Following research into Perth’s ecosystem in 2013, data company Boundlss were commissioned by the QLD government to mapped South East Queensland’s startup scene. Humbly, we have some thoughts on what they found.
Released at the end of October, the SEQ Startup Ecosystem Report 2014 quantifies a staggering amount of entrepreneurial data, from regional demographics to fund flows to network centrality.
Here’s a look at the most striking aspects of the report, how it might be used by budding entrepreneurs and investors, and what the community’s response has been.
Centrality Rank: Methodology
Crucial to us at TSJ is the centrality rank, specifically how representative it is of “useful” people within the ecosystem. The information comes from a solid methodology; researchers ran interviews and workshops in Brisbane, on the Gold Coast and the Sunshine Coast, and gathered connectedness data from online platforms including Linkedin, AngelList, ASSOB, CrunchBase, Gust, Twitter, Eventbrite, Kickstarter, Pozible and Meetup.
Boundlss Director Jonah Cacioppe compared their algorithms to Google PageRank, and said that while the report’s emphasis on influence is a, “tricky art, and by no means are [they] saying that that kind of centrality ranking is the be all and end all, [the rank is designed to] just give an indication of who’s there”.
“Basically we got all the connections we could from Linkedin, Crunchbase etc, and added in some manual ones we viewed in our discussions,” Cacioppe said. “When we ran interviews like this, we would record it and any connections people discussed, we’d draw a link on our map.”
“It doesn’t just take into account number of connections; you might have 500 connections and I might only have 100,” he said. “It also takes into account who my connections are with, so if I’ve got three connections to really central players, and you have 500 connections but to no one central, you might get a lower ranking than I might.”
What the report shows
Certainly the data represents some of the most quantifiably connected and important figures within the state’s startup world. It thankfully highlights the connectivity between the Brisbane, Gold Coast and Sunshine Coast ecosystems, although it unfortunately leaves out people who have temporarily left, but are still connected to, the ecosystems.
“You’ll find some of the people are to be expected, like Steve Baxter,” Cacioppe said. “Then there’s people you wouldn’t necessarily hear of, especially down on the Gold Coast and Sunshine Coast.”
“We kind of use something like this to service people like that,” he said. “So other stakeholders can say ‘ah there’s somebody there who’s actually doing a lot and connected, maybe we should reach out to them’.”
However, some have issues with the results’ methodology and usefulness, at least for those people not already ingrained within the system and, presumably, most in need of this information.
Number one rank, Spike Innovation founder and TSJ co-founder Colin Kinner argued that central players are often not the most useful “because by being central, they’re almost by definition the busiest and least available.”
“My understanding is that the data they had to work with was seeded from the handful of workshop sessions they ran, and some of the names of people who attended were probably selected, largely by the QLD government,” Kinner said. “So I don’t know the data they seeded was largely representative.”
“I actually don’t think the centrality thing is that important to be honest, because it’s an interesting list but I’m not sure if it actually tells you a whole lot,” he said. “I look at it and say ‘okay in the context of a handful of meetings, these were some names thrown out there’, but to read a whole lot more into it, that this is some big dive into who’s who in the startup scene in SEQ, it’s probably not that”.
In terms of people not particularly mentioned in the report but who would be otherwise useful for SEQ young business starters, Kinner emphasised mentors with global experience, such as 500 Startups’ Sangeet Choudary, who was in Brisbane for the Global Cafe.
“If I was to get a startup founder saying ‘who should I talk to about my platform business and some of the challenges in it’, I would much rather find a way to get that person to talk to Sangeet, who might be in Singapore at the time, then go talk to the most central person in SEQ,” Kinner said.
None of this is to say the ranking data is irrelevant for people entering the scene, as everyone listed, from CEA’s Anna Rooke (placed fourth) to the Innovation Centre Sunshine Coast’s Mark Paddenburg (fifteenth), has a vested interest in ensuring the ecosystem’s survival and, more generally speaking, will give you the time if you ask for it.
“I don’t have the innovation and entrepreneurial ability, but what I am good at is connecting people, ideas, capital, teams, angel venture capital, introductions etc,” Paddenburg said. “I see my role and the Innovation Centre’s role very much as connecting the startup people and startup teams to team members, other talents, other businesses, and with capital at the right time.”
“Innovation centres and incubators can only be effective if they have those connections,” he said.
Here, Paddenburg touches on one aspect the report might have highlighted: the degree to which our ecosystem is entrepreneur-led, something Brad Feld places a high degree of importance on. Depending on how well the report actually reflects the structure of the startup community in Queensland, it appears active entrepreneurs (that is, those currently running startup companies) could be playing a more central role.
Similar to Kinner, Paddenburg also emphasised the role of mentors from the IC Mentor Panel, but is uniquely placed to gauge the ranking from a Sunshine Coast perspective. He argued that not enough room was made for people occupied overseas or interstate who could not make the workshop, i.e. Knowledgewise’s Greg Searle and CloudDC’s Gavin Keeley, or regional entrepreneurs like Jaybird Sport CEO Judd Armstrong, who “aren’t looking for the limelight but do their work for global customers”.
Other Notable Findings
Amongst the report’s other findings is a huge disparity between the major startup markets and QLD’s top industries; notably, “Arts and Recreation Services” and “Construction” were diametrically opposed, an incongruity Cacioppe found surprising.
“We’re missing a trick, not just in QLD but definitely here in WA, by not of focusing on things like health, mining and construction,” Cacioppe said. “Construction is big in the world, funding in US in health is bigger than it’s ever been, so I think you get your foot in Australian health market then go to Asia or the US.
“I think we can fall into a bit of our own hype, read tech press and a lot of it talks about consumer plays and games and just social stuff, and you forget about all the interesting enterprise opportunity and market potential of [health and construction] spaces,” he said. “it might not be sexy but people need that.”
This is an issue that our Terman column has touched on in the past, noting that a focus on the Four Pillar economy is not actually a bad thing for tech and tech startups, but an opportunity. By the same token, building a vibrant ecosystem is not as simple as focussing on a region’s top industries of the day. If that were the case, Santa Clara county would still be known as a hub of apricot growing, not as the world leader in tech innovation.
Cacioppe also found the future impact of technology on the state’s economy surprising, referring to the $96 billion per annum the report estimates that disruptive digital technologies will contribute to QLD’s economy by 2025, 24% of the state’s projected $396 billion Gross State Product.
Referring to the potential of these disruptive technologies, Cacioppe emphasised the importance of keeping tech companies in-house to decrease the risk of foreign ownership within the state. The report states that “$2 billion to $5 billion in total funding needs to flow into the sector over the next ten years…to ensure the majority of this value is created and retained by local tech companies,” and that formation rates would also need to rise from from 12 new startups per year per million people to 170 by 2025.
While these figures are encouraging, the report notably overlooks one of Brisbane’s most active startup investors. More on them in a future article.
On top of the community issues listed in the report, Cacioppe mentioned a number of specific recommendations to ensure the ecosystem’s viability, notably supporting grassroots activity with initiatives such as more networked events and hubs, an established central startup hub, and facilitating access to international networks.
In addition, he recommended “transformative top-down actions,” such as increasing entrepreneurship/technology education and identifying specific domains to deregulate in order to establish a global competitive edge in those fields. The question for Queensland (and the Commonwealth) is what do we have that is being underexploited due to regulation in relation to developing new multibillion markets? Is it the expanses of long, quiet, remote roads that could be ideal for testing driverless vehicles? Our airspace?
The important thing to note is that any advantage created through deregulation lasts only as long as other countries and jurisdictions fail to deregulate, unless they’re so late to the party that you’ve already won all the best entrepreneurs and engineers in that domain.
Cacioppe also suggested a network of seed accelerators be created as well as additional efforts to attract superannuation to venture capital.
This report provides a thousand and one takeaways; Cacioppe was particularly impressed with the state in comparison to the rest of the country, and lamented that many of its achievements go unreported.
In a moment of either hyperbole or blind optimism, Cacioppe said that while the state doesn’t compare with US levels of funding and formation, “if the kind of activity happening in QLD happens for the next five, ten years, then you’ll be in a really comparable place”.
“Assuming the ecosystem in the US is strong but may slow in growth, it might have had massive growth in the last ten years but that’ll probably slow, and if Australia and QLD keeps up it’s healthy activity and gets more money, we could be in a really interesting place in the future.”
Finally, Paddenburg, as mentioned, had some issues with the representation of the Sunshine Coast but approved of the report as a whole.
“The report provides a snapshot of where QLD’s up to, and while we’re not a benchmark of other areas of Australia, we’re up there in terms of deal flows,” Paddenburg said. “What it does show is SEQ is very active, it has a lot of collaboration happening within innovation, with River City Labs and university based incubators.”
“This is why I liked working [with people like] Steve Baxter, Anna Rooke, Greg Burnett and Aaron Birkby; to their credit they spent the whole weekend here for Startup Weekend.
Cacioppe, through his research, was similarly impressed by the regions’ level of camaraderie, interaction, and activity, emphasising the “bloody long drive” that Birkby and Burnett took from the Gold Coast for SW Sunshine Coast.