To Investigate and Learn from Startup Accelerators and Innovation Ecosystems - Israel, Netherlands, Sweden, Germany, UK, India, China, Singapore

Innovation Ecosystems: Lessons for Australia

Report by Dr Toby Christopher Heap, Churchill Fellow

2017 Churchill Fellowship to investigate and learn from startup accelerators and innovation ecosystems - Israel, Netherlands, Sweden, Germany, UK, India, China, Singapore.

Awarded by The Winston Churchill Memorial Trust

INDEMNITY CLAUSE

THE WINSTON CHURCHILL MEMORIAL TRUST

Innovation Ecosystems: Lessons for Australia

Report by Dr Toby Christopher Heap, Churchill Fellow

2017 Churchill Fellowship to investigate and learn from startup accelerators and innovation ecosystems - Israel, Netherlands, Sweden, Germany, UK, India, China, Singapore.

I understand that the Churchill Trust may publish this Report, either in hard copy or on the internet or both, and consent to such publication. I indemnify the Churchill Trust against any loss, costs or damages it may suffer arising out of any claim or proceedings made against the Trust in respect of or arising out of the publication of any Report Submitted to the Trust and which the Trust places on a website for access over the internet. I also warrant that my Final Report is original and does not infringe the copyright of any person, or contain anything which is, or the incorporation of which into the Final Report is, actionable for defamation, a breach of any privacy law or obligation, breach of confidence, contempt of court, passing-off or contravention of any other private right or of any law.

Signed Date 12 July 2019

ACKNOWLEDGEMENTS

When I decided to apply for a Churchill Fellowship, I was naïve to the logistical challenge that awaited me and the degree to which I would be calling upon the good will and generous support of so many. There are dozens of people who have helped me in one way or another at some point on this Churchill journey. Unfortunately, I am not able to mention them all here, but there are a handful of people I would like to call-out for their particularly generous support.

First, this Fellowship would not have been possible without the support of my business partner and brother Ben Heap along with the rest of the H2 Ventures team. He has always been such a huge support to me, for which I can’t thank him enough. I would also like to mention Lily Wu who did a lot of the heavy lifting in researching my trip and setting up an awesome array of meetings with amazing people.

The number one piece of advice I give to aspiring Churchill Fellows is to get the best referees you can. I know from experience that, when assessing a group of unknown candidates for anything, the quality of their referees tells you a lot about the individual. With that in mind I am so grateful and humbled by the people who wrote references in support of my Fellowship. For their support I would like to thank: the Hon Arthur Sinodinos AO who, at the time, was the Minister for Industry, Innovation and Science; the Hon Wyatt Roy, who, as the youngest person ever elected to the Australian federal parliament and the youngest Minister in the history of the Commonwealth, was previously the Assistant Minister for Innovation; and, Milton Samios, the Chief Executive Officer of Investec Australia Limited. I would also like to thank Ali McDonald, Geoff Mason and Jacqui Marshall who helped behind the scenes with arranging these references.

Prior to and during my travels there were several people who provided particularly valuable contributions and/or went out of their way to make very helpful introductions that led to valuable meetings. On this front I would like to thank Wyatt Roy, Dave Sharma, Katherine Heathcote, Simone Whetton, James Mabbott, Nick Kaye, Brett Mason, Lewis Casey, Kate May, Jane Ryan, Miriam Waters, Susan Corbisiero, Daniel Zhan, Philip Yeo, Bruce Gosper, Carolyn Atkinson, Michael Smith Jr, Hugh Mason, Edwin Chow, Der Shing Lim, Tsvi Vinig,

Constantijn van Orange-Nassau, Lynette Wood, Jonathan Kenna, Marie Wall, Mikolaj Norek, Tor Bonnier, Matt Anderson, David Watson, Ben Brabyn, Catherine Howarth, Philippe Legrain, Kevin Baughan, Stian Westlake, Saul Estrin, Thomas Hellmann, Aaron, Ari Siegmann, Dan Galai, Chris Cannan, Omri Wislizki, Rachel Daydou, Peter Davidson, and Johan Uddman.

Of course, I must thank the team at the Winston Churchill Memorial Trust for putting their faith in me in the first place and for all their financial and logistical support in making this possible. I would also like to thank all the sponsors of the Trust, past and present, and the broader Churchill Fellowships community of which I am excited to now be a member.

Last but certainly not least, my family. Without the support of my best friend and wife Rebecca and my three wonderful children Heidi, Edison and Archer I never could have considered taking on this Fellowship. They were so patient with me in the months before and after the trip and while I was away. They somehow managed to juggle everything without ever weighing me down with any issues they were having back at home. This trip would also not have been possible without the support of Rebecca’s parents, John and Rosemary who do so much to support our family for which I am so very grateful. Thanks to my parents for giving me the best upbringing, education and family life that anyone could hope to have, for their ongoing love and support, and for making me the curious lifelong learner that I am. Finally, a special thanks to my dad for proof-reading this report for me.

To all these generous people and the countless others who have helped me throughout this journey, I am forever in your debt.

Thankyou.

INTRODUCTION

Day One I landed in Singapore, my first stop, with some trepidation. This was not my first visit to the city state, but I nevertheless felt a sense of unease about the intensity of the eight weeks that lay ahead. As my meetings kicked off, I quickly came to see Singapore as the perfect place to start this journey of innovation discovery. By the end of my trip I would have discovered that perhaps nowhere else on earth takes such a comprehensive, structured, and centrally planned approach to innovation. Even though, on balance, I do not think this is the ideal approach, it did provide a great reference point for the cities that I was to visit over the following months.

After my first week on Fellowship, I left Singapore feeling thoroughly exhausted and a bit unwell. I had started with enthusiasm and zeal. I had gone for runs each day and walked to almost every meeting in the hot and humid conditions. I was missing my family and questioning whether I had bitten off more than I could chew. Seven weeks of meetings to go…

I must admit that before being awarded a Churchill Fellowship I had a limited knowledge of the role that Winston Churchill played in our history. However, I have since become engrossed in several books (see Further Reading at the end of this report) on the life and impact of Churchill and feel a strong connection to the role that international exposure, learning and connections can have on one’s outlook and ability to make a difference to society at home and abroad. It is a testament to the global citizen that Churchill was (especially for his day) that many of the places I visited on my trip have a significant historical connection to Churchill. It left me feeling like I was traveling in the footsteps of a giant and with a strong sense of duty that I hope to fulfil over the remainder of my years.

Why? My background is as a scientist, a founder and an investor in early stage startups. I believe strongly in the power of innovation to improve the collective wellbeing, but I am concerned

5 about Australia’s ability to leverage innovation effectively to remain globally competitive for my children’s generation. Australia is indeed a lucky country. We are blessed with natural resources and have benefited more recently from demand for our exports due in part to our geographic position in the world, but there is no reason to think that our good fortune will last forever.

It concerns me that the average age of the top five listed companies in Australia is 127 years versus 27 years in the United States. This points to a lack of ‘creative disruption’. Therefore, I decided to undertake a Churchill Fellowship, to study leading innovation ecosystems around the world, to see first-hand how Australia might do better.

An obvious question is, why didn’t I visit the United States? First, I visit the US quite regularly, so I felt I had less to learn there. Second, Silicon Valley is the gold standard. Everyone wants to be ‘the next Silicon Valley’. I felt it more valuable to study how others are trying to achieve that.

How? This report is a summary of my findings from the conversations that I had on my eight-week journey across Europe’s and Asia’s leading startup ecosystems. My conversations were all held under Chatham House Rule (i.e. participants are free to use the information without revealing the identity of the speaker). As such, I have avoided attributing quotes, other than to indicate the city in which I heard them, and sometimes the profession of the speaker.

I have tried to validate through multiple interviews, and online research, any claims on policies and the like. If there are any errors, they probably represent changes since my interviews took place or common local misconceptions.

I have a background in design thinking and decided to use that approach to information discovery on my Fellowship. I avoided entering conversations with a list of questions for fear of hearing only what I already knew. I had casual unstructured conversations. I tried to get the person I was with to talk as much as possible and asked follow-up questions when they finished. Upon completing my Fellowship I had 398 pages of shorthand notes from my conversations. I then went through my notes and wrote key words on individual Post-it

6 notes which I stuck on a wall. I grouped these notes by topic which allowed me to see what common themes where emerging. Four key innovation ecosystem pillars and five thoughts for Australia emerged.

These views and findings are not conclusive. I had one week in each city but was able to meet with a diverse selection of those in the local ecosystem and I got an interesting overview of the prevailing mood, based on roughly ten interviews per city. I found that after approximately ten interviews in a city there were diminishing returns to further interviews, as I began to hear just things I had heard before.

The more interesting findings emerge when we compare the cities for common and conflicting views and then consider Australia, with its unique circumstances, in this context.

Finally, I am a proud graduate of the University of Sydney and serve as its Alumni Council President. In addition to my goal to study innovation ecosystems I took the opportunity on Fellowship to meet with global Alumni Association representatives of the University of Sydney as well as university alumni organisations from other leading universities. I was fortunate to be able to meet with University of Sydney alumni representatives from Singapore, India, Germany, the United Kingdom and China as well as alumni representatives from Oxford University, Cambridge University, and Tel Aviv University.

CONTACT DETAILS

Dr Toby Christopher Heap

Founding Partner, H2 Ventures

PO Box 4078 Castlecrag NSW 2068

KEYWORDS

Innovation, Startup, Ecosystem, Technology, Entrepreneurship, Accelerator, Culture, Policy, Commercialisation, R&D

CONTENTS

INDEMNITY CLAUSE ...... 2

ACKNOWLEDGEMENTS ...... 3

INTRODUCTION ...... 5

Day One ...... 5

Why? ...... 5

How? ...... 6

CONTACT DETAILS ...... 8

KEYWORDS ...... 8

CONTENTS ...... 9

EXECUTIVE SUMMARY ...... 11

ITINERARY ...... 13

WHAT MAKES AN INNOVATION ECOSYSTEM? ...... 22

1. Culture & talent ...... 23

Existential threats ...... 24

Attraction: leapfrogging culture change ...... 25

Cost of living ...... 29

Culture drain ...... 30

Talent competition ...... 31

Global outlook ...... 32

Heroes ...... 32

Innovation divide ...... 33

2. Markets & geography ...... 34

Born Global ...... 34

China ...... 35

South East Asia ...... 35

3. Financial capital ...... 36

Startup funding ...... 36

Scaleup funding and exits ...... 37

4. Government policy & supporting infrastructure ...... 38

Infrastructure ...... 38

Agile ...... 39

Getting out of the way ...... 40

Strategy ...... 41

Waves ...... 42

Patents ...... 43

Marketing ...... 43

Artificial Intelligence ...... 44

Regulation ...... 45

THOUGHTS FOR AUSTRALIA ...... 47

A forward-thinking and agile Australia ...... 47

Hearts and minds ...... 48

A nation of inventors ...... 49

Reverse the culture drain ...... 51

Getting out of the way ...... 52

CONCLUSIONS & RECOMMENDATIONS ...... 54

DISSEMINATION AND IMPLEMENTATION ...... 56

PHOTOGRAPHS ...... 57

RECOMMENDED FURTHER READING ...... 61

EXECUTIVE SUMMARY

Innovation Ecosystems: Lessons for Australia

Report by Dr Toby Christopher Heap, Churchill Fellow

2017 Churchill Fellowship to investigate and learn from startup accelerators and innovation ecosystems - Israel, Netherlands, Sweden, Germany, UK, India, China, Singapore.

Australia is blessed with natural resources; however, we cannot afford to rely on this forever. Australian also suffers from a lack of ‘creative disruption’. I undertook this Churchill Fellowship to study leading innovation ecosystems around the world, to see first-hand how Australia can do better.

This report is intended for anyone involved in the Australian startup and innovation ecosystem, particularly policy makers and influencers. My aim is to stimulate further discussion and debate on the best ways to boost the Australian innovation ecosystem.

Our Australian innovation ecosystem has been growing in recent years but we cannot rest if we wish to be a world leading innovation driven economy.

Through the numerous interviews I conducted on Fellowship I found that there are four key pillars to a healthy startup ecosystem:

1. Culture & talent 2. Markets & geography 3. Financial capital 4. Government policy, regulatory environment & supporting infrastructure

Of these, culture & talent is the most important.

In addition, I have proposed five thoughts for Australia:

2. Hearts and minds – Innovation should be a unifying force for the nation; it should be depoliticised and have bipartisan support. 3. A nation of inventors – Australia should aim to inspire and support more of our people to embrace their inner inventor. 4. Reverse the culture drain – Australia should aim to leapfrog our way to a stronger innovation culture by retaining our best innovation talent, attracting our innovative diaspora to return, and attracting new innovative people to make Australia home. 5. Getting out of the way – While there is a role for governments in supporting innovation, one should not forget that creativity often comes from constraint. In fact, if you ask startups what governments can do to help, they will often say “just get out of the way”. Governments should focus their initial efforts on preventing and removing policy barriers to innovation. Under each of these thoughts I have proposed several example activities. I recommend that each of these thoughts and associated activities be considered and discussed with an open mind and that the best of the activities be implemented.

ITINERARY

On Fellowship I was grateful to have 86 meetings with more than 130 individuals who, in one way or another, were able to provide useful insights into innovation in each of the cities I visited. Below is a summary of my Fellowship itinerary ordered chronologically.

Name(s), Title(s) Organisation(s) City, Country Bruce Gosper, Australian High Commissioner Australian High Singapore, to Singapore Commission Singapore Carolyn Atkinson, Counsellor (Political- Singapore, Economic) Department of Foreign Affairs and Trade Tobias Fischer, (1) Regional FinTech Advisor, (1) Asian Development Singapore, (2) Regional Lending Program Manager Bank, (2) Grab Singapore Financial Services Asia Nick Hungerford, (1) Senior Advisor, (2) (1) Portag3 Ventures, Singapore, Founder/Director (2) Nutmeg Singapore Jeremy Berger, Portfolio Director Life.SREDA Singapore, Singapore Michael Smith Jr, Partner SeedPlus Singapore, Singapore Hugh Mason, (1) CEO, (2) Adjunct Associate (1) JFDI.Asia, (2) Singapore, Professor Institute for Singapore Engineering Leadership, National University of Singapore Jason Edwards, Partner Qualgro Singapore, Singapore Janesh Patel, Partner Dymon Asia Capital Singapore, Singapore

Name(s), Title(s) Organisation(s) City, Country Edwin Chow, Group Director, Industry Enterprise Singapore Singapore, Development, Innovation & Start-ups (SPRING Singapore) Singapore Marianne Tan, Head of Partnerships and Action Community for Singapore, Internationalisation Entrepreneurship Singapore Steve Leonard, CEO SGInnovate Singapore, Hsien-Hui Tong, Head, Venture Investing Singapore Michael Blakey, Managing Partner Cocoon Capital Singapore, Partners Singapore Der Shing Lim, (1) Angel Investor, (2) Co- (1) AngelCentral, Singapore, Founder (2) JobsCentral Group Singapore Elaine Wong, Key contact # University of Sydney Singapore, Singapore Alumni Singapore Network Anurag Singh, Business Development Australian Trade and Bangalore, India Manager, Bangalore Investment Commission (Austrade) Suresh Jayaraju, Samsung Senior Director, NASSCOM 10,000 Bangalore, India Head-10,000 Startups Startups Vikyath Nanjappa, Startup Incubation Nadathur S. Raghavan Bangalore, India Centre for Entrepreneurial Learning (NSRCEL), IIMB Suresh Bhagavatula, Associate Professor and Indian Institute of Bangalore, India Chair of Entrepreneurship Management Bangalore Ashok Madaravally, Director Pitney Bowes Bangalore, India Suhas Gopinath, (1) Co-founder, (2) Director, (1) HappyEMI, (2) Bangalore, India (3) ICT Advisory Board Member, (4) Member Globals Inc, (3) World

Name(s), Title(s) Organisation(s) City, Country of National Expert Advisory Committee on Bank Group, (4) Innovation, Incubation, Technology & Government of India Entrepreneurship (NEAC-IIITE) Hosahalli Subramanya, Director & Biocon Institute of Bangalore, India Chair Bioinformatics and Applied Biotechnology Vinod Shankar, Chief Operating Officer Global Incubation Bangalore, India (COO) Services (Ginserv) Jerry Vachaparambil, (1) Strategic Marketing (1) Khosla Labs, Bangalore, India & Global Alliances (2) Clutch.AI, Subir Mansukhani, (2) Founder, (3) Chief (3) Novopay Digital Officer Anirudh Banger, Principal AI Engineer CBREX Bangalore, India University of Sydney Indian Alumni Dinner # University of Sydney Bangalore, India Navneet Nair, Kartik Rao, Syed Khalid Ahmed, Indian Alumni Sunny Gurnani, Vishnu Closepet Suresh, Supriya Singla, Alex Thomas Jayant Chacko, Debasish Das, Kartik Manjunath, Harish Rangaswamy, Deepak Abraham, Anirudh Banger, Nikhila Unni, Vinay Malik, Grana P S Gnanaraj, Mugunth Elanchelian, Sarala Vijayapadman, Seema Desai, Girija Umashankar, Rohit Bhaskaran Frans Anton Vermast, (1) Strategy Advisor & (1) Amsterdam Smart Amsterdam, The International Smart City Ambassador City, Netherlands Lucas Evers, (2) Head of programme art- (2) Waag Institute science and Open Wetlab Katja Berkhout, Director International StartupDelta Amsterdam, The Jitske van Os, International Project Lead Netherlands

Name(s), Title(s) Organisation(s) City, Country Manuela Krull-Mancinelli, Managing StartupBootcamp Amsterdam, The Director Smart City & IoT Netherlands Adam Ayers, Lab Lead - ING Labs Amsterdam ING Amsterdam, The Netherlands Tsvi Vinig, Associate Professor in University of Amsterdam, The Entrepreneurship & Innovation Amsterdam Business Netherlands School Darya Krasilnikov, Head of Incubation Amsterdam Centre for Amsterdam, The Entrepreneurship Netherlands (ACE) Constantijn van Orange-Nassau, (1) StartUp (1) StartupDelta, (2) Amsterdam, The Envoy, (2) Co-founder & Chairman, (3) Startup Fest Europe, Netherlands Advisor (3) European Commission Ismail Chaib, (1) Chief Operating Officer, (2) (1) TESOBE (Open Berlin, Germany Cofounder Banking Project), (2) MakeSense, German Chapter Alex Ruthemeier, (1) Co-founder, (2) (1) Expatrio Global Berlin, Germany Managing Director Services, (2) Finovent Frank Wiethoff, Managing Partner KPMG KPMG Germany Berlin, Germany Berlin & Region East Claudia Alsdorf, Head of the Digital Ecosystem Advisory Kelly Sims, (1) Trade and Investment (1) Australian Trade Berlin, Germany Commissioner, (2) Deputy Consul General and Investment Michael Bingel, (1) Landing Pad Manager Commission, (2) (Berlin) Australian Consulate- General

Name(s), Title(s) Organisation(s) City, Country Lunch on the occasion of the visit by Dr. (1) Australian Berlin, Germany Toby Heap at the Australian Embassy in Embassy, Berlin, (2) Berlin Australian Trade and Phoebe Brown, (1) First Secretary Investment Kelly Sims, (1) Deputy Consul General Commission, (3) Michael Bingel, (2) Landing Pad Manager Germany Trade and Dr. Jürgen Friedrich, (3) Chief Executive Invest, (4) Brittany Arthur, (4) CEO beliefXchange, (5) Fabian Bahr, (5) Director, Berlin Office Giesecke & Devrient, Tim Kunde, (6) Co-founder and Managing (6) Friendsurance, (7) Director Deutsche Fintech Vincent Ma, (7) Director Solutions, (8) Björn N. Siebert, (8) Public Affairs Manager door2door, (9) Cube, Christian Tegge, (9) Chief Operating Officer (10) MXC Aaron Wagener, (10) Chief Operating Officer Jock Gordon, Entrepreneur & Advisor Jock Gordon Strategic Berlin, Germany Advisory Mario Paladini, Founder & CEO AiRelo Berlin, Germany Jens Woloszczak, Founder & Chief Executive Spotcap Berlin, Germany Officer Yannis Salavopoulos, Founder & Managing Capitals Circle Group Berlin, Germany Director Christian Herzog, (1) Head of Division, Digital (1) BerlinPartner, (2) Berlin, Germany Business & Startups, (2) Founder Start Alliance Lynette Wood, Australian Ambassador to Australian Embassy in Berlin, Germany Germany Berlin, Department of Foreign Affairs and Trade Jonathan Kenna, Australian Ambassador to Australian Embassy in Stockholm, Sweden Sweden, Department Sweden

Name(s), Title(s) Organisation(s) City, Country of Foreign Affairs and Trade Jonas Larsson, (1) Managing Partner, (2) (1) Perceptron Stockholm, Investment Adviser Ventures, (2) Vinnova Sweden Sonia Kaurah, (1) Community Manager, (2) (1) SUP46 (Start-up Stockholm, Board Member People of Sweden), (2) Sweden Australian Business Council of Sweden Marie Wall, Deputy Director, Startups Swedish Ministry of Stockholm, Enterprise Sweden Mikolaj Norek, Managing Director Karl-Adam Bonniers Stockholm, Tor Bonnier, Chairman Foundation Sweden Olof Berglund, Business Coach Stockholm Innovation Stockholm, & Growth (STING) Sweden Matt Anderson, Deputy High Commissioner Australian High London, United to the United Kingdom Commission in Kingdom David Watson, Senior Trade and Investment London, Department Commissioner for UK, Ireland and the of Foreign Affairs and Nordics Trade Ben Brabyn, Head / Chief Executive Level39 London, United Kingdom Catherine Howarth, (1) Chief Executive, (2) (1) ShareAction, (2) London, United Trustee Scott Trust (Guardian Kingdom Media Group) Philippe Legrain, (1) Founder, (2) Visiting (1) Open Political London, United Senior Fellow, European Institute Economy Network Kingdom (OPEN), (2) London School of Economics & Political Science (LSE)

Name(s), Title(s) Organisation(s) City, Country Kevin Baughan, Deputy Chief Executive Innovate UK London, United Officer Kingdom Paul Copping, Chief Innovation Officer Digital Greenwich & London, United DG Cities Ltd Kingdom Stian Westlake, (1) Policy Advisor to the (1) UK Department for London, United Minister of State for Universities, Science, Business, Energy and Kingdom Research and Innovation, (2) Senior Fellow Industrial Strategy (BEIS), (2) Nesta Hugh Simpson, Technology Consultant, EY London, United Regional IOT Lead Kingdom Kerstin Classon, Senior Investment Manager Australian Trade and London, United Nordic Region Investment Kingdom Commission (Austrade) Saul Estrin, Professor of Management London School of London, United Economics Kingdom Matt Perkins, Chief Executive Officer Oxford University London, United Innovation Kingdom Thomas Hellmann, Professor of Saïd Business School, London, United Entrepreneurship and Innovation University of Oxford Kingdom Alex Feyler, Venture Manager Oxford Foundry London, United (University of Oxford Kingdom entrepreneurship centre) University of Sydney UK Alumni Association University of Sydney London, United Drinks. # UK Alumni Association Kingdom Many guests including: Tony Chan, Chair Felicity Hudson, Member of Executive Committee

Name(s), Title(s) Organisation(s) City, Country Antonio Costantino, University of Sydney German Alumni Association John Pritchard, Chairman # Cambridge Alumni London, United Association Kingdom Christine Fairchild, Director # Oxford Alumni London, United Relations Kingdom Aharon, Chief Executive Officer Israel Innovation Tel Aviv, Israel Ari Siegmann, Chief of Staff Authority Dan Galai, (1) Owner & Chairman, (2) (1) Sigma-PMC, (2) Tel Aviv, Israel Professor Hebrew University Chris Cannan, Australian Ambassador to Australian Embassy in Tel Aviv, Israel Israel Israel, Department of Foreign Affairs and Trade Paul Israel, Executive Director Israel-Australia Tel Aviv, Israel Chamber of Commerce Omri Wislizki, Australian Landing Pad Australian Trade and Tel Aviv, Israel Manager, Tel Aviv Investment Commission Nimrod Cohen, Managing Partner TAU Ventures Tel Aviv, Israel Shira Gal, Head of Incubation programs Iris Ginzburg, Head of MBA Program in Coller School of Tel Aviv, Israel Technology, Innovation and Management, Tel Aviv Entrepreneurship University Nimrod Vromen, Partner, International Yigal Arnon & Co. Tel Aviv, Israel Hitech Department Uzi Scheffer, Chief Executive Officer & Board SOSA Tel Aviv, Israel Member Gil Arazi, Founder & General Partner FinTLV Venture Capital Tel Aviv, Israel Avi Cohen, Co-Founder & CEO The Floor Tel Aviv, Israel

Name(s), Title(s) Organisation(s) City, Country Desmond Marshall, Managing Director, Asia Pacific Sigalit Ben Hayoun, Director # Tel Aviv University Tel Aviv, Israel Alumni Relations Startups to China Panel at the Australian (1) Australian Trade Shanghai, China Landing Pad in Shanghai and Investment Dane Richmond, (1) Trade Commissioner / Commission Consul (Commercial) (Austrade), (2) XNode Adam Gong, (1) Business Development Corporate-Startup Manager Innovation Dr Chuyang Liu, (1) China Specialist and Accelerator, (3) Group Deputy State Director (Victoria) 8 Media, (4) Euclideon, Jasper Gill, (2) Startup Program Lead (5) Shanghai Megan Gathercole, (3) Founder and CEO Technology Innovation Phil Lu, (4) Vice President Centre, (6) Ladies Who Kate Guo, (5) Manager Tech Jill Tang, (6) Cofounder Rachel Daydou, (1) Innovation Consulting (1) Fabernovel Asia, (2) Shanghai, China Director, (2) Co Director Startup Grind Shanghai Peter Davidson, Founder & Angel Investor Fishburners Shanghai, China Emily Xu, Open Innovation Manager Innospace+ Shanghai, China Johan Uddman, (1) General Manager, (2) (1) JadeValue Fintech, Shanghai, China Vice President (2) CashBUS Rebecca Kraut, Vice President of Marketing Airwallex Shanghai, China Bryan Chao, Senior Director of Strategy Ke Finance Shanghai, China Echo Xie, Convenor # University of Sydney Shanghai, China Shanghai Alumni Group

For people with multiple relevant roles or meetings with people from different organisations, the organisations and their respective titles are indicated by a number in parentheses. # Indicates that this meeting was primarily regarding my secondary objective to learn more about university alumni organisations.

WHAT MAKES AN INNOVATION ECOSYSTEM?

As was pointed out to me in Tel Aviv, Australians are natural risk takers. We invest in exploratory mining companies (an inherently risky activity) and we love gambling. We are also great early adopters of new technologies. Taken together, this should make Australia an ideal place for innovative startups to thrive and in recent years they have been, but we cannot rest on our laurels. There is still a long way to go and for several reasons we are still risk averse when it comes to investing in high-growth technology companies.

As I considered the relatively newer countries of Singapore and Israel, which embraced innovation from their founding, I considered the once in a nation’s history opportunity that Australia could have at some point in the future if we were to become a republic. It made we think about how important it is that, if we were to become a republic, we do not waste this one-off opportunity to own our innovative future. As I travelled through the United Kingdom it struck me that too much of the republic debate is about disowning the past, rather than owning the future.

Startups are the future of any economy and startup ecosystems are the scaffolding that allow startups to thrive. Just like biological ecosystems, a healthy startup ecosystem includes all the elements necessary for new startups to be born and to grow into large and successful companies that will employ future generations. There are many different views on how to describe the elements of startup ecosystems. From my Fellowship I have concluded that there are four key determinants (or pillars) that make up a health startup ecosystem:

1. Culture & talent 2. Markets & geography 3. Financial capital 4. Government policy, regulatory environment & supporting infrastructure

In the following pages I discuss my findings from the eight innovation ecosystems that I visited with regards to each of these four ecosystem elements. Of these four ecosystem elements the first (culture) and the last (government) were by far the most talked about by

22 people I visited on my Fellowship. It seems that markets/geography are very important but are largely pre-determined; as long as you understand the geographic context of an ecosystem, you are better to focus on what you can influence. Financial capital is equally important but seems to be largely the result of a healthy ecosystem rather than the cause of one.

1. Culture & talent There seems to be almost universal agreement around the world that a culture that is conducive to innovation and access to high quality engineering talent is the most important element for a healthy startup ecosystem. However, many people see cultural change as too hard and slow, so they put it to one side and focus on ‘quick wins’. When reflecting on the cities I visited and the impressive degree to which many of them had addressed the requisite ecosystem pillars, I was reminded of the phrase I often would hear in Indonesia when bartering with market vendors trying to sell me a knock-off Louis Vuitton handbag, ‘same-same but different’. Often in their efforts to tick off as many ecosystem elements as possible, ecosystems ended up appearing superficially the same as Silicon Valley (everyone’s ‘gold standard’) but scratch below the surface and they were missing the key element of innovation culture.

Culture covers things such as risk appetite, openness, frankness, and the degree to which people have a global outlook. Some important drivers of culture in ecosystems such as Israel, with its sense of constant threat, cannot be recreated but other drivers such as having a culture of global opportunity can be encouraged through transformational international study trips. Of course, this kind of intervention is a long game and requires patience and a consistently long-term outlook. Countries such as China and Singapore which embrace long term planning are well placed to adopt these types of interventions.

Culture is hard to change overnight because is built up over decades and centuries as a result of the historical context of a people. In Singapore I was told that Kiasu (a fear of being blamed) leads to low collaboration which means local angel investors don’t share deals out of fear that they may fail causing a loss of face. As one person put it “we need to normalise mistakes and open the dialogue otherwise resultant insights become monopolised”. On the

23 other hand, Berlin’s inherent culture is “artistic, unfettered and non-corporate”. There are “no banks in Berlin, just art, culture and politics” and “Berlin has no limitations”. Unlike Berlin, Singaporean corporate and startup people are one-in-the-same. People move between the two worlds by simply changing their suits to polo shirts. As one person who had lived in both cities put it, “Singapore has no soul or creativity”.

Sweden suffers from Lagom which means “not too much, not too little, sitting comfortably in the middle of the bell curve”. I was told this is a “toxic, oppressive and individually stifling pressure to conform”. I prefer to think of it as ‘the train tracks of mediocrity’ and see a similar phenomenon in Australia where our tall poppy syndrome combined with a fear of failure leads to the same outcome.

In Israel I was told that “if you want to know why we are good at innovation, go look at an Israeli kindergarten. Kids are the centre of the family and are monsters until about the age 13”. This allows them to develop the chutzpah (extreme self-confidence or audacity) to question authority and the status quo. It was pointed out to me that the anti-authoritarian Australian culture (or “Aussie chutzpah”) has similar benefits for startup culture and should be celebrated and cultivated.

An interesting insight shared with me in London was that the word culture implies it is a given whereas the term cultivate implies a deliberative effort to affect a desired outcome. We should start talking about cultivating the attitudes to risk, failure, collaboration and success that will propel our startup ecosystems rather than sitting back and waiting for some magical innovation culture to eventuate.

Existential threats A common message I heard was that “defence paranoia drives a lot of US, Chinese and Israeli innovation”. Singapore was built in a period when it was fearful of its neighbours. Just as in Israel today, this existential threat creates a culture of self-reliance and technological urgency. One of the people I spoke to in Singapore talked of a country that is “becoming too comfortable now because there is no pressing fear”. In Berlin I was told, “things are good here, so there’s no urgency”. This complacency reminded me of Australia where we are blessed with a rich supply of natural resources and have not had an economic recession for

27 years. This leads to the question, ‘do you need a burning platform for innovation to thrive?’

The other consequence of existential threat is that it often leads to compulsory national service, which many believe to be helpful for creating a culture predisposed to innovation. Singapore, Sweden and Israel all have compulsory national service. In Stockholm I was told that the 12 months of national service allowed young participants to grow up, learn responsibility and discipline and to have an engineering mindset. The Israeli Defence Force was described as “the biggest human resources company in the world processing 100-150 thousand graduates per year”.

Attraction: leapfrogging culture change Healthy startup ecosystems need depth of talent and experience in founders, investors, advisors and mentors. To grow, startups need to be able to access high quality talent at reasonable costs. Talent is a supply-demand problem.

Supply is affected by the output of the education system in terms of quality of education and volume of people graduating with the appropriate skills needed for future industries and by the appetite of graduates for working in startups. Supply is also affected by immigration policy. In Silicon Valley one-third of startup CEO’s are Indian and one-third of startup engineers are Chinese. More than half of the unicorns (privately held startups valued at over $1 billion) in Silicon Valley were founded by immigrants and if you look at the senior, non-founding roles at those same companies, the proportion of immigrants jumps to 71%.

Demand is driven by the competition for talent. Startups are in competition with large companies when it comes to attracting talent to join their fledgling companies.

The most universal finding from my entire Fellowship was the important role that talent attraction plays in startup ecosystems. While changing the innovation culture of a city or country is hard and slow, there is a shortcut, which was evident in the cities I visited. Successful startup cities attract talent from beyond their borders, whether that be from other countries (e.g. Singapore and Berlin) or from other cities within the same country (e.g.

Bangalore and Shanghai). This immigrant talent is self-selecting for having a high appetite for risk and a proven willingness to take risks to succeed. In other words, they have the right cultural attributes for startups and by attracting more of them these cities are short- circuiting the sometimes-glacial pace of natural culture change.

Singapore has an “open door” attitude when it comes to startup founders. For example, the Monetary Authority of Singapore supports foreign startups with incentives to come and then to export back to their home markets through expansion grants. They see startup founders (as distinct from employees) as job creators not job takers. Entrepreneurs are outside the standard immigration policy headcounts. As one local put it, “the highest ecosystems are the ones that can arbitrage the politics around visas”. A Singaporean Venture Capital investor said to me that “not many startups we fund are just Singaporean founders” and another told me the “better quality companies are foreign founders with a local co-founder or core team member for localisation”.

In Amsterdam I was told how “positive immigration policy is key to a successful startup ecosystem because it is the ultimate risk taking to leave your home country and start fresh”. In this way you can “frog leap organic cultural change via immigration”. In 2015 the Netherlands introduced a startup visa which provides a 1-year residents permit for startups that are accepted into local incubators or accelerators. These incubators and accelerators act as visa facilitators and provide a national entry point and enable a two-week visa process for founders. Entrepreneurs are also taxed favourably (receiving a 30% discount) to compensate for living overseas.

Berlin is doing a great job of attracting foreign born startup founders. Forty percent of founders in Berlin are non-German (for example SoundCloud who relocated from Sweden). It helps that Berlin is known as an “open and startup friendly place which is 1-2 hours to anywhere in Europe”. One local described Berlin as being “like San Francisco 15 years ago, a cheap 24/7 city with a big influx of founders”. Berlin also has a big freelancing community who like it for its low cost of living, great work-life balance and cosmopolitan lifestyle. Germany even has a special Freiberufler (freelance) visa to attract freelancers. This got me thinking that digital freelancers who are working globally and can be based anywhere are another group that progressive governments should be aiming to attract as they are not taking jobs (they are self-employed) but are high value taxpayers. Also, as the workforce 26 moves towards a higher proportion of self-employed freelancers, will countries start to compete for these high value members of their population?

Germany also makes it relatively easy to get a residency visa if you are going to be self- employed (e.g. a startup founder). In addition, anyone earning a reasonable salary and working in a technical field (like computer programming) can get an EU Blue Card Visa to live and work across the 26 EU Schengen countries.

One startup founder I spoke with in Berlin said that they had selected Berlin over Sydney because of visas. “Australia has the distinct disadvantage that it is 22 hours away from Europe; however, initiatives like the Advance Queensland Hot DesQ program (which provides a $100,000 equity free grant to high quality founders) are a positive step to making it more attractive.”

In a globally competitive market for talent, some countries are putting themselves behind the eight ball.

Sweden is a very fair society, perhaps to a fault. Whereas in France people speak French to visitors to say “you’re in France, you should know how to speak French”; in Sweden people speak Swedish to visitors because it would be considered discriminatory to assume that they don’t speak Swedish. In both cases, the visitor is uncomfortable. In a similar vein, and unlike most of the world, I was told that it is hard for highly educated people to get visas in Sweden because it would be unfair to prioritise them over the less educated.

People don’t get paid well in Sweden and it is very expensive to live. I was told that recruitment of international talent is “really hard” because of government controlled housing leading to a potential 20 year wait for rental housing. This has led some companies, such as Spotify, to purchase their own houses for their staff. Many other companies apparently expand overseas and keep their staff small in Sweden.

So why would anyone move to Sweden? I was told that “the only reason people move here is because they have partners who are Swedish”. Although someone else said that “many Eastern Europeans come for the lifestyle”.

In London I was told that “immigration equals entrepreneurship” because immigrants are self-selecting for the kinds of characteristics that make good entrepreneurs and because

27 immigrants often have no option but to be entrepreneurs in their new home countries. This is even more so for refugees.

There is a strong argument that diversity of thought, in general, drives entrepreneurship and so it would follow that the most diverse and cosmopolitan cities (i.e. the ones with high immigration) establish a positive spiral whereby the most entrepreneurial people want to come, and their coming further increases the diversity and entrepreneurial success of the ecosystem.

Access to the labour market is an important factor for new immigrants, although less so for entrepreneurs. Even though the UK has no support for new arrivals, they have a very flexible labour market which makes it easy for immigrants to get a foot in the door. This is unlike Germany, where a brickie requires a three-year qualification, and France, where a bin man must pass a reading and writing test to qualify. Of course, entrepreneurs don’t need to worry about labour force flexibility and many of the gig economy startups are making it easier for immigrants to become self-employed. For instance, I was told that “in Paris taxis are driven by French people and Ubers are driven by North Africans”.

I couldn’t help but think about the thousands of highly trained international students who come to Australia each year, only to be sent home at the end of their studies. This feels like low hanging fruit if we want to compete with Silicon Valley at leveraging talent into start-up ecosystem success. In London I was told that retaining more of these graduates is in our national interest and needs to be framed in a way to gain popular and political support.

I also discussed the power of diaspora returning home. This is particularly evident in China and India, where people who have emigrated to other countries (often the USA), been successful, and then returned home, are “twice filtered for risk tolerance”, thus making them incredibly valuable to their innovation ecosystems.

The numbers are irrefutable, 51% of unicorns (private companies that have reached a value in excess of one billion dollars) in Silicon Valley have at least one foreign born founder. Silicon Valley and the United States more generally has benefited greatly from the influx of well educated (often in STEM fields) immigrants.

However, the United States is not the only country to benefit from highly educated immigrants. Between 1990 and 2000 approximately one million people (often well-educated scientists) immigrated to Israel from the former Soviet Union which subsequently provided a huge boost to the economy, while increasing the population by 20%.

Israel encourages immigration in several ways. Israel specifically targets the Jewish diaspora around the world. All Jewish people around the world are afforded the right to migrate to Israel (known as Aliyah). Israel also targets the next generation of the Jewish diaspora through programs in which they pay to bring young Jewish people to visit Israel. These programs are designed to enable an influx of smart motivated young people who are self- selected to fit into Israeli society. For technical experts (judged as anyone earning two times the average salary in high-tech role) it is easy to get a five-year visa.

Cost of living The ability to survive (pay the rent and sustain oneself) while attempting to develop a new technology or startup business model is a crucial factor in any startup ecosystem. On one level, Australia (like Germany and Sweden) with its strong social safety net and good public healthcare and education, provides an environment where would be founders can afford to try and fail. However, the leading startup cities in Australia have a high cost of living which makes it harder for people to quit their jobs and focus on a new venture. Many of the ecosystems I visited had some variant of basic income support for founders at the very early (experimental) stages of their journeys.

India has a system called PRAYAS (Promoting and Accelerating Young and Aspiring innovators & Startups) which is part of their National Initiative for Developing and Harnessing Innovations (NIDHI). PRAYAS provides individuals with approximately $20,000 AUD to ‘play around with a prototype’ before it is at a stage where a traditional incubator, accelerator or other investor would be interested. The Indian government also provides the NIDHI-Entrepreneurs-in-Residence (EIR) Programme which provides a living allowance for graduating students for 12 months “to make pursuing entrepreneurship related to a technology business idea more attractive among available career options”.

Similarly, Germany has the Exists programme for university graduates, which provides a 2,500 euro per month grant to cover personal living expenses. Berlin also benefits from its low cost of living. It has famously been described as “poor but sexy”. I was told that “you can live on a low income and have a good life in Berlin” and when I asked another local what made Berlin so attractive for startups he said: “it’s really simple, it’s cheap”. I was told that in Berlin a seed investment of two-hundred thousand dollars is the equivalent of a one- million-dollar investment in the United States because of the lower cost of living and the supply of lower cost of Eastern European tech talent.

Israel has its own take on short term living support for potential founders. I was told that upon completing their military service, people are provided with a post army bonus which can only be used to pay for education or to start a business.

Culture drain Of course, it is one thing to attract new entrepreneurs to an ecosystem, but it is also important to understand that in a global environment competing for entrepreneurial talent, each ecosystem needs to fight to retain its existing talent, otherwise it will suffer from a culture drain. In Singapore I was told that: “Ironically, the best risk takers leave. The best systems engineers go to the United Kingdom, the USA, Hong Kong, and China.”

In Bangalore I heard that it is “difficult for any Indian player to access really good deep tech talent because the best of the best brains gets top dollars in the US, and no startup can compete”. And to make matters worse, when those talented engineers decide to start their own ventures, they do it in their new overseas locations.

In Amsterdam I was told that there is very little brain drain and that startups tend to keep their headquarters in Amsterdam because they are able to attract great talent, the cost of living and corporate tax rates are both low, and the government provides good research and development incentives.

In Stockholm the big concern was the culture drain happening at the point of exit. People talked about how offshore acquihires (buying out a company primarily for the skills and expertise of its staff, rather than for its products or services) are bad for the ecosystem

30 because they are taking brains while others lamented that a recent large exit iZettle, was bought by Paypal for double the price that it had intended to list locally. They had similar concerns that Spotify would likely list in the United States.

Talent competition Entrepreneurial ecosystems are a subset of the local economy and thus compete with the rest of the economy for talent. If you go back a decade in any of the cities I visited you would have found that most graduates did not consider entrepreneurship as a career option but that has been changing in recent years. In Singapore I was told that in 2003 1.8% of students wanted to be entrepreneurs. In 2014 this had risen to about 6%.

In Bangalore I was told that students are shifting to choose startups over multi-national companies at a rapid rate. “There has been a generational shift in thinking. Five years ago, 1- 2% wanted to start or work in a startup, now it’s closer to 25%”. Universities are having to rapidly transform to cater for people seeking entrepreneurship skills. “You can clearly see that students seeking jobs after university is going away”. This means that for governments, “just creating more jobs is no longer good enough”.

Polls 10 years ago in Israel found that most parents wanted their children to be doctors or lawyers, now 63% want their children to go into high-tech industries.

However, if there are too many other options for graduates, and not enough local startup success stories, graduates are less likely to want to follow the entrepreneurial path. As one Singaporean academic said: “Why would you want to become an entrepreneur here? We have 2% white collar unemployment and 25% of adults are millionaires, so kids have no motivation to follow the startup route.”

In Stockholm I was told that employee pay is low and personal taxes are high, so the risk reward equation is tipped in favour of being a founder. “The only way you get rich in Sweden is by starting your own company.”

In London it was brought to my attention that on average entrepreneurs do worse than employees, so the optimal decision if you have the choice is to be an employee. However,

31 people who are excluded from regular employment opportunities, such as migrants, are more likely to become entrepreneurs.

Global outlook Having a populace with a global outlook also seems to be an important factor for a thriving entrepreneurial ecosystem, especially if your home market is small.

The National University of Singapore has an overseas colleges program where students are sent for a year to global universities such as Stanford University and Tel Aviv University and, while they are there, they intern at tech startups and venture capital firms. I was told that this transforms the students, “they get the bug for entrepreneurship”.

In Berlin I was told that internationalisation of a startup ecosystem is very important, because it creates a virtuous cycle where international founders want to move to international cities, which leads to the cities becoming even more attractive for international founders. I was told that no one applies from overseas to move to Hannover whereas Berlin has people coming from everywhere.

In Shanghai I was told about how Taiwan had sent large numbers of young people to the United States universities to study electronics and upon their return they injected their newfound skills to help kickstart the local electronics industry.

Heroes Just as the athletics world needed Roger Bannister to demonstrate that a four-minute-mile was possible, startups ecosystems need heroes who set the standard for future generations of founders to follow. In Berlin I was told that “without the Samwer brothers, we would not be where we are”. In Tel Aviv I was told that Mirabilis, the company behind the ICQ messenger, started it all.

In Stockholm I was told that “the unicorns have shown it’s possible”, and because of Sweden’s pay-it-forward culture where experienced founders are always happy to help newcomers, they enable the next generation. These successful founders are also often the

32 first to invest in the next generation of startups because they know how to value them and are comfortable with the inherent risks involved.

Innovation divide As I travelled around the world I kept coming across a common theme. There is a growing gap between the innovation haves and the innovation have-nots. I regularly came across two-speed economies where those in the innovation fast lane where reaping the benefits of technology enabled disruption while those in the slow lane were more likely to feel that innovation is a threat to their jobs and their futures. In Singapore one venture capitalist said: “We don’t want to end up like San Francisco with rich founders living alongside the destitute and homeless.”

In Amsterdam I visited the Waag Institute which is aiming to empower people to be active citizens through technology. the Waag Institute operates at the intersection of science, technology and the arts and has maker spaces, wet labs and courses that allow everyday citizens to be engaged with their own futures.

In London I was told that the role of entrepreneurship is vulnerable as a result of several recent tech industry scandals such as the Cambridge Analytica affair. People talked about “silver spoon startups”, being “startups founded by sleezy ex-investment bankers with ponytails while living in fancy flats”. These founders find it easy to raise capital for bad business propositions while legitimate founders struggle to access capital networks. One example I was told about was an “Eton alum with lots of old school ties who raised two million pounds in two weeks with a 6-page pitch deck even though he admitted having no idea about tech”.

Tel Aviv is very much a two-track economy. Born global startups don’t even think about the local market because it’s too small. I was told that “startup nation is only 9% of the nation” and the better they get at telling the startup national success story, the more the other 81% feel like they have been left behind.

2. Markets & geography How a startup ecosystem is positioned geographically in the world along with its population and demographics will determine its markets. Besides long-term population policies and economic policies, this is largely pre-determined, and can be used as the starting point for setting a market strategy for an innovation ecosystem. On my travels three broad topics came up regularly: 1. Smaller ecosystems need to focus on larger global markets; 2. China is the largest global market but is not easy for foreigners to crack; 3. South East Asia is a very exciting opportunity in our region.

Born Global In Berlin I was told that “Australians don’t jump overseas quickly enough, unlike New Zealanders”. I was told that German startups with their home market of 80 million people still look to Europe first as it is a market of 500 million people. In Tel Aviv I was told that “Australia needs to be part of a global network to ensure they see where things are going”.

In Bangalore I was told that “India is a very different market, Indian consumers are different because they have a very low propensity to pay and are willing to endure a lot of pain to save money, which means startups must be solving a really strong pain point.” I was told that Uber and Amazon have not been successful in India.

In Stockholm I was told that Swedish startups know that Sweden is only a test market, so they operate in English and look to Europe and the world market. I was told that “Australia needs to realise it is a test market”.

However, I was also told in Sweden that born global startups have lower survival rates and are not great for the local economy, with a lower contribution to jobs, especially if they shift their global headquarters offshore. In Stockholm I was told that there is a strong correlation between where a startups first big customer is based and where they stay. Spotify and Sendit are two examples of startups that kept their global headquarters in Sweden as a result of their first customers being local. It was proposed to me that “global from day two” might provide the best of both worlds.

Being born global means talking a global startup language. In Tel Aviv I was told that Israeli startups talk US dollars not shekels because “no one knows Australian dollars or shekels, they would ask: how much is that in real money?”.

However, Israel provides a good example of what happens if the only market is global. Israel is experiencing a growing two speed economy in which the high skilled, high wage technology workers are benefiting from exporting to global markets, but local unskilled frontline workers are missing out. One local policy maker told me “I wish we didn’t have to be so globally focused, if we had a local market in parallel, we would get lower wage jobs, call centres, sales and distribution jobs”.

Australia can also seek to benefit from other markets that are looking to go global. In Shanghai I was told that many growing Chinese startups see Australia as a great first stop or test bed as they look to expand globally.

China In Shanghai I learned about the realities of running a startup in China. A lot of people talked about the “grey time” or “grey zone” for startups. While China is a huge and rapidly growing market not many foreigners succeed there. I was told that this is because “the right time to enter China is during the grey time, which is too scary for foreigners.”

As it was described to me, in China the government wants to encourage innovation in new fields so rather than regulating them they initially have no rules with the unwritten rule of “don’t do bad shit, then as bad things happen, they regulate”.

In Bangalore I was told that Indian startups struggle against global competitors. The Facebook of India is Facebook. I was told that Chinese startups benefit from China having a different language and a paranoid government that makes it hard for global startups to operate locally and thus protects local startups.

South East Asia In Singapore and China there was a common focus on the opportunity of South East Asia. In Singapore I heard that most local venture capital firms have a South East Asian focus

35 including Singapore, Indonesia, Thailand, Malaysia. I was told that “Indonesia is the big kahuna”.

South East Asian financial inclusion is a large opportunity. Grab has customers across six markets with 3 million drivers and is leveraging its reach to expand into lending and payments. In Indonesia the average income is $3,000 per year but the marketing cost to acquire a customer for a traditional bank is $300, so banks will never serve these customers. Grab was founded in 2014, and now has over 7,000 employees due to its ability to capture these low value customers.

In Shanghai I was told that Alibaba own 65% of the south east Asian economy “but no one notices because they buy emerging local companies and don’t rebrand them”.

3. Financial capital As I travelled across the different startup ecosystems. I was surprised to find that financial capital was one of the least talked about aspects of each startup ecosystem. A comment that stuck with me from my time in Bangalore was: “a startup celebrating a successful fundraising is like a chef celebrating buying ingredients”, in other words financing is necessary but it is not the measure of success. The discussions that I did have about funding could be divided into three broad categories: startup funding, scaleup funding, and exits.

Startup funding I was told in Singapore that a healthy startup ecosystem “need angels with experience”. Angel investors are the earliest stage investors, who take the most risk. As important as their financial capital is their experience and ability to mentor founders. Governments often introduce policies to encourage more seed stage investing. In the United Kingdom the federal government introduced the Seed Enterprise Investment Scheme (SEIS) tax incentives in 2012 which has been very successful at increasing the flow of seed stage capital. However, I was told that this increase in supply of capital has increased seed stage valuations while potentially reduced the average level of experience and quality of mentoring from seed stage investors. As one investor put it “there is a lot of dumb money in London”. 36

“In the 1980’s Israel had zero venture capital”. Then in the early 1990’s Israel established the Yozma investment program to attract multinational companies to establish a local presence and invest in R&D while sharing the risk with government. The program provided conditional matching loans against projects (not companies). The loans were to be paid back at the rate of 3% of sales until the loan was repaid. This was described to me as a “bottom up process” as the government did not select industries or focus areas or even lifecycle stages for their investments, it was driven by the private sector. This proved to be a very successful approach for Israel.

In 2006 Enterprise Singapore established a similar 1:1 evergreen co-investment fund capped at $4 million. It has more recently been increased to $200 million. Under this model, 70% of profits go to investors and founders even though they are contributing only 50% of the equity. This is similar in design to the Innovation Investment Fund that operated in Australia from 1997 until 2014.

One of the biggest issues for developing ecosystems is that when down cycles inevitably arrive, and investors lose money, it can take a long time for capital to start to flow back into the ecosystem. In London I had an interesting discussion about the potential value of a constant flow of government capital which would reduce the impact of down cycles and allow the ecosystem to have a growing cycle rather than resetting to zero each cycle.

In the Netherlands and in the United Kingdom, the respective royal families support their local startup ecosystems. In the Netherlands the crown prince Constantijn van Orange- Nassau is the special envoy for Startup Amsterdam where, among other things, a key role is to attract international venture capital funds to invest in Amsterdam. In the United Kingdom, The Duke of York Prince Andrew works with a broad range of organisations providing programmes which facilitate the growth of smaller entrepreneurial ventures and companies.

Scaleup funding and exits Now that many startup ecosystems have managed to establish a healthy supply of early stage startups many ecosystems are starting to focus on scaling up these small startups to have serious economic impact. In London I was told that you “need to be able to scale

37 startups to have economic impact, this is where Silicon Valley is special”. Scaleups require larger investments than startups which places them outside the scope of most private investors and many VC’s. This leaves larger institutional investors as the obvious targets for capital, but I was told in London that “most people have given up on pension funds”, leaving only corporate venture capital to fill the void. To address this the British Business Bank, which is the development bank of the United Kingdom, has established a fund of funds model to support scale up programs. I was told that Canada has done same.

Several of the discussions I had around financial capital revolved around the importance of exit ecosystems. In Singapore I was told that “the exit ecosystem is not there yet, Initial Public Offerings (IPOs) are not going great.” In Stockholm I was told that exits are important because they lead to recycling of capital back into the ecosystem by the people with the best experience possible, successful founders. This has been a key factor in the success of the Swedish ecosystem where successful founders feel a strong sense of responsibility to support “the next generation”.

4. Government policy & supporting infrastructure In Shanghai I had an interesting discussion about how each national government around the world operates ideologically on a spectrum where individual freedom is at one extreme (the United States operate at this end of the spectrum) and the common good is at the other extreme (China operates at this end of the spectrum). Much of Europe sits somewhere in between these two extremes. This affects everything in these societies but particularly government approaches to data protection and regulation. For example, China is willing to have individuals suffer for the benefit of society.

Infrastructure In Tel Aviv it was pointed out to me that “startups are a bottom up process, but governments love to associate startups to the infrastructure because the simple thing is to build a building, put up a plaque, cut a ribbon and take credit for any ecosystem success”.

As I observed in many of the cities I visited, governments often build these innovation centres in remote places because the cost is lower and they can appear to be serving regional constituencies. But as I heard in Tel Aviv “Innovation parks are outdated, innovation goes with the centre of the city because all the ecosystem support is there… investors, lawyers, accountants”.

I visited a number of these innovation parks during my travels and while they looked impressive from a distance, they often felt underutilised and soulless once inside. A good example was the One North precinct in Singapore which one investor described as “too far away, it’s almost in Malaysia” even though it was only about 20 minutes from the city centre.

In Israel I was told that there is great potential for innovation in Australia due to its high levels of investment in research and facilities but there was a damaging lack of investment in commercialisation: “There are phenomenal research facilities like the Charles Perkins Centre at the University of Sydney, but the scientists don’t have the funding to commercialise.”

Agile I leaned from the cities I visited that strong startup ecosystems are agile, and they sense and respond to the changing world. Similarly, government interventions to support startup ecosystems need to be agile. As one person I spoke with in Singapore said: “People are riffing on the fly, it’s a band not an orchestra, and the government is the band manager. You need to be prepared to fail. Some in government get that. You need to be responsive, when you fail you change direction. Sticking to the programmed past is not good when ecosystems change.”

Agility is not an excuse for being flippant. In London I was told that “government agility, like in Singapore, is good but there is a fine line between changing course too often vs leaving a policy in place forever… Innovate UK suffered from too much politically motivated intervention.”

In Amsterdam I had an interesting discussion about what is the measure of a successful startup ecosystem. Some talk about the number of startups. This has the advantage of being easily quantified but doesn’t really mean much, as was evidenced by the number of ecosystems switching focus from quantity to quality. Others talk about the total capital raised in an ecosystem, but we saw a healthy amount of capital raised in the Australian ecosystem in the late 1990’s only to see the ecosystem largely disappear for 15 years. It was proposed to me that it is “the ability of an ecosystem to identify and react to signals (internal and external) to transform and reinvent itself time and again that sets Silicon Valley and Israel apart from other ecosystems”. This gives an ecosystem the ability to endure financial and technology cycles, which allows long term momentum to build. In this model the ecosystem itself is the measure, not the individual startups and because tech cycles are getting shorter, only these agile ecosystems can prosper. This way of thinking was supported in Stockholm where I was told: “Don’t compare ecosystems in growth markets, compare how they handle bust cycles”.

Getting out of the way Ask startups what the government can do to help them and one of the most common answers is “get out of the way”. In Berlin I was told that “the good thing about the last mayor is that they didn’t interfere at all”. In Singapore I was told by a venture capital investor that the government distorts early stage quality because they create a negative selection bias. This is where the startups that attract government funding are the ones that focus their efforts on government funding, at the expense of building a great startup. As they put it: “you can’t accelerate shite”.

This does not mean that there is no role for government. It was pointed out to me several times that Silicon Valley was catalysed by the United States government. But it is important for governments to know when to step back and not to make the mistake that I was told happened in the Netherlands. Apparently as the ecosystem evolved, the government got more involved because of a “we created this” attitude. It was their baby and they couldn’t let it leave the nest.

In Singapore I was told that “creativity often grows out of constraints” and in Bangalore I was told that “you can’t innovate on a full stomach”. In Stockholm I was told that “the Paradox of entrepreneurship is that too much support is bad”. I was given the example of two Swedish music streaming startups, Soundcloud and Spotify. Two years after launching Soundcloud moved to Berlin because it was cheaper than Stockholm which gave it more time to operate without the need for additional investment or an immediate revenue model. Spotify stayed in Stockholm, accepted the higher cost of operations and embraced urgency. Spotify was forced to come up with a business model that allowed it to make revenue early because it had no other option. It needed revenue to survive. Ultimately, Sportify has been the more successful startup of the two.

Unfortunately, innovation is often politicised which makes it hard to get out of the way and can often lead to suboptimal, short-term policies. In Stockholm I was told of how Israel had depoliticised innovation to the point that “it’s like oxygen”. In London I was told of how the UK government removed the risk of politicisation by creating Nesta, one of the world’s biggest independent innovation foundations, which was endowed with several hundred million pounds which was raised through a national lottery.

Strategy All too often, government innovation policies do not seem to be part of a long-term strategy. They are often reactionary and politically motivated. I was told that the startup ecosystem in the United Kingdom was all organic with no coordination or density. In Singapore I was told that “the government catalyst does not need to be that big, then the commercial market takes over”.

China is very good at strategic long-term planning. It creates 5-year plans that go out many decades with very clear goals. For example, it has clear goal to lead the world in Artificial Intelligence by 2030. However, I was told in Amsterdam that “the limitation of this top down approach is that if it’s not in the 5-year program it will not be allowed to happen”. This limits the organic agility of Chinas innovation ecosystem when market and technology dynamics change.

In India, the government established the National Expert Advisory Committee on Incubation, Innovation, Technology and Entrepreneurship, an 8-member team of bureaucrats, scientists, and entrepreneurs to advise on innovation strategy.

In London I was told that “you need to understand the institutional system in which an economy is based”. The United Kingdom is based on creative disruption, where the whole system is in conflict and only the fittest shall survive. China and Singapore practice state led innovation, which can’t be replicated without their level of state control.

In Israel I was told how “Australia is spending large amounts of money on Cooperative Research centres (CRCs) that are technical but not innovative. I was told that “Australian researchers need to be more globally aware as they are doing things without knowing that others have already done them.” And when Australian researchers do develop something genuinely innovative, they let others commercialise it, for example I was told that Australia spent $50 million researching the bionic eye and then sold the technology to Israelis for $20 million so that they could commercialise it.

In Shanghai I was told of how the government identifies national champions who they collaborate with and support first through protectionism. I was told that the “Chinese miracle started with special economic zones”.

Waves An interesting phenomenon became apparent as I discussed the evolution of startup ecosystems. Ecosystem histories were often broken down and described to me in distinct waves. These waves seemed to be driven by internal and external factors, innovation fads and short-term government policies.

In Singapore the first wave started in 2002 and was focused on infrastructure such as coworking spaces and mentoring to support early stage startups. In around 2011 the focus transitioned onto how to leverage multinational companies to help scale Singaporean startups. By 2018 it had become apparent that the corporate model was not working, and the strategy had shifted to encouraging local startups to ‘Go Global’ and to encourage successful founders to re-invest in the next generation of startups.

In India the first wave was in the late 1990’s and was focused on Business to Business (B2B) startups serving the United States market. The second wave began in 2009 with a focus on Business to Consumer (B2C) startups serving the local Indian market with “Techcrunch replica” startups like Ola and Flipcart replicating business models that had been proven in the United States. I was told that during this wave “lots of startups got funded that shouldn’t have”. The third wave started in about 2016 and was focused on deep tech (artificial intelligence, robotics and augmented reality) startups. This wave has seen the focus back on B2B and has seen a shift from service to product focused startups. While the second wave produced a large quantity of startups this third wave is seen as a “period of higher quality”.

In China there was an explosion of policies to encourage entrepreneurship and innovation in 2015. Governments at all levels provided a lot of support. I was told that the growth of co- working spaces and incubators was “crazy” and there was a definite bias towards quantity over quality. Then in 2017 there was a slowdown in support and a shift towards quality over quantity.

None of these waves were planned from the start but rather evolved organically. It did make me wonder if a more planned approach to ecosystem waves could be useful.

Patents One barrier to entry for deep or advanced technology development is the cost of securing intellectual property protection. In India I was told that the government will reimburse 90% of the cost of patents. In Israel, I was told that each university has a VC fund for early stage technology development that pays for patents. Israel also has an incubator program which provides 85% of the research and development costs of a company. There are 19 incubators in the program of which 11 are in the life sciences space.

Marketing Governments have a responsibility to communicate the benefits of innovation to their own citizens and well as marketing their ecosystems internationally to attract foreign capital and

43 talent. This can be done directly or by providing funding for non-profit organisations to do this on their behalf. In Stockholm I was told that this marketing should be inclusive: “don’t frame it as being only for rich white males”. I was also told that it is “no longer about building the next Google, it’s now about empowering people and creating jobs”. In Tel Aviv I learned that “success stories lead to more success stories and Australia has some great success stories but outside of Australia no one has heard of the Cochlear story”. We need to better market Australian innovation globally.

In Berlin I was asked why there is no body to promote Innovation Down Under, i.e. all of Australia and New Zealand, rather than the current state-based marketing approach. In London it was put to me that “the Nordics work together, why can’t Australia and New Zealand do the same?” In Tel Aviv I was asked “why have state based trade people when no one knows the states outside Australia?”

Artificial Intelligence It became clear to me on my travels that there is a new global race like previous arms and space races. This is the race to determine which nation or nations will lead the Artificial Intelligence (AI) revolution. As someone with a background in AI, I have a strong view that life as we know it will be dramatically changed in the coming decades in ways in which none of us can begin to imagine. But what I had failed to realise before my Fellowship was that the inherent bias of the societies that lead the way in AI development will forever determine the direction that AI follows. This means that there is a competition over “who’s controlling the algorithms” between the United States, Europe and China to determine the values that are imbedded into AI. As one person put it to me in Stockholm, each country needs to ask, “do we want to be consumers or producers of our own version of the digital world?”

I travelled through Berlin as the new General Data Protection Regulation (GDPR) was rolling out. I learnt how German sensitivity to data protection came out of World War II when government data on religious affiliation was misused with devastating effect against Jewish people. I was told how the German “data protection mindset is limiting for local startups” which, for me, was such a contrast to China. In Shanghai I was struck by the power of data

44 to drive new business models. One example was the peer to peer (P2P) lending industry which went from nothing in 2010 to 3,500 P2P lenders in 2015. True P2P lending has not been particularly successful in the United States, the United Kingdom or Australia, but in China P2P has been a great success largely because the new P2P startups had access to data that would be unimaginable in other countries. P2P startups leveraged tele credit models whereby tracking the telephone connections between citizens they could accurately determine a potential lenders credit risk. This enabled 500 million people, that otherwise would be left out, to have access to financial inclusion.

I realised that as self-learning AI requires data to improve, countries that have a lower bar for individual data protection will have a natural advantage in the AI race. This will give those countries a better chance of controlling the future of AI and thus the future of life as we know it. This is not to say we should have a race to the bottom on data protection regulations, but that we should be aware of both the benefits and the drawbacks, including geopolitical implications, to restrictions on data collection, access and use.

Data and the artificial intelligence that it enables will have a bigger impact on the world than the industrial revolution and the internet revolution combined. But like other technologies before it, the misuse of data also poses great risks. Like regulation, the setting of privacy and data use policies is a risk-reward scenario and the reality is that countries that set their thresholds lower will have a significant advantage in the artificial intelligence race. This is critical because the leaders in artificial intelligence will influence the inherent biases in artificial intelligence and so the geopolitical powerhouses of the future will be those that lead in the artificial intelligence race. With both data and other regulation, we cannot afford to take a simplistic, zero risk, approach to what are very nuanced problems.

Regulation Australia is a relatively open system with regulatory clarity and is regarded as a testbed for Chinese corporates. In Shanghai I was told that “Australia is a safer first step to the west”. This is a strength that we should play to.

In Shanghai I was told that the Chinese “cooperative model” of regulation of new innovations is to “just let it happen for a while” until a proof of concept and market have

45 been established. This allows the regulators to worked together with startups to understand (via data sharing) the market dynamics, and to build the laws together.

This was how it worked in P2P lending and bike sharing. In the case of bike sharing, there was two years of minimal regulation before rolling out laws that included mandatory GPS tracking of bikes, a minimum three-year bike life, and mandatory bike parking areas.

THOUGHTS FOR AUSTRALIA

During and immediately after my Fellowship travels, I developed five ‘thoughts for Australia’. These are intentionally high-level conceptual ideas aimed to foster further considered discussion and debate rather than specific recommendations. Each of these thoughts coalesced out of the many discussions I had and observations I made while on Fellowship.

A forward-thinking and agile Australia Australia has a complacency problem. We are a truly lucky country; we have not had a recension for 27 years, we have not had any significant geopolitical threats in our region for over 70 years, and we continue to benefit from a large land mass replete with natural resources. However, we cannot rest on our laurels; mining will not support Australia forever, and we cannot assume that the period of geopolitical stability in our region of the world will continue. We must make a transition from a complacent nation to an innovation nation.

The measure of success of a startup ecosystem is not the volume of startups, the total capital raised, or the number of unicorns; it is the ability of the ecosystem to efficiently and autonomously adapt to changes in the external environment in which it operates. Australia should take a leaf from Singapore’s book to implement long-term ecosystem planning combined with responsive on-the-run adjustments based on effective built-in ecosystem feedback mechanisms.

Example activities:

a. Committee for the future economy – Australia could establish an independent forward planning commission that is responsible for setting the long term (30 year) strategic direction for the nation. This committee could update the strategy every 5 years. The committee could be composed primarily of technical and subject matter experts in such a way that it is independent of party politics and has bipartisan support for its output. It

could oversee a small secretariat that leveraged existing expert bodies such as the Productivity Commission, Treasury, and the Departments of Industry and Education to set the long-term national strategy. To encourage implementation of the strategy, the committee could report annually on how well the nation is tracking towards the 30-year plan. b. Objectives and key results – The world’s leading startups have implemented a process of goal setting and performance monitoring called Objectives and Key Results (OKR’s). Australia could implement the use of OKR’s for all innovation interventions and transparently report on them annually. As a result, Australia could develop a culture of dropping those initiatives that aren’t working or that have worked so well that they are no longer needed.

Hearts and minds Invention and innovation have always been key drivers of economic and social progress, but it does not always feel like that. Many people equate innovation with job loss in the short term and a dystopian future in the longer term. Innovation from the outside-in is threatening but innovation from the inside-out can be empowering; as a nation, we need to get everyone inside-the-tent when it comes to innovation. Innovation cannot be, or be seen to be, the exclusive domain of ‘rich kids’ or people who live in capital cities. Innovation must be inclusive and cannot be allowed to contribute to inequality, in fact, it should be a driver in reducing inequality at a national level. Done right, innovation should be a coalescing force for a nation, it should be depoliticised and have bipartisan support. Being a future conscious, innovation driven nation should be a unifying point of national pride.

Example activities:

c. Endowment to promote innovation – The government could provide a sizable endowment to establish an independent institute with the purpose to promote the importance of innovation to the future prosperity of all Australians. Global examples of this include Nesta in the United Kingdom and the Kauffman Foundation in the United States.

d. Inside the tent – Australian’s are not risk averse by nature. We invest in mining and we love to gamble but when it comes to startups, many Australian’s feel as if they will suffer the consequences of a technology driven change to the economy without being able to benefit from the outsized returns they see wealthy individuals making from investing in startups. Australia has the highest individual share market participation rate in the world. We could aim to have the highest startup investment rate in the world which would make something that seems out of reach for ordinary Australians much more approachable. The Australian government could require that any support and incentives that it provides to startups be linked to a scheme that requires those startups to issue a small percentage of their equity to a national ownership scheme whereby randomly selected citizens will become equity holders in early stage startups. This could change the mentality towards startups and make people feel a part of the national innovation story. The government could establish an organisation that would hold the equity stake in the startups (so that each startup only has one additional shareholder) and then provide a derivative or fractional exposure to the success of that startup to thousands of individuals.

A nation of inventors There are two kinds of innovation: R&D driven innovation (often called deep tech) and business model innovation (for example software-as-a-service).

Invention (or R&D driven innovation) is easier for people to understand, value and embrace because it produces something tangible.

Australia has always been a nation that punched above its weight in invention. We generally embrace and celebrate invention; we should play to this strength. To change the culture, we could inspire more of our people to embrace their inner inventor.

Example activities:

e. Patents – Inventions require patents, but patents are costly to secure. To overcome this barrier-to-entry for R&D innovation the government could

provide soft-loans that cover 80-90% of the cost of applying for patents. The loans could have an 8% p.a. interest rate but should only be secured against the patent. f. Grand challenges – The government could provide ten $1m grand challenge prizes each year for Australian citizens that first solve or best solve DARPA style grand challenges around major societal issues. For a relatively small capital investment this would attract great interest and would encourage many people from all walks of life to become involved in invention. g. Living wages – The government could consider some form of targeted and time limited (e.g. one year) living allowance to provide citizens with the freedom to think and experiment. This could be targeted at young people who are working on inventions to solve national grand challenges as a form of opt-in national service. h. Modern libraries – To ensure deep tech invention is not limited to those who have access to hardware and lab facilities the government could support the rollout of maker spaces and bio hacking labs across the country. Libraries, as one of the great public assets of all time in that they provide open access to knowledge for all citizens, could be used as the location for these facilities. The government could provide funding to upgrade hundreds of existing libraries. The government could also roll out makerspaces in schools and universities. i. Entrepreneurial curriculum – The national school curriculum could incorporate: (1) exponential thinking skills (to train students to be able to better foresee the future), (2) story telling skills (as is common in the United States), and (3) the study of risk and reward (from explorers through to venture capital), into the existing curriculums for each school subject. j. Lifelong learning – The government could actively promote labour force mobility through lifelong learning in national priority subject areas and could consider providing a modest lifelong learning budget (or HECS like funding scheme) to every citizen over the age of 30 to kickstart a culture of lifelong learning.

Reverse the culture drain An innovative, risk tolerant, culture is the number one thing that matters for an innovation driven nation, but it is also the hardest thing to achieve. You can’t just fund a shiny new building, cut a ribbon and announce that you now have a widespread innovation culture. Therefore, governments often focus on the things that can be tangibly achieved by simply spending money, such as building physical infrastructure (co-working spaces) or boosting financial capital (co-investment initiatives). The Government could focus more of their efforts on the more subtle cultural change initiatives.

Example activities:

k. Short circuit culture change – Culture change takes time but could be accelerated by importing people who already have the right culture. People often talk about the ‘brain drain’ where some of our best and brightest move overseas but an equally important consequence of people migrating away from Australia is the ‘culture drain’. People who move to a new country to chase opportunity are self-selecting to be more risk tolerant than average, so when Australians move overseas, the innovation culture deteriorates. However, people who immigrate into Australia are equally self-selected to be risk tolerant. As such, a net positive flow of immigration could lead be a shortcut to improving the innovation culture. l. Digital nomads – The gig economy is giving rise to a new class of digital nomads who can work from anywhere in the world. These digital nomads tend to be at the leading edge of innovation. Australia could become an environment that welcomes digital nomads to our shores. m. Special innovation zones – Cost of living is an important factor for startup founders and their employees. Immigration is also an issue for capital cities that are already struggling to keep up with growing populations. While density is very important for startup ecosystems, it may be possible to create density in second tier cities by creating special innovation zones that have lower costs of living. These innovation zones could have special economic zone status with lower tax rates and preferential government support.

n. Double migrants – The one thing better than people who have self-selected as being risk tolerant by moving geographically for the chance of better opportunity is people who have done it twice. Encouraging our overseas diaspora to return home is an even better shortcut to improve the innovation culture.

Getting out of the way Creativity often comes from constraint. There are plenty of things that governments can do to meaningfully boost innovation that do not require any capital commitment. In fact, if you ask startups what governments can do to help, they will often say “just get out of the way”; what do they mean and what are some ways the government could get out of the way of innovation?

Example activities:

o. Ease of doing business – Remove the ‘red tape’. The government could make starting and closing a company easy, fast and one-hundred percent digital. p. Exit ecosystem – The government could ensure a globally competitive tax outcome for local startup exits. They could consider tying preferential startup exit tax benefits to a requirement to recycle capital back into the ecosystem; thus, encouraging successful founders to invest in (and mentor) the next generation of founders. q. Competition for capital – It is important to understand that venture capital competes within an overall investment landscape and that misperceptions about risk and reward of retail and institutional investors can distort capital flows. For example, I spoke to an expert in risk who suggested that Australia suffers at the hands of a myth that superannuation is risk free. Policy can also impact capital flows and risk appetites, for example dividend imputation makes Australians much more focused on income distributing investments which makes it hard for capital growth investments such as high-growth startups to attract investors. Negative gearing on real estate also distorts the investment landscape by encouraging large pools of capital to be locked up in

a non-innovative investment. One academic suggested that Australian investors have a landlord mentality. They want to own real estate or dividend paying ‘blue chip’ shares and thus earn stable rents rather than investing in the higher risk, higher capital return, industries of the future. At a national level, this leads to very incremental innovation that is not bold enough for the current pace of change globally. The government could consider adjusting dividend imputation and negative gearing policies to reduce the bias against more innovative high growth investment opportunities. r. Regulation – Regulation is obviously important, but it is can put a brake on the velocity of innovation. Often, the benefits of faster innovation and increased competition is undervalued when calculating the risk reward trade- off in regulation. Regulators that have an advice and competition mandate may be in a better position to understand and manage this more nuanced balance. The federal government could consider adding an explicit competition mandate to the Australian Securities and Investments Commission.

CONCLUSIONS & RECOMMENDATIONS

After traveling to eight leading innovation ecosystems across Europe and Asia I concluded that, by comparison, Australia is doing a reasonable job on the innovation front. However, there are several things we could work on if we wish to be a world leading innovation driven economy. Others have talked about the key pillars of an effective innovation ecosystem. Through the numerous interviews I conducted on Fellowship I found that there are four key pillars to a healthy startup ecosystem: culture & talent, markets & geography, financial capital, and government policy & supporting infrastructure. Of these, culture & talent is the most critical (and most difficult) to get right. Markets & geography is mostly a given and other than recognising their impact and properly accounting for them strategically, there is not a huge amount that can be done to address these at the ecosystem level. Financial capital appears to look after itself if the other pillars are in order and the best thing governments can do is make sure that they do not create any unnecessary barriers to innovation and entrepreneurship.

I have proposed five ‘thoughts for Australia’:

1. A forward-thinking Australia – Australia should take a leaf from Singapore’s book and develop an ecosystem with long term planning combined with responsive on the run adjustment based on effective built-in feedback mechanisms. 2. Hearts and minds – Innovation should be a unifying force for the nation; it should be depoliticized and have bipartisan support. 3. A nation of inventors – Australia should aim to inspire and support more of our people to embrace their inner inventor. 4. Reverse the culture drain – Australia should aim to leapfrog our way to a stronger innovation culture by retaining our best innovation talent, attracting our innovative diaspora to return, and attracting new innovative people to make Australia home. 5. Getting out of the way – While there is a role for governments in supporting innovation, one should not forget that creativity often comes from constraint. In fact, if you ask startups what governments can do to help, they will often say “just

get out of the way”. Governments should focus their initial efforts on preventing and removing policy barriers to innovation.

I recommend that each of these ideas be considered and discussed with an open mind and that the best of the associated activities be implemented.

Australian innovation has a lot going for it. We have a great history of invention. Our mining history and our large migrant population gifts us with a reasonably risk tolerant culture and we have large and growing markets in our geographic region. We have all the right ingredients if we want to be a leading innovation driven nation, but it won’t happen without some concerted effort, so let’s step-up, take the next steps and fulfil our potential for the sake of our children and the generations beyond.

DISSEMINATION AND IMPLEMENTATION

Technology is changing the world more rapidly than at any other time in history and nations that do not innovate will rapidly be left behind. The Australia early stage investment and innovation ecosystem has been improving in recent years, but we cannot rest on our early successes. There is a lot of work still to be done if we are to lift Australia to be one of the most innovative economies in the world.

It has been a privilege to travel to leading innovation ecosystems and consider Australian innovation in a global context. Since returning from my Fellowship I have been meeting with industry and ecosystem leaders to share my learnings. I will continue to have these one-on- one discussions and I will distribute versions of this report to key actors in the Australian startup ecosystem. I will seek to communicate my findings via general and industry specific media and as a speaker at industry events. Finally, I plan on disseminating my findings to a wider audience via my innovation centric social media network, blog and mailing list.

PHOTOGRAPHS

Singapore, after our meeting Bruce Gosper, the Bangalore, the NSRCEL startup accelerator located at the Australian High Commissioner to Singapore, kindly invited Indian Institute of Management Bangalore (IIMB) has me to attend ‘Jazz and Drinks’ at his residence. It was a worked touched over 40,000 entrepreneurs and created great way to start my Fellowship and a fantastic more than 5,400 jobs to date. opportunity to meet and network with a lot of interesting people that operate at the intersection of Australia and Singapore.

I hosted a wonderful dinner with Indian Alumni of the It was great to visit Khosla labs, the startup incubator University of Sydney in Bangalore. It was a terribly wet started by Vinod Khosla, founder of Sun Microsystems. It evening outside and it turns out that the road is a great example of a successful founder reinvesting infrastructure in Bangalore does not cope very well with a back into their home country. downpour however we still had people driven for up to 4 hours each way to attend, while several others flew in from different cities across India. We had a very helpful discussion which I was able to feed back to the Alumni Relations team on my return.

The Amsterdam Centre for Entrepreneurship (ACE) was I was so happy to be able to meet up with Constantijn van the most unique co-working space I visited on Fellowship. Orange-Nassau at The Next Web conference in The entire thing was created by stacking old shipping Amsterdam. Constantijn is the Startup Envoy for The containers together like LEGO bricks. It looks fantastic, Netherlands and had some excellent insights on building although I was told that it gets uncomfortably hot inside startup ecosystems. the containers on warm days. The windowless monolith in the background is a data centre.

My first meeting in Berlin was at a startup in this graffiti Australian Ambassador to Germany, Lynette Wood, kindly covered building. This proved to be a good representation arranged a wonderful lunch for me at the Australian of the Berlin startup scene. It is very creative and grungy, Consulate in Berlin with leaders from the local startup or as people often described it ‘poor but sexy’. ecosystem including Tim Kunde, co-founder of Friendsurance, and Dr. Jürgen Friedrich, Chief Executive of Germany Trade and Invest.

As an ex-runner, it was a thrill for me to visit the 1912 It was fun to visit the Nobel Museum in Stockholm and Stockholm Olympic stadium and to watch the Stockholm see displays like this one celebrating Australian Barry marathon as it wound its way around the city and Marshall who won the 2005 Nobel Prize for medicine. finished in the stadium.

I had lovely drinks at the National Liberal Club in London I was fortunate to visit the incredibly grand Australia with a group of University of Sydney Alumni. House in London to meet with Deputy High Commissioner to the United Kingdom, Matt Anderson.

I couldn’t very well visit London on my Churchill A visit to the Churchill war rooms was obligatory as well. Fellowship and not take this photo in front of the It is such a great museum and provides a great insight Churchill statue. into the truly exceptional man that Winston Churchill was.

I visited the Birthright Israel Innovation Centre in the Tel- Adam Gong and Emmelyn Wu from Austrade invited me Aviv Stock Exchange building where I learned how Israel to a blockchain community event in Shanghai. It had a actively encourages the global Jewish diaspora to great turnout and provided an excellent opportunity to immigrate to Israel. witness the local ecosystem in action.