Sponsors

Thanks to our sponsors for helping to make this episode of The Startup Retro possible.

Rippling

Are you a founder overwhelmed by HR, payroll, onboarding, and IT tasks? Simplify with Rippling: an all-in-one platform for your global workforce.

Get 3 Months Free 

Teamified

Build a top-notch team fast with Teamified. Teamified offers fractional CTOs, contractors, and remote team members from the Philippines, India, or Sri Lanka. Cut hiring times by 50%.

Get started 

The Day One Network

The Startup Retro is part of Day One, the podcast network dedicated to founders, operators & investors.

For broader updates on the Day One network, including news about other shows and network-wide updates, sign up for the Day One Newsletter. We are dedicated to creating content that helps Australian founders succeed.

Sponsor the show

Want to become a sponsor? Send us an email.

‍

Will Richards (00:00):

This podcast was recorded on the lands of the Kaurna and the Kulin Nation.

(00:06):

G'day and welcome to The Startup Retro, a weekly show where we help you level up on the Australian startup ecosystem by giving you an insider's view on Aussie startups and venture capital. I'm Will Richards and on this week's episode of The Startup Retro, I'm super excited to be joined by Cheryl Mack from Aussie Angels as Gemma is off in Italy for the next few weeks. Cheryl comes with a heap of experience from the early angel investment space and some great insights on the news of the week. In today's episode, we dive into..

Cheryl Mack (00:33):

Uber Partners with Turo following the end of Car Next Door.

Will Richards (00:36):

Premier Capital's new growth fund.

Cheryl Mack (00:38):

The sale of AirTrunk and a massive exit for the founder.

Will Richards (00:41):

The highlights from this year's Startup Daily Awards.

Cheryl Mack (00:44):

Safe Ag Systems who are the SafetyCulture for farms.

Will Richards (00:48):

This podcast also includes an interview with David Burt from UNSW Founders, where we discuss Labor's proposed cap on international students and what that means for the Australian startup ecosystem universities and the economy more broadly.

(01:04):

Let's jump into the headlines and a headline that just hit the news this morning was that Uber is now pivoting to a partnership with Turo after just turning the lights off of its partnership with Car Next Door, which was an Australian startup it acquired a few years ago for $105 million. It's basically turned off that partnership and now working with Turo instead, which is another US-based business, but has a really strong presence here in Australia. What did you think of that Cheryl?

Cheryl Mack (01:30):

Yeah, it's kind of funny that one minute about a week or two ago, it feels like Uber was saying things like, oh, well, we can't make Car Next Door work because of car ownership costs and people are stealing cars and a lot of kind of excuses that felt a bit random or insufficient based on their previous investment. But Turo really did land in Australia with a bang, so I can't blame them for wanting to partner with Turo.

Will Richards (02:02):

I guess it's a global presence that already exists as well, so that it maybe just works better for Uber to use that as well. They were saying the drivers that they were getting with Uber were not as respectful of the vehicles and not as high quality, but then what you're sort of seeing now is everyone who was using the Car Next Door app via the Uber app is now just going to be using... It's the same group of people who will now be using-

Cheryl Mack (02:23):

It's the same group of people. So the excuses make me question and the timing, the fact that they purchased, shut it down, partnered all in the span of a very short period of time, it feels like, is a little bit questionable as to was that the strategy all along?

Will Richards (02:41):

Yeah, exactly. Well, $105 million is a lot of money to test an idea out, but I guess when you're Uber, it's maybe not.

Cheryl Mack (02:48):

I think that's a rounding error when you're Uber. That's probably not material. The accountants weren't picking that one up.

Will Richards (02:53):

Yeah, and so some stats on Turo's year so far, they've had 134% rise on bookings year-on-year and host earnings, so these are the people who put the cars to be rented out, they've had their income go up by 189%. So I think if you're sitting there right now with a vehicle on Turo, you're pretty happy with how it's been going and probably where it's going to go in the future with this increase in demand.

Cheryl Mack (03:16):

Oh, for sure. Also, they've got bonuses and benefits for becoming a Turo driver right now, so I think with rivals being shut down and bonuses, I don't know, I've got a car, maybe I'll register on Turo.

Will Richards (03:30):

My car is... I don't think it actually qualifies because it's too old, unfortunately.

Cheryl Mack (03:36):

You got a junk box, one of those rally cars.

Will Richards (03:39):

Yeah, it's unlike Airbnb where you can kind of put anything on there and people will review it and whatever, but I think Turo has some safety concerns around certain vehicles, so unfortunately I can't get onto it.

Cheryl Mack (03:48):

Fair, fair, fair.

Will Richards (03:49):

Another headline I saw that really grabbed my eye was a report by Airwallex on the financial confidence that founders have in the market right now, and they surveyed 500 founders, and I think just from the stats that we're seeing, they were probably founders definitely on the earlier side of the journey. But there were some pretty interesting things that came out about how founders are feeling about their confidence in, let's say, their business and their financial outcomes, but then also what services are being offered by banks, and what I guess from Airwallex's point of view is maybe a massive gap in the market of founders not being served by traditional banks. So one stat that really jumped out was that 92% of founders have concerns about their financial operations, and that almost half of them, 44%, were frustrated by the products that traditional banks offer, startup founders and startups themselves. Is that something you see from your perspective at Aussie Angels working with really early stage founders, a lot of frustration and a lot of anxiety?

Cheryl Mack (04:48):

I feel like that's just par for the course. If you're running a business and you don't have concerns about your financial operations, then you're not growing quick enough, you're not going big enough, you're not taking enough risk. At least in the startup space, if you're running a dry cleaning business, then yet you probably shouldn't have concerns about your financial operations. But yeah, we see this all the time. It's pretty standard. Not something that I'm like, I don't know if, but I, if you'd asked me what I thought this would've come out as, I think this is unsurprising.

(05:22):

It doesn't mean that it's good. Well, maybe lots of founders having concerns about the financial operations, but founders being frustrated by the products offered in terms of how they can get funding and how banks can support them through that journey. Not necessarily just funding, but the way that you run a business if you are high scale and the types of cashflow issues you tend to face, there are very few options out there. So actually I'm maybe mildly surprised that it's as high as 56% aren't frustrated. If anything, I would've expected that to be more.

Will Richards (05:59):

Yeah. I wonder as well is that frustration not just for the relationship that the startup, the business, has with the bank or the business bank, but also as a founder, your risk profile, if you're going to borrow for other things in your personal world, it becomes really challenging. I've heard stories of founders going to get a mortgage to buy a house and the bank's basically just not touching them, which can just put so much external pressure on young founders or any founder really.

Cheryl Mack (06:24):

Well, if you think about, it's a tiny segment. You've got, what is it, 25 million Aussies and call it 12,000 to 20,000 of them are tech founders. That's a tiny segment. So unless somebody comes up with, actually, I'm going to focus on this segment and it's a viable segment to focus on, I can understand why they're not trying to actually cater to this segment. We really need somebody who is open to catering to this segment.

Will Richards (06:53):

Yeah, it's an interesting opportunity. I wonder if Airwallex will jump on this. Obviously they run a financial-

Cheryl Mack (06:58):

Maybe that's why they commissioned the report.

Will Richards (07:00):

Exactly. Maybe it's just their way of finding new market opportunities.

Cheryl Mack (07:02):

They should.

Will Richards (07:03):

Exactly. Yeah, they would win a lot of favor here in Australia if they did it. I did see another stat that really jumped out, which was that 33% of founders rely on family and friends for financial support, and this was separate from family and friends investing in the business. This was kind of talking about could I potentially borrow some money or could you lend me some stuff so I can basically live while I'm either bootstrapping this business or-

Cheryl Mack (07:26):

Yeah, pay my bills so that I can put more money into the business. Interesting. Again, I thought you meant all the family and friends supporting as in... Because it says as a significant source of venture capital, so I'm like, actually that seems low. A lot of founders get their first checks from their friends and family, but for financial support, I don't know. That's interesting.

Will Richards (07:49):

Yeah, you sort of need to then lean on people. If you have a steady job, you're very unlikely to contact your family and be like, oh, can you just lend me some money? Unless something really serious happens. But I think when you are trying to build this business, there's no income for the next short term. You're just way more likely, which I think is where that 33% be like, oh, do you mind if I just grab some cash for whatever reason? Maybe it's a loan, maybe it's put kids through school or something like that, definitely just increases.

Cheryl Mack (08:17):

Yeah, it gives you meaning to the term, it takes a village.

Will Richards (08:21):

Yeah.

Cheryl Mack (08:21):

It takes a village to raise a kid. It takes a village to build a business.

Will Richards (08:24):

100%. Well, if you have any founder friends, just check in on them and make sure they're doing okay.

Cheryl Mack (08:30):

Actually, I used to offer every founder... And even before I started investing, I would tell founders, if you need a meal and a place to sleep, call me and founders would take me up on that all the time. So I used to have founders come over just for dinner because they're like, yeah, I don't want to eat ramen again tonight. I'm like, yeah, come over. I'm probably not making you anything fancy, but I'm happy to make it a bit more nutritious than a bowl of ramen.

Will Richards (08:55):

That's so good. I think there's so many ecosystem events where you see, I think that there's a big separation between founders crying poor and I can't afford to eat sort of thing. That's very different to I think the vast majority of people, but it's just an extra thing they don't have to worry about. There's so many ecosystem events where if there's pizzas guaranteed, the venues fill up. It's just such a nice, perfect, I just don't have to worry about that tonight. I can work a bit later. I can focus on my thing and just rock up and meet some good people and have a free meal.

Cheryl Mack (09:27):

And learn something. Yeah, 100%.

Will Richards (09:30):

Exactly. The next headline that jumped out was the start of a new venture fund, which is sort of playing in the private equity late stage tech space, and it's got some quite heavy hitters. So we've got Ryan Sohn who was previously at Perennial Capital Private to Public who's launching a new private equity fund in partnership with some big hitters from SEEK Investments and Cube Holdings, and they're investing in companies with revenues of $10 million plus. So definitely that later stage, companies that are on their way to going public or big trade sales, I think they're probably likened to investing compared to businesses or investment firms like EVP who are sort of known really for going after these quite steady income SaaS businesses.

Cheryl Mack (10:16):

The one thing that I question a little bit here is they're saying the fund size is going to be between $30 million to $50 million, but the check sizes that they're going to write are between $5 million to $20 million. What is it, ten $5 million checks? A 10 company portfolio is somewhat diversified, but honestly, that to me doesn't sound like the math adds up. Especially then if you're going to write $20 million checks on a $50 million fund, that's two and a half checks. That doesn't make sense. So I would think that they would need at least $100 million to make that kind of math work.

Will Richards (10:51):

Yeah. Well, this came out of Street Talk on the AFR, so obviously there's always room for-

Cheryl Mack (10:55):

I have been misquoted in the AFR many times.

Will Richards (10:58):

Yeah, definitely. But it's a great call out because it doesn't really quite add up, but I think the comparisons that definitely not a traditional venture fund. They're more of a private equity player, which is targeting this internal rate of return of 25% plus, which is a pretty healthy target.

Cheryl Mack (11:14):

It's still pretty healthy. I know VC funds that barely hit that.21 Honestly, if you're getting a 25% IRR and a VC fund, you're still doing all right.

Will Richards (11:25):

Do you think there's room for these sorts of funds in the markets to be popping up? Is there a gap in Australia's ecosystem for this?

Cheryl Mack (11:32):

100%. Australia does not have nearly enough funding options and different types of funding sources, and we are just not that creative. This is the next thing, it's good, but we need 20 more of these that are all differently structured. We just got to get more creative. So I absolutely appreciate this and I think it's a right step in the right direction, but there is gaps left and center. This is filling one of them, and I hope that they're successful with this and then build another one and pick another gap that we see and continue. Then maybe that will make room for the next person to come along and go, great. Well, they were successful in filling this gap. I see another gap. We are just so far behind in terms of different types of funding structures here compared to our overseas counterparts like the US and the UK.

Will Richards (12:24):

Yeah, I've got two builds on that. I think I would love to see your list of things that you would want to see in the ecosystem, like what's missing. Just like Cheryl's list, I think there's already a Cheryl's list of resources, but then Cheryl's dream list of things for Australia to jump on and maybe give some ideas for these investors who've been around the block. They've all invested with some quite well-known companies before. I think this is the evolution of the ecosystem as well, where people learn in like likes of SEEK Investments, that's a massive internal venture fund at SEEK obviously, and then they're now seeing a gap in the market to launch something new. So potentially we can get those two things together. Cheryl's list of dream funds, dream things are missing, and then a few young investors can jump on those and try to start them.

Cheryl Mack (13:09):

You don't have time for that Will. I could fill an entire hour with my dream list of gap fillers.

Will Richards (13:16):

Fantastic. The final headline was a massive transaction, and I'll caveat this with, it's not really a startup and it's not really a traditional venture startup, but I think we've been talking about private equity a little bit here, and that was the sale of AirTrunk, a data center business, which has been sold in a $23 billion deal to a consortium of investors, including Blackstone and the Canadian Pension Fund investment board, marking it basically as one of the largest acquisitions in Australia's history.

Cheryl Mack (13:46):

Yeah. Man, that is a bonkers number and the fact that the founder will walk away with a cool $500 mil plus about the same amount in stock, that is next level.

Will Richards (14:00):

The crazy thing is he'd already sold 88% of his stake in the business in 2020, so he only has prior to this transaction around 10% left in the company. Then he's just sold 5% for $500 million and he's still got another 5% left in the business.

Cheryl Mack (14:18):

Man, I don't know who got to invest in that business, but it's also the type of thing that you're right, it's not exactly a startup, and so it's probably not something that I would've invested in any way, but it does make me question sometimes.

Will Richards (14:29):

Well, I think you're already on the path of property investment and starting some interesting new businesses, and we can probably chat about that a little bit later, but potentially that could be the new AirTrunk.

Cheryl Mack (14:39):

Oh, definitely. I am absolutely on that path.

Will Richards (14:43):

Well, it's a great founder story. So Robin Khuda, he started the business in 2015, but originally an immigrant from Bangladesh who started the business. It expanded to 11 data centers with five of them operating in Australia and other sites in Japan, Singapore, Hong Kong, and Malaysia. So it really is a global business and has just been taking private by the likes of Blackstone. So a fantastic outcome for this business and the founder, and hopefully we see some of that capital recycling back into the ecosystem fairly soon.

Cheryl Mack (15:14):

Yeah, 100%.

Will Richards (15:15):

So Cheryl, this week there was a pretty fun event that you actually got to attend and you were one of the nominees for the awards night that Startup Daily put on. Firstly, how was the night?

Cheryl Mack (15:24):

The night was epic. They did a fantastic job. Simon is an excellent host. He's hilarious in all the best ways, but the night was excellent. I think they said last year was about 200 people attended. This year was about 400, so that room just felt packed and such good energy.

Will Richards (15:42):

That's fantastic. Yeah, it's so nice, I think, to pause and reflect on what's happening around us, really take a chance to talk about some of the amazing things that are happening. It's not necessarily just financial outcomes, but really these support networks and these people who are doing amazing things to enable everyone, and it's really just nice to stop and give everyone that chance to reflect and have those conversations.

Cheryl Mack (16:07):

Little pat on the back.

Will Richards (16:07):

Yeah, exactly. I saw a really beautiful post from Vicky Sterling who was the industry champion around how the night and the award has really given her energy to go back out there and do the amazing things that she's doing. So I think just for that case, it's awesome, and to celebrate the best new founders and the up and coming talent from the young networks is fantastic too. So since you were there, I would love for you to maybe touch on what were some of the most exciting nominees and startups that you saw and what categories did they win?

Cheryl Mack (16:36):

Oh yeah, for sure. So one of the awards was The Most Innovative Startup. There was actually a tie for that one. It was a tie between Goterra and Agili8 is I think how I pronounce that.

(16:50):

Goterra is a really cool one. They manage food waste by using robotic insect farms. That is just next level futuristic if you think about it, right? We are creating so much waste and they're just like, cool, we're going to use robot insect farms to fix that. Don't worry team. Then Agili8 provides healthcare solutions using smart glasses and AI to serve remote communities. If you think about some of the biggest challenges that we're seeing in remote communities, and again, they're just coming in and being like, yeah, let's use AI in smart glasses. Love that.

Will Richards (17:21):

I might just jump in. I think both of those, an interesting similarity, they're so different, but both of them have the same dynamic of bringing innovation to where it needs to happen. Goterra have these big shipping containers that they take to the likes of Coles or outside the shopping centers and restaurant complexes or farms, and that's when the food waste is found. It's the same with the healthcare, the smart glasses as well. You can take them to these remote communities where they can really have an impact. So it's just like a similarity you see in both those businesses, which is fantastic, but they're both doing two extremely different things.

Cheryl Mack (17:52):

Yeah, bring the innovation to the people.

Will Richards (17:55):

Build it and they'll come, as long as you take it to them.

Cheryl Mack (17:58):

Yes, exactly. I love that. Then another category which is unsurprising that they of course included AI category, but it was the AI Game Changer, and the company that won that was Curious Thing AI. So that was Australia's first AI startup, first voice AI startup, sorry. They basically launched the first AI phone agent, which is pretty cool. They've now expanded to the US, UK, Canada, but I think they've been around for a few years now. So they were ahead of the times and they changed the game.

Will Richards (18:32):

Those are so great. You probably have spoken to their AI robot Lucy on some phone call without realizing it.

Cheryl Mack (18:39):

Probably.

Will Richards (18:40):

Yeah, they have some crazy stats around how many phone calls they have going on simultaneously. But yeah, very cool to see Curious Thing. I think one of my call-outs was definitely Startup Investor of the Year, which went to Startmate, and I think Batko accepted the award on behalf of the investment team there. But oh my God, do they do a lot of deals.

Cheryl Mack (19:00):

Oh, yeah. I think I'm an investor in five or six cohorts now, and when they send out updates for them, I just get piles of emails. They've invested in so many companies and I think I'm an indirect investor through their fund in a number of big winners, so I'm super excited.

Will Richards (19:17):

That's awesome. Yeah, I think, well, [inaudible 00:19:21] as well was Skalata Ventures too, and they've been super active in the last few months especially. But yeah, Startmate just they've got that accelerator program, they've now got the early stage angel bits going on as well. Just the sheer volume they get through, they're really paying to the power law and getting some fantastic results.

Cheryl Mack (19:44):

Oh yeah, power law all the way.

Will Richards (19:45):

All right, cool. Let's jump into our favorite startup picks of the week for startups that have just raised some capital. Cheryl, what was your pick of the week?

Cheryl Mack (19:51):

So my pick of the week is Safe Ag Systems. As somebody who splits my time between Sydney and Adelaide, this was a South Australian company that actually I think I saw them present at evokeAG or something last year, and it is founded by a mother-daughter team. You see couple teams all the time, but not a mother-daughter team. I think it is the first startup that I've seen has been a Mother-daughter team. So I'm loving that.

Will Richards (20:18):

Yeah, it's an interesting round actually because we got a tip off from AgFood about this. So the details around exactly what the capital committed was is hard to get our head around. There's been no official press release. But AgFood has suggested they're going to commit $2.5 million into this business. I think the closest comparable to explaining what they do is they're kind of like SafetyCulture, but specifically for the AgTech sector and farms basically. So their focus is really on policies and procedures and building templates and allowing people working on farms who are obviously surrounded by massive equipment, massive machinery, and sometimes really big animals basically, to get through the process very safely.

Cheryl Mack (21:00):

Yeah, amazing. I'm so excited to see this one.

Will Richards (21:02):

So they've had some pretty good growth since they've been founded, and they were founded quite a few years ago, and I believe this is the first external capital that they've taken on. So around 4% of Australia's 240,000 farm workers are currently using the app and it's already generating $2 million in revenue, which is very commendable, but plenty of room to grow.

Cheryl Mack (21:21):

So I know you said they're like SafetyCulture, but for AgTech. But for those who are unsure of what that might mean, basically their product has things like policies and procedure templates, inventory management, emergency management, worker induction and onboarding, task management. Basically everything that you would need to manage a farm or an agriculture production operation from the ground, right? If you're thinking about how you actually manage everything from start to finish and ongoing, their app provides that.

Will Richards (22:02):

Super excited to be joined by David Burt, the director of Entrepreneurship at UNSW Founders. Following a big change that's happened from the Labour government reducing the cap of international students coming into Australia. Obviously Australia is really a country that is of course built on immigration and built on that flow of skilled talent coming in. We can't forget the traditional custodians, of course, who have also created the Australia that we know and love. I'm also an example of international immigration. David, I'd love for you to set the scene on, I think, firstly what UNSW does and what your role is in the university sector and the connection between university and the startup landscape, and then what this change means for you and your role.

David Burt (22:45):

Thanks Will. So the University of New South Wales, or UNSW, people can think of it we are a global standard research intensive university. So what that means is we educate the next generation of students and we do world competitive, cutting edge scientific research to try and produce the knowledge. There's a tight connection between those two things, and we can touch on that a little bit more. But that's what UNSW does is we're trying to compete with MIT and Stanford and Harvard to be one of the best universities in the world. Then as director of entrepreneurship, I work in the UNSW Founders program and we partner with philanthropy and government policy makers to create more opportunities for people to start and grow new companies. So we're all about trying to help UNSW people, so that could be alumni or the scientists themselves or the students, start and grow companies.

Will Richards (23:39):

So you work with students all across the board. So you could be a student coming and doing an undergrad or even someone doing maybe a short course, all the way through to a PhD. I think even professors, right? They can jump in and try and start a business too.

David Burt (23:51):

Yeah, we work with students and UNSW people across the whole spectrum. We have first year students, undergrad students at UNSW that have actually raised venture capital to do their startup while they're a student. We have people that have recently graduated, we have PhD students, we have professors. All of them are eligible for support in the program and we have hundreds of them in each category that are either actively exploring how to do a startup company or have actually started and we're helping them grow in the first few years.

(24:19):

Again, what's different about UNSW Founders is we work with people months or years before incorporation. So, again, all our services are free, we don't charge anything, we don't take equity in their company for the service. We work with philanthropists that think on generational timescales like the Farrell Family Foundation. So Peter Farrell, founder of ResMed, is one of our key donors, or we work with government policy makers who are really interested in economic development. We have a strong nexus to that because pretty much all net new jobs in an economy are started by firms less than five years old. So if you want job creation, you need a steady clip of new companies being started every year.

Will Richards (24:57):

Let's dive into the issue at hand where the labor government has basically said they're going to cut the numbers of international student by about 30%, so they're capping it at 270,000 in 2025. I hope I've got that correct. I think you're the expert to-

David Burt (25:11):

The proposed cap is 270,000 students here.

Will Richards (25:15):

Perfect. What do you think that means broadly for universities like yourself, but then also just the startup sector in general?

David Burt (25:22):

I think the first answer to that question is what does it mean for Australia's economy? It's bad news all over the shop. So Australia is a tiny population with a huge landmass. We have an aging population, and so less international students means less startup founders and less talent for early stage startup employees. If you think about the risk appetite it takes to uproot your life and study and live in another country that actually maps really well to the risk appetite and mindset of starting a company or joining a very early company.

(25:51):

So at an Australian level, this is bad for the economy. It also brings in, depending on how you measure it, and there's a little bit of debate around how much foreign currency or export revenue that international students bring into Australia, but everyone will agree it's at least $20 billion a year, and some people measure it up to $43 or $44 billion a year. So that just gets stripped out of the economy. So that's at an economy level.

(26:13):

For universities, it's a hit on the revenue. Obviously international students are charged a premium to study in Australia compared to domestic students. So that's a revenue loss for the university. So again, for the startup sector, if you think some universities invest quite heavily in startup support or ecosystem support programs, so if the university revenue takes a hit, you might see some of those programs closing. We saw that in COVID, when COVID stopped many university students from showing up in Australia, university revenue went down and you saw sort of a corresponding decrease in the support that the university sector was putting into the startup community.

Will Richards (26:52):

Yeah, that's fascinating because you guys are almost a little bit protected from that because built on philanthropic donations from influential people across Australia who want to see that impact. But I guess more broadly, there's a lot of universities that don't have that support, and basically what you're saying is they'll just turn off the switches, they can't afford it.

David Burt (27:09):

We saw that in COVID. We saw entire programs close or teams go down by half. Again, every university has a role to play in helping their community be entrepreneurial. University is the perfect mix of people right at the early stage of their career as well as domain experts in their field. You get those people combining together. It's a great coral reef for startup formation, just helps nurture the little fish. Again, universities have a massive role to play in supporting that early stage entrepreneurship, especially the months or years before incorporation where people are trying to figure out, they're trying to find their feet.

Will Richards (27:42):

Yeah, of course. Could you explain the students who will be affected by this? Is it the whole gamut of students that participate in the Australian university sector, or are we just talking about undergrads here or PhD students? Is there a type of student that's going to be adversely affected and then by the flow on effect, is that going to affect us? Are we going to struggle to commercialize research because a lot of PhD students are just no longer doing their research here in Australia?

David Burt (28:08):

So it's positive to see that the proposed legislation does exempt PhD students from the cap. So PhD students are a critical piece of, not just the university infrastructure, but just the talent that's available to the business community. So fortunately, PhD students as it's currently proposed wouldn't be restricted by the cap, which is great. So it would be mainly targeting undergraduate and postgraduate students. I think it's also important to emphasize that right now this is proposed legislation, so it hasn't actually passed parliament.

(28:37):

So there's actually a window of time where the community, the startup community, can actually influence government because when it comes to government policy and how it is actually made, often government will float an idea and if there's a lot of feedback from the community, they will change legislation or they will revisit it. So I think we're in that window right now where if people have access to policymakers, they're electorate representative, write them a letter, bump into them an event, let them know your opinions on this topic. This is the window to influence what is currently proposed legislation. Hasn't actually passed parliament yet.

Will Richards (29:08):

Yeah, there's been a few proposals that the startup community has rallied behind and managed to halt or delay, which is good. So we do have some influence and we can definitely use it here as well. I'd love to get your sense on international students and how they participate currently in the startup ecosystem. I think from your perspective, you are really uniquely positioned to see that. I know from my university experience, there were a lot of, I think, local students who were very interested in starting their own company or testing out new ideas. What's it like from the international student perspective?

David Burt (29:38):

So at UNSW, we have about 60,000 students, and year to date, we've had about 10,000 of them through the founders program in one shape or form. That means they've come to at least one of our events. So there's a lot of curiosity from international students to be interested in entrepreneurship for two reasons. One, there's a massively increasing trend of students interested in entrepreneurship. That's true for international, just as it's true for domestic Australian students. About 20% to 30%, depending on how you measure it, think that starting a company or working as an early-stage employee in a startup is their first step post-graduation. That's sort of really 10Xed over the past 10 years, it used to be probably about 2%. Now it's at least 20%, sometimes 30%.

(30:20):

So when you look at what we see in terms of the students that are actually participating in our programs, huge demand from international students, they're subject to the same economic forces and reality of what the job market look like and what's happening to legacy industries because of technology disruption. So international students are hugely interested in entrepreneurship. They're showing up, they're starting companies. Some of our best early-stage companies that have come out of the founders program are founded by first-generation migrants.

Will Richards (30:46):

Do you think when international students are coming into Australia to start those new businesses, because I think that's really fascinating that it's grown so quickly, do you think they're uniquely positioned just by nature of who they are to start more resilient businesses that solve a more unique issue?

David Burt (31:01):

I think as a first generation migrant, and again, I'm not one to Australia, I was born in Australia, but I work with a lot of international students that are excited to start a company. So I meet hundreds of them every year. I think being an international student, being a first generation migrant to Australia does give you a pretty unique mindset. Again, risk appetite to uproot your life, move to a new country is really well suited to the risks of startups. They have a global perspective from day one. They understand that there are other markets, there are other customers.

(31:31):

I think if you are raised in Australia, Australia is pretty great. It's an easy place to stay. But sometimes we see domestic startups not realize how important global markets are and just how big the world is. So I think international students come with that global ambition a little bit more baked in from day one. I think the other piece is they often have lower safety nets as well. So when you think about the resilience and the kind of effort required and the mindset required to do the work to grow a company, we see first generation migrants and international students really perform well on those dimensions.

Will Richards (32:08):

Then what about just working at startups or getting an internship at startups? I think starting a businesses is definitely taking the leap, but what about just interacting with maybe not a seed stage company, but your biggest technology companies across Australia, is there a big appetite for that as well from the international student market?

David Burt (32:25):

There is for two reasons. One, because of the aforementioned interest in startups as a career choice. The other is a lot of the bigger employers in Australia, they sometimes have a little bit of hesitancy around employing international students. Obviously the visa situation, often when you study in Australia and graduate, it comes with one or two years of work rights. But some larger companies still won't accept those people as employees. They're very risk averse when it comes to visas, and they're sort of wondering what happens one or two years in the future. Whereas startups are actually really attractive employers because they think in 6, 12, 18 months in terms of their runway, their ambition, how they're trying to grow. So it's a nice alignment between what a startup is actually looking for in an early stage employee and the time horizon and the risk tolerance of a recent university graduate.

Will Richards (33:16):

I'd love to get your sense, just to wrap up the conversation around, if you were to maybe rewrite this policy, what would you like to see change or what ideas would you like to see the government take into account if they were going to change this proposal?

David Burt (33:29):

Yeah, it's kind of like if you wanted to dig a hole and you picked up a hand grenade is what they're doing at the moment, when they should pick up a shovel. So the problem is cost of housing and lack of housing, that's the actual problem that's really hard for a lot of people in society at the moment. So the solution to the problem is not to blow up the international student market, it's to put in place good housing policy. The thing that people forget is Australia's actually been here before. It was a massive housing shortage in Australia in the aftermath of World War II. So in the aftermath of World War II around the late forties, home ownership in Australia was about 50%. There was a lot of housing stress and it was a bit of a housing crisis.

(34:06):

Then the federal government put in a policy and over the next 20 years you saw housing ownership go from 50% to over 70%, and that took two decades. Housing policy is hard and housing policy has essentially been ignored by all flavors of politics for the last 20 years. There's been really zero effective housing policy in Australia. Those chickens are finally home to roost. So the answer to the question is we'd really love to just scrap this legislation entirely and design a policy that's fit for purpose for the actual problem, which is we need a decade of good housing policy to make up for two decades of zero housing policy.

Will Richards (34:42):

So this is a bandaid solution to a much, much bigger problem that's just maybe fixing one symptom of the issue.

David Burt (34:49):

It's not even a bandaid because the majority of international students that I speak with actually live in share houses. So if you take 50,000 international students out of the economy, you're not freeing up 50,000 houses, you might be freeing up 50,000 bedrooms. But again, it's only a particular segment of the population that's open to living in a share house. So again, when you think of the housing stress that actually exists in Australia and where it exists, this isn't even a bandaid. This policy is a distraction. They're trying to distract the public by looking like they're doing something when actually it's not even a bandaid, it's just politics.

Will Richards (35:23):

Fantastic explanation. I think a lot of people get a lot of value out of that. In terms of how can people maybe find you and interact with what you do at UNSW, I'm sure there'll be people who want to learn more about what you do and what the UNSW Founders program does. Could you provide some opportunities for them?

David Burt (35:40):

Yeah, absolutely. So the best way to look at what we do is our website, you just Google UNSW Founders, will be the first result. We primarily exist to help UNSW people start and grow companies. So alumni, students and staff. We do have some programs that are open to anyone living in Australia that's interested in starting a company, specifically in the domains of health, biotech, climate tech and national security technology. So if you're a UNSW person interested in startups, absolutely we have an infinite amount of programs for you and support. If you have ambitions in those particular areas of the economy, health tech, biotech, climate tech or national security, we have some specific programs that are government funded and donor funded in those areas that are open to anyone excited to build a company from Australia.

Will Richards (36:24):

Awesome. Thank you so much, David.

David Burt (36:26):

Great, thanks Will.

Will Richards (36:31):

So every week we love to end the podcast the same way we end the newsletter, which is with a section we called Knowledge as a Service, which is where we share an interesting read or listen from the week. There was plenty of discord this week around Paul Graham's most recent essay, Founder Mode.

Cheryl Mack (36:47):

Founder Mode.

Will Richards (36:48):

Did you give Founder Mode a read and does it resonate with you and your founder journey?

Cheryl Mack (36:53):

Yeah, absolutely. I love reading stuff from Paul. He is that wealth of knowledge that is easy to read and digest. But you're right, it creates discourse, which is fun. Yeah, absolutely. Do great companies need great founders and great managers? Absolutely. The stage at which I invest, which is that earliest stage, we are backing founders. So for me, it's the only requirement that needs to exist.

(37:25):

But I do think that Paul missed a crucial point, which is that the best founders also ignore 90% of advice that they get from people within the ecosystem. So it's not just about rejecting corporate dogma, it's also about rejecting startup dogma as well. That's why the best founders, the best companies, they're doing so in a very unique way that others generally haven't thought of. So I think that's one point that if we wanted to build on it, is that it's not just about rejecting corporate stuff, it's about rejecting all of the startup stuff as well, because you get tons of advice and it's about filtering that.

Will Richards (38:02):

Yeah, that's fascinating. I completely agree with the stage that you invest, it is all about the team. It's all about the people. It's not about the systems necessarily. But surely at some point the business does need managers. The founder can't accept every bit of information that the business is generating, can't make every single decision. I think it's interesting because a lot of people are sort of like, oh no, there's these amazing founders that we all look up to. The classic example is a business like Facebook with Mark Zuckerberg where he's led the whole way and he's managed to pull rabbits out of hats, one after the other. I think it's interesting, but he's obviously exceptional and not every person is exceptional. Sometimes you do need great teams to get great work done. So sometimes I think it's like it's founder mode up until a point, right?

Cheryl Mack (38:53):

Yeah. But I think it's missing the point that Zuck had people surrounded, his right-hand person was Sheryl, right? So if we're saying that it's only the founder, that's just not true. I think maybe that's another point that people are missing, that it's not just founder and the best founders have great managers around them that have supported the back end of whatever crazy idea they've come up with. In pulling that rabbit out of the hat, they have made sure that there was a rabbit in the hat to pull out.

Will Richards (39:21):

100%. Well, I think, yeah, the essay Founder Mode definitely went viral. There's some very interesting discussions on LinkedIn and Twitter about it. But it actually led to my pick of the week, which was another essay by Paul Graham, which I've gone back to a couple of times and definitely sent to a few young people I know who have asked me for a little bit of direction, which is an essay called How To Do Great Work. It helped me at one point in my life where I was a bit like, what do I want to do in the next 5, 10, 15, 20 years. Allowed me to pick the focus that I wanted to work on. I think it's paying off so far. But yeah, it's a good essay. Have you ever read How To Do Great Work?

Cheryl Mack (40:01):

Oh, I think I read it like 10 years ago when I first started in this startup ecosystem. So please don't ask me to quote anything from it.

Will Richards (40:07):

Yeah, of course. That's all good. No, one to check out.

Gemma Clancy (40:15):

Thanks for joining us for this episode of The Startup Retro. We would love to hear what you thought of the show, so feel free to reach out to us directly on LinkedIn with your feedback. That's Will Richards and Gemma Clancy.

Will Richards (40:24):

If you've enjoyed this episode, we would love if you could follow us on your favorite podcast player and leave us a review so more people can find us.

Gemma Clancy (40:31):

Catch you next week.

‍