make our own. At the time, there were a number of people in Australia trying to create Australia's version of Y Combinator, which had started recently in Silicon Valley. And Mick and I said, well, why don't we do that? And let's not wait to raise money. Let's just get started. Let's bootstrap. Let's offer what we know, what we learned at Kazaar.
Mark Pesce: Kazaar.
John Allsopp: To people. You offer the marketing, I'll offer the technology, and we'll get people going quickly. And over time, we'll raise a little bit of money and we can start investing in companies like Y Combinator does. And that's when the whole Pollinizer thing started. And really, it was around that time that the startup ecosystem that we know today really started to get into its stride.
Adam Spencer: Pollinizer was founded in 2007 and would shut its doors a decade later. Phil's co-founder, Mick Labinskis, believes that ultimately Pollinizer was a little too early to have the impact it might otherwise have had.
Malcolm Turnbull: Yes, I'm really excited about what Pollinizer was able to do in terms of the positive impact in the industry, but we spent so much time learning about it and creating, investing in it, in the creation of it, that we didn't actually invest in enough good companies. I will unfortunately always look at Pollinizer as massively underachieving because even though we had a couple of good companies come through it, we were just a few years ahead of the big growth curve.
Adam Spencer: Many people we spoke to for this series echoed Mick's sentiments here. It wasn't until the 2010s that things really kicked off for Australia's startup ecosystem. During the 2000s, any startup support organisations that did exist had limited reach and visibility throughout the broader community. And without an established startup ecosystem, there were still many practical hurdles for early-stage startups.
Phil Hayes-St Clair: Yes, so I'm obviously from Germany. I came to Australia in year 2000 to work as a postdoc in the CSIRO.
Adam Spencer: Sylvia Pfeiffer is CEO of Coviu.
Phil Hayes-St Clair: And by 2006, I'd gotten to the point where we'd been working on digital video technology for 6 years, and I'd seen the birth of Google, YouTube was born around 2006. We were developing a video search engine within CSIRO, and so in 2006 I decided to also go out on my own and build a digital technology company, a video technology company. So in 2006 there were a couple of VCs around, but you can count them on one hand. They had maybe, you know, a couple of million dollars of investment for digital companies. Most VCs would be investing in mining or maybe some in digital technology, but very few. I was going out to raise capital and the first thing I was always asked was, "So you're writing a couple of software programs. Why can't you just do it in your garage and why do you need investment for that?" So there was just no appreciation of the complexity and the effort required in building a digital company. There were very few people that would actually provide support, and you do need support companies such as cheap or affordable lawyers and accountants and that kind of stuff. So it was just really difficult to do it back in the day and very expensive.
Simon Thomsen: Well, there wasn't really a lot of infrastructure and support.
Adam Spencer: Jodie Fox told us about the various friction points she encountered when co-founding Shoes of Pray in 2009 out of her apartment.
Simon Thomsen: I was reminiscing about the other day, it's just crazy, it was this one-bedroom apartment in Surry Hills and I remember having a team of 8 people in there, hundreds of pairs of shoes over a period of time where it was summer and it was 40-degree days and no air conditioning and it was kind of amazing. And I do remember as well, even, you know, service offerings were really tough to to engage with. So a good example was when we went to set up our first bank accounts and we needed to submit business plans in the format that the bank prescribed. And then because we were global in this online retail world, we needed to be able to, you know, trade in different currencies because it increased our conversion rate and reduced consumer friction in the funnel. And we needed to have separate accounts for each currency, and the fees were becoming phenomenal, and the administration was really challenging, and It was when PayPal wasn't even really fully accepted in Australia because the banking regulations didn't contemplate a financial institution that was neither a bank nor a customer. So, you know, there was lots of kind of friction points for us very early on because the system itself didn't contemplate, you know, what it was that we were looking to build or that we were operating in.
Adam Spencer: We'll continue our story after these messages from our sponsors. Today, stocks have fallen to their lowest level since 1997, as the Dow Jones continues to plummet. The global economic collapse of the last several months has already surpassed the events of 80 years ago, which triggered the Great Depression. We started this episode with the dot-com crash of 2000, and before the end of the decade, another economic crisis had gripped the world once again. The Global Financial Crisis of 2008 caused many to lose their jobs and, according to CB Insights, global VC funding for startups dropped 10% in the fourth quarter of that year. While Australia was spared the worst of it, economic growth did slow significantly and the unemployment rate rose sharply. But while the GFC undoubtedly caused a lot of grief, most of the people we spoke to argued that in fact the GFC held unexpected benefits for Australian startups.
Hamish Hawthorn: The startup scene really only took off again around the global financial crisis.
Adam Spencer: Again, Matt Barry.
Hamish Hawthorn: You had an intersection of a financial crisis, so people were being laid off and put out of work, and stock market was crashing around the world, and this, that, the other. So there's 3 things happening there. You've got people looking for work, you've got companies looking to hire people cheaper, And you've also got people who are looking to bridge a period of time with a startup before they go back to a real job or before their company can function again. You had a lot of people, for example, out of work from the banks who were like, you know what, I will get back into banking, but I'm going to give that startup a go for a year or two or help my wife's company or what have you and work on a side project for a period of time before I get back in there.
Phil Hayes-St Clair: Well, the GFC hurts everybody and you don't wish it upon anyone. It creates extreme stress in particular for financial markets.
Adam Spencer: Jasmine Grigalinas is founder and chief evangelist of Circconomy, formerly known as the world's biggest garage sale.
Phil Hayes-St Clair: But I think like bushfires create new growth, I think GFCs create new growth. I think the GFC does definitely hurt and burn out some businesses and, and maybe burn them to the ground, but what it also does is it actually creates that new growth, new ideas, new innovations, and new energy, and potentially even new people in an ecosystem that does constantly need maybe to burn to around a little before it can rebuild.
Cameron Adams: I think in general, the GFC and most external financial events don't have much of an impact on the startups that really matter.
Adam Spencer: Again, Dean McAvoy.
Cameron Adams: What it tends to do is it tends to take the people who sit on the sidelines, the people who've jumped in because it's, you know, hot and new, and they tend to not be the best founders or the best companies. It's the people who have this real authentic connection with a problem that tend to make the best startups. And in times of financial crisis and in times of hardship, The people that stick at it through those hard times are the founders that actually have the most success. So in fact, it takes all the bystanders and people who are here just because it's cool and hot out of the market, which I think is a good thing.
Mick Liubinskas: I think the other element that really laid the groundwork was the decision by Google to open up a local engineering office.
Adam Spencer: Again, Nicky Shevak, who told us about Google opening an office in Australia in 2006.
Mick Liubinskas: Google Maps was invented and built in Sydney. Google acquired the company, so the team was in Sydney beforehand, but they also built large parts of Google Chrome, large parts of other Google products.
Evan Thornley: I'll go back to 2007, which is when I joined Google.
Adam Spencer: Allan Noble is the founder of OzOcean.
Evan Thornley: So I was hired by Google to grow their R&D presence in Australia, to run the R&D center in Sydney. I was given the task of of essentially growing the engineering center from 20 engineers to 150 engineers in 3 years. Well, I didn't stop there. I kept hiring and growing the center. We ended up, by the time I finally moved on from Google in 2018, there were over 650 engineers working for Google in Australia. Now along the way, a few interesting things happened. Shortly after I joined in 2007, Lars and Jens Rasmussen set about to build Google Wave. Mm-hmm. And that became a huge focus for the engineering— Google's engineering center in Sydney. So Google Wave was released in May 2009 amid a flurry of excitement and activity. Unfortunately, it didn't really achieve the traction with consumers that Google had hoped for. It was a bit of a disappointment, unfortunately, and Google canceled the product, you know, barely a year later. It was August 2010. Mm-hmm. 10. Now that was a very hard decision for Google, but it turned out it had very great unintended consequences for the Aussie tech startup ecosystem because it unleashed a flood of tech talent onto the local ecosystem. Because the, the kinds of engineers that had been attracted to work on Google Wave tended to be the engineers that were perhaps a bit less risk-averse, a bit more inclined to work on something a bit radically different. And so many of those engineers, when they found themselves no longer working on Wave, they started chomping at the bit. They thought, well, maybe I should be looking at startups instead. It didn't happen overnight, but it certainly has happened. And in the intervening years, we've seen dozens, if not possibly now in the low hundreds, of former Google Australian engineers essentially go out into dozens of Australian Aussie startups. Perhaps the most famous example would be Canva's Cameron Adams.
Adam Spencer: So to briefly recap our story so far, despite two economic downturns and limited startup support infrastructure, the 2000s saw a wave of Australian high-growth startups and the community continued to grow thanks to conferences, workshops, and grassroots community groups and informal meetups. And while the dot-com crash had soured the promise of the internet for some, the 2000s would see 3 new technologies come to fruition which would further propel the internet into the mainstream: Wi-Fi, social media, and smartphones. Collectively, these technologies had an enormous impact on the world at large and the world of startups in particular.
Phil Morle: Wi-Fi has played an enormous role in the growth of, of the tech startup industry.
Adam Spencer: Alan Jones is an investor and interim CEO of Fishburners.
Phil Morle: Prior to Wi-Fi, you had to connect your computer to everybody else's computer via an Ethernet cable. And generally speaking, that meant there had to be a little socket in the wall where you could plug in. And the cable and the sockets and the device that connected them all together and connected that to the internet was pretty expensive and non-trivial to install. So offices had them and corporate campuses and maybe universities. But almost nowhere else, right? So Wi-Fi let us work from informal spaces. It allowed us to be connected to the internet from home without interrupting everybody else's use of the telephone. And it also meant that we could collaborate and do our own work at the same time.
Adam Spencer: Wi-Fi itself was in large part an Australian innovation made possible thanks to groundbreaking research and development done during the '90s at the CSIRO. I'm going to take a brief detour to acknowledge CSIRO's long history of innovation in Australia. It was initially formed as the Advisory Council of Science and Industry in 1916, so its history goes back over more than a century. The very first computer in Australia was owned by the CSIRO, which first booted up in 1949, making it one of the world's very first electronic computers. Some of the CSIRO's most notable inventions include extended wear contact lenses, polymer banknotes, the insect repellent used in Aeroguard, and of special importance to our story, key components of Wi-Fi technology.
Cameron Adams: Wi-Fi is the most extraordinary thing that we have given the world.
Adam Spencer: Simon Thompson is the editor of Startup Daily and the host of the Startup Daily Show.
Cameron Adams: We should be incredibly proud of this. We could have a National Wi-Fi Day and just have another day off, which would be great, where we all celebrate And just like Wi-Fi, the introduction of smartphones beginning with the iPhone in 2007 brought more and more people online.
Adam Spencer: Obviously iPhone 2007, I still remember seeing Steve Jobs release that. Phil Hayes-Sinclair is co-founder and CEO of DropBio Health. You know, when I think about him saying on stage, "Are you getting it yet?" about the fact that we combined all these things into this device. I did remember thinking, wait a second, this is going to change everything. It wouldn't be understated to say that everyone is trying to pursue something that sort of leverages off the back of that change. And that's really, really exciting.
Phil Morle: So what happened with smartphones, right, was basically in that first generation of Australian tech startups, to get you to try my tech startup, I had to get you to my landing page. And you were on your computer mainly at work and maybe in the evening. Evenings, right? And you carried around a phone in your pocket that you could send text messages to and from and you could make calls, but that was all it did. So in order to get you to my web address, I had to get you to remember it. And the way that I would do that would be by plastering things in your real world with my ads, you know? So I would put ads on the back of buses and cinema screens and television commercials, radio ads, wherever I could get them. There's old people out there who will still remember the sound of the Yahoo Yo! Which was our signature sign-off on our television and radio commercials.
Adam Spencer: Alan Jones worked as a product director for Yahoo during the early 2000s.
Phil Morle: Now we were building one of the biggest online media properties ever, and most of our advertising media was spent in physical spaces instead of on the internet, right? And all of that was because the time between when you were exposed to the brand and when you actually got to sit down and type in www.pets.com, like, that might be 5 or 6 hours in which lunch, a bunch of other stuff might happen. And so the huge thing that smartphones changed for the tech startup industry was suddenly we could reach people in between those two tiny slices of their day. You know, so there was a slice of day when you're at work, a slice of day in the evening when you're on your computer. The rest of the time you're not thinking about tech startups at all. And now with a smartphone, we could reach you with a— initially with an email, and then, you know, later you would check into a social media app. Mm-hmm. To see what was going on and we could serve you an ad there. And then eventually we were able to send you a push notification, actually make you go, "Ooh, my pocket's vibrating," and pull it out and, "Oh, Facebook wants to tell me that my friend just liked my photo," you know? Another thing that changed around that time was social media, the early versions of social media started to bring a broader set of society onto the web for the first time to rediscover with old university friends and old high school friends what they were doing. What we're doing now. And then the other thing that really changed is the technology industry realized that the power of the long tail, that it would be much more effective to sell clicks rather than impressions and only charge advertisers when somebody clicked on the ad. And so that made online advertising much more accessible for, for a much broader set of much less well-funded online brands to get going. When they only had to pay for clicks.
Adam Spencer: So throughout the 2000s, Wi-Fi, smartphones, and social media hastened the mass adoption of the internet. After the sputtering start of the dot-com boom and bust, the internet was now well and truly in its stride and would ultimately touch almost every aspect of human life. The global economy was in the middle of a dramatic shift in which software companies delivering online services would disrupt many existing industries. Between 2011 and 2015, we would see a new wave of Australian startups, many of which were software companies providing online services, including Canva, Airtasker, Buildkite, Afterpay, Sendle, and Shippit. During this time, we also saw an explosion of new organizations founded specifically to support Australian startups, such as Startmate, Fishburners, Square Peg, River City Labs, BlueChilli and Blackbird. While not everyone agrees on an exact timeline, most of the people we spoke to for this series agreed: before 2010, Australia didn't have a true startup ecosystem. It was during the early 2010s that we saw a huge explosion of startup activity, and from that explosion, the Australian startup ecosystem finally emerged.
