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Interview: Steve Baxter of River City Labs in Brisbane — October 17, 2013

Interview: Steve Baxter of River City Labs in Brisbane

/Sarina Quinlan

stephen-baxter

“There are some really good businesses here, but when you look at the level of activity elsewhere you can see that we’re behind the eight ball. It needs serious local and state government help and support and if they want to do that, they have to be willing to spend the money.”

Steve Baxter has been responsible for pushing the Brisbane startup scene forward through his coworking space River City Labs and supporting global movements such as Startup Weekend. It’s never a rare occurrence for Steve to dip into his own pocket to help new tech businesses flourish. The Fetch caught up with Steve about his new gaming ventures and his Brisbane perspective.

What inspired you to open River City Labs?

I have several investments, and after travelling to Sydney I saw a great example of getting support for entrepreneurs and helping them get started in an organisation called Fishburners. I came back to Brisbane and looked for Fishburners, and other similar organisations and they didn’t exist, so that was the start of it. I looked at doing it commercially as a full profit business, but to be honest it’s not a big business. So I decided to launch the business, but with a bit more philanthropy involved.

After that, did you decide to invest in the gaming space, or did you invest before River City Labs?

The games were after River City Labs. The games side, with respect to Right Pedal Studios, is a different form of investment. It’s full profit, an accelerator fund. We take advanced prototypes and we launch them into the market through funding, mentoring and production resources, in a reasonably fast way. It’s definitely different.

How many games have you released so far through Right Pedal Studios?

We just released the first game in late March. The game is called Dragon Season. It’s an endless runner game, which is currently available on the Australian Google Play Store. Hopefully in a few weeks it will be available globally on Google Play and the Apple Store. It’s been discovered by a number of people in China, even though we only released it to the Australian Android market, and it’s found its way to about thirty-four thousand installations. That was really very surprising. It wasn’t what we’d planned, but we’re now pursuing some Chinese producers, which is quite interesting.

We also have one game out as a closed beta. It is due to come out as a world-wide release in the next few weeks. There are currently three others being worked on and we’re talking to another four teams about coming in.

Have you seen any major shifts in the startup scene in Brisbane since you started River City Labs?

Since River City Labs opened its doors last year (2012), there’s been a gradual shift. I’m actually a little disappointed with the startup scene in Brisbane. I spent some time in San Francisco and I travel to Sydney four times a month on average, so when I see the startup scene in Sydney compared to Fortitude Valley, it’s completely stark.

It’s been a slow growth. We were half full six weeks in, and we were half full in November last year; we’re still at about 60-65% now.

What do you think the Brisbane scene needs?

It needs a lot more people to take it seriously; it actually needs signals from Government. There has been market failure with regards to tech startup in Brisbane. There are some really good businesses here, but when you look at the level of activity elsewhere you can see that we’re behind the eight ball. It needs serious local and state government help and support and if they want to do that, they have to be willing to spend the money. It’s embarrassing when Auckland, New Zealand, have a higher angel funding rate than anywhere in Australia. That is because of direct government intervention.

How are places like NZ ahead?

In areas like matching investment funds, they invest in meetings with successful and respected entrepreneurs from the US to educate local angel groups. This was directly linked to the absolute increase in startup activity.

I’m just going to read you some statistics:

  • The number of startup incubators in the US is 1400, compared to 30 in Australia
  • The number of angel investors in Australia is 500, compared to 300,000 in the US
  • We do approximately 50 Angel deals per year, compared to 63,000 a year done in the US
  • There are eight early stage VC funds in Australia; there are 420 in the US

Do you think angel Investors lack direction, or does it take too long to get funding in Australia / people are more hesitant?

Probably all of the above, to be honest. Had Australia given birth to Facebook or Google or something along those lines, it would be a different story. But if we don’t take the initiative, we’ll never make these advances. For example, in Brisbane there are three coworking spaces/incubators – in Auckland there are six.

In the same year, Auckland recorded 45 Angel Investments per annum, while Brisbane had two. Auckland’s 40 venture capital investments trumped Brisbane’s 30, and the whole of Australia was only marginally higher at 72.

Are Brisbane startups are having to leave and go to Sydney to try to talk to Angel investors?

I am doing some work with the state government to try to prevent this. At some point in time, we have to actually understand that if this something we want to do, it’s going to cost to play. We are that far behind.

It’s a tragedy. There are a lot of issues that we’ve got to work through. But first we have to want to fix it, and put in the extra miles.

Where should they be putting their energy: sales channel or online marketing?

It depends on the type of business. There are a lot of businesses that are hesitant to spend money on sales and marketing yet still expect to gain the interest of investors. You need to do put in the effort and prove to investors that your business is a worthwhile prospect.

What turns you off a startup?

People or groups that generate an idea in the mobile tech sector, who don’t have the skills or knowledge to develop it, and expect investors to spend their money on a team to build their product. I believe in doing majority of the work yourself, and if you don’t have the knowledge or experience in the area of your idea, that you should take the time to learn and not just rely on others to do all the heavy lifting for you.

What makes you decide that you want to invest in a startup?

Teams. A good team can have a bad idea to start with, but will realise it’s a bad idea and change it. If the idea requires any creative and technical work build it, then you need a strong technical team. A lot of others will outsource, but it isn’t as appealing for investors. As for the business, the idea has got to be something that makes a splash. Technology has such great potential to have a huge impact, and it just takes the right idea to ;p the world on its head.

Are you going to Sydney to scout for new startups or angel investors?

Not really scouting, I already have 11 investments – I had 12 – which is too many. I would love to get back down to maybe seven or eight. Right Pedal Studios and River City Labs take up a fair bit of my time. Really what I’d like to do is less, and be able to spend more time with my 11-week-old daughter to be quite honest.

How do you relax?

I don’t at the moment. My hobbies are fishing and flying, of which I get to do precious little; and I’m sure that now with a young girl I’ll probably get to do even less. It’s surprising what can take up time in your day.

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About our contributor // Sarina Quinlan is a marketing consultant and the curator of The Fetch in Brisbane. Follow her on Twitter via @digitalsarina.

Interview: Perth local, Larry Lopez — October 15, 2012

Larry Lopez

Interview: Perth local, Larry Lopez

/jstrharsky/1 Comment

This week, Perth curator Justin Strharsky interviews Larry Lopez, Partner, Australian Venture Consultants.

Larry Lopez

Twitter: @lopezjohnston

What brought you to Perth?

I came to Perth at the insistence of my Perth born wife, Janet Crossland. I was bored with the direction my life was taking in Silicon Valley, and I wanted a change. I certainly got that!

I’ve read in one of your bios that you been involved in several countries with the “development of investment models to enhance growth in emerging technology”. What does that mean?

Early on I spent a lot of time working with different communities outside Silicon Valley that wanted to expand the knowledge-based sectors of their economies. At the Bank, we believed if we could help create the market, we could own a large part of its banking business, so we spent a lot of time in markets we thought would become creators of new companies (the Bank now has successful operations in India, Israel, China and England). This meant understanding what their region’s strengths were, and how they could build upon those strengths.

I spent a lot of time in England, Sweden, Israel and Australia, and I got to follow my partners around Asia including India. So many regions wanted to be the next Silicon Valley. I always fought that idea, as the Valley has so many unique attributes that cannot be replicated. I am of the view that each community must build on its own strengths and then plan based on what it can learn from other successful models.

Israel is a great example of how a small agriculture based economy could turn itself into a global tech powerhouse. They initially built their aspirations around silicon and defense spinouts. This gave them the opportunity to play off existing competency and relationships. It was a natural transition to communications and security, and ultimately the internet.

Here are the two great lies communities convince themselves of:

  1. They can become the next Silicon Valley
  2. They have the unique opportunity to become global leaders in biotech

If you have been around enough different emerging regions, you can imagine how pathetic that sounds, but I still hear it all the time.

So, how do you feel the investment climate in emerging technology differs here in Australia from other places you’ve worked?

There are too many pretenders in Australia.

Most of the companies I meet here are about getting people rich (unsuccessfully, I might add), not about building great companies. That formula doesn’t work.

Companies need to be built around great people identifying and solving market needs, that once the solutions are articulated, they seem OBVIOUS. I just don’t see that here as much as in some of the other markets I am involved in.

Also here people expect the government to play a role. WTF? I don’t’ buy into that baloney! The last folks I would want to rely upon for the success of my startup would be the government.

That is not meant as a criticism, it is a fact. Governments are not meant to be entrepreneurial, and generally don’t attract entrepreneurs. They are here as the umpires not the players.

I find that Aussie investors are too nice to management teams. If a company is underperforming, it probably needs new leadership not just more money. It is ok to switch out management.

Also many crap companies here survive much too long. In the Valley, dud companies usually die a fast death. There are some absolutely crappy companies around Perth that should have been shut down years ago, yet they stagger on, burning capital and wasting time and other valuable resources.

How would you characterize the investment landscape in Australia? In Perth?

I think there are some great entrepreneurs and deals around town right now. I was at the Perth Startup Weekend not too long ago, and I met some great young and passionate entrepreneurs including the organisers of the event. I feel really good about the future. I just hope some of the old guard doesn’t fuck things up.

What trends in emerging technology excite you?

I am excited by projects that are easy to move around geographically and are capital efficient. Mobile apps are a good example. You can make a lot of mistakes and not burn all of your capital. If you get it wrong at first, which is the most likely outcome, it is easy to re-focus, and get back on track.

I also love technology that has applications in the resources sector. I love disruptive technology. Ironically that may not work when it comes to solving needs in the resources industry. Perhaps, we’ll save that discussion for another day.

Are there any opportunities or trends that Australia/Perth are particularly suited to tackling?

In terms of mining and petroleum, we are the biggest users and therefore buyers of mining and petroleum technology in the universe. While we are leaders in implementing and using cutting edge technology, most of the invention comes from overseas. It would be great to become exporters of technology over time. I beleive WA Universities are becoming more engaged with industry in looking at future technology needs. The key will be to enable researchers to access commercial opportunities. There are a number of new programs around Perth addressing this. Hopefully there can be a shift in mindsets that will produce positive outcomes. If you think about some of the great companies of our times, HP, Cisco, Yahoo, Google and Apple, they came from academic and corporate cultures that made it easy to spinout. Sometimes I think people here try too hard to add value. Maybe they just need to let go.

The building of the SKA should also produce some derivative benefits in terms of access to computing power and also innovation. The danger is in not having the foresight to take advantage of the opportunities, or even worse, getting in the way.

We see a lot of “not enough access to capital” vs. “not enough quality deal flow” debate in the Australian start-up press. Do you have a take on this? Are there enough quality early stage investment opportunities here? Do start-ups here have enough access to capital?

I think this is a catch-22. If there were enough successful deals, there would be a lot more risk capital in Australia available for startups. The reality is, Australia has not produced very many big exits relative to the amount of capital that has been available over the last 15 years. So investors aren’t that excited about the market.

That being said, I have never seen a good deal that didn’t get funded. The other day, a friend in the Valley was telling me about a company he met from Perth that couldn’t get funded here because local investors didn’t understand the value proposition. I happened to know the company. The issue was that it had a terrible value proposition and a sub par team. I think some of the local investors are world class.

In addition, current Commonwealth Government policy and is not well suited for attracting capital. Capital markets want clarity, not broken promises and misleading policy. One of the positive government initiatives over the last few years has been the Commercialisation Australia grants program. This allowed a certain amount of risk mitigation for investors in the form of low cost or free capital from the Commonwealth. Now I am not saying I like that kind of policy, but hey it was good for startup companies and their investors. Without warning the government hit the pause button. Investors hate that kind of behavior.

Aside from the performance, another major issue facing venture capital as an asset class is that the primary target investors, superannuation funds, have been scared off by an over awareness of the management expense ratios which are biased against venture capital managers when compared

Clearly there are a lot more investors concentrated in some other markets like Silicon Valley and Israel when compared to Australia. That being said, there are large startup ecosystems in those regions that can support a vibrant investment community, we just don’t have the volume.

So what is the solution? I believe you can only fix what you can control (duh!). We need to start from the ground up. The local startup community needs to abandon its greedy nature and embrace a more constructive future. People need to focus on building great teams around great ideas. They need to spend every dollar like it was their last. They need to learn to walk away from failure without shame. There are a lot of new faces around town going in the right direction, we need to support them and help them embrace a new paradigm that is about building great companies not promoting deals. When this happens the wealth will come, but if folks want to create wealth with hype and over promotion, we will be doomed to more of the same old same old, as the saying goes.

Interview: Melbourne Local, Alan Downie — July 23, 2012

Interview: Melbourne Local, Alan Downie

/Kate Kendall

This week, Kate interviews one of Melbourne’s startup heroes  – Alan Downie, the CEO and cofounder at BugHerd and community organiser at HeadStart Australia.

Name: Alan Downie

Website: bugherd.com

Twitter handle(s): @alandownie and @bugherd

Works: BugHerd, HeadStart, FiveSecondTest, UsabilityHub, AngryMonkeys, Intranet DASHBOARD

BugHerd is one of Melbourne’s recent startup success stories, why do bugs need herding and what does your product do?:

Bugs need herding because when you’re building a website or web application, everyone has an opinion about it!

You may have a client that wants a different version of their logo, a project manager that doesn’t like the sign-up process, a bunch of testers finding glitches, a dev team managing their own internal issues… not to mention that end users of the web app will always find something new to break. If your team is using a traditional bug tracker, all of these issues have to get collated from emails, phone calls, Zendesk or maybe UserVoice and put into a bug tracker for the dev team to resolve. Then when the issue is fixed you have to get back to whoever reported it (usually the same way they contacted you in the first place) to let them know it’s done! So the end result is that you have a 15 minute conversation across three or four different people just to log an issue that may only take a few minutes to fix.

The reality is that when you’re building a web app, everyone who ever looks at the website is a source of bug reports; so we figured what better place to put your bug tracker! We bypass all the complexity of JIRA or FogBugz, and just get clients, end-users and your team to make annotations directly on your website. We collect that feedback, along with a bunch of meta data like who they are, what browser they use using, what the url was and we can even grab a screenshot of exactly what they saw. It means that we provide a ton of context around an issue even when the user only gives us a few words of their own. We bundle all that up and put it in front of the developer in a way that makes it easy for them to find, replicate and fix.

BugHerd’s backend, IT Crowd style

How did you find raising money for BugHerd both globally and locally?

I’ve never been much of a networker, so incubators like Startmate and 500 Startups were crucial for us to find investors.

Every one of our investors either attended a pitch event or were introduced to us through Startmate or 500. That’s not to say you can’t do it yourself, it’s just a matter of finding who you want money from, and then finding someone who might know someone who can get an email address or tee up a meeting. Today you have things like Angel List, which can facilitate that for you, so that really breaks down the barrier to finding that right person.

It doesn’t matter if you raise locally or in the US. The important thing is that you locate your business in the city or country that gives you the best chance of success. That’s step one – forget about where to raise from. If you want to work with retail companies, you go to the US. If you want to do something with mining companies, then you get on plane to Perth! If you’re doing a SaaS product and don’t plan on having a sales team then it really doesn’t matter where you’re based in the early days. Once you work out where your business needs to be, then that’s when you work out where to raise money form. We decided Australia was where we wanted to run our business, so we focused our energies on raising here. The best value you can get from your investors is their experience, so we wanted to be where they are.

You recently started HeadStart Monthly – what’s the purpose of this event and how important is it to give back to our tech community?

In the US, and in the Valley in particular, IT folks are born wanting to start a business. In Australia we still very much have the mentality of “get a good degree, get a good desk job”. Nice and safe. People love to complain about how risk averse investors are in Australia, but the reality is that it starts with students and employees not taking the risk themselves first. The average Aussie would rather have a house and mortgage than to run their own business.

There aren’t enough investors investing in startups here because there aren’t enough people running startups!

We know a lot of smart people are working on the investor part of the problem, and we want to work on the startup part of the problem.

We’ve been meeting a lot of people who are clever, passionate and have awesome ideas, but they’ve just got no idea what they’re doing (to put it bluntly). We looked at these teams and realised that the only difference between them and us was that we’d done Startmate and had 18 months of running a funded startup under our belt. The difference in knowledge objectively isn’t that great, but the gap is vast in terms of how much you can achieve once you have that knowledge. When you getting started you have a feeling that you’re just missing some small piece of the puzzle, that there must be something the other guy knows that you don’t; and it’s true. The crazy thing is that those things are massive hurdles for a startup and yet are actually really, really easy to learn. Business validation, customer acquisition and application metrics are all dead simple concepts to learn, but as a beginner you don’t even know that you need to know them. In short, we just got tired of seeing people pour 6-12 months of their lives into an idea without having ever spoken to a customer. It’s a *heddesk* moment for us now, but 18 months ago we were doing exactly the same thing!

The more we can help these pre-businesses become real businesses, the greater the success rate will be and that will in turn make startups more enticing to investors, and then the whole wheel starts to turn.

You work out of a new coworking space in Abbotsford called House of Commons. What do you think of coworking as a movement and what do you like about it?

Amusingly, I used to hate coworking. There are still some things that bug me about it (I still hate open plan offices!), but I’ve definitely come around to the idea.

As an early stage startup, a coworking space can act a bit like an incubator. You’re surrounded by people who can challenge your plans and be a sounding board for your thoughts and ideas. For me, the biggest danger to a startup is working in isolation. When you work by yourself there’s no one over your shoulder asking you, “have you launched yet?”. House of Commons is a bit smaller than some of the other spaces around, so the noise isn’t a huge issue. We’re all very open with our businesses and help each other out whenever possible.

The new House of Commons coworking space

[Ed’s note: check out our coworking directory here to discover a space near you.]

What was your first job?

I didn’t do IT at school or university (initially at least); having always had a computer at home, computers were more like a toy for me than something I’d do as a career. I built my first website in 1995 in my first year of uni, but didn’t take it up as a career until four years later.

Bizarrely I didn’t think of the Internet as anything other than a research tool and a means to play multiplayer Quake.

After nearly dying of boredom doing Science/Engineering, I quit uni and did everything else from fixing computers to selling used cars. After spending a year or so installing internet in people’s homes, I decided I’d rather be on the other end of the modem, so I went back to uni to do Multimedia.

I actually owe a lot to a big bloke by the name of Brad ‘Hubba’ Houghton. He gave me my first web gig at Triple M/Fox FM in Melbourne when I was only six months into my degree. He had no reason to hire me other than a gut feeling (he had a lot of gut to have a feeling in, mind you).

What’s your favourite Melbourne neighbourhood/locality?

I lived in South Melbourne for a few years, and loved it. At the time I didn’t really take advantage of the awesome food and coffee in the area, and now that I’m out in the ‘burbs I always wish I was back.

Early morning coffee from St. Ali, French toast down the road at Gas and the famous South Melbourne Market dim sims for lunch. What else could you ask for!

What other events or sites do you check for your source of startup news and happenings?

Most of my news comes from Hacker News or Reddit, although I try to keep tabs on the local industry as much as possible via Fairfax, Startupsmart and Delimeter. There have been a couple of other local startup focused publications, but none of them have quite nailed it yet. I’m at Silicon Beach drinks occasionally, and obviously always at HeadStart!

What’s next?

BugHerd is taking up most of my time at the moment. Matt (my cofounder) and I still have FiveSecondTest running on the side which we may get back to one day. I’m running the HeadStart event along with Vincent Brendel (2nd Thursday of every month), and in the next few weeks Matt and I will be starting a tech-centric podcast which should be a heap of fun.

Alan’s other site: FiveSecondTest

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Stay tuned for more interviews here and via our go-to email digests @ http://thefetch.com

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