I’m pleased to announce that I’m one of the seed round investors in Moore’s Cloud. A bunch of us have decided that their prospects are bright enough that it’s worth giving them some money to see if they can make good on all the ideas they’ve been having.
This a risky investment. Very risky. So why do it?
The Anti-Innovation Nation?
It’s almost a truism that while many great inventions are made by Australians, they aren’t commercialised here. To fund their ideas, inventors often have to go overseas, to Europe, the USA, and increasingly Asia, to find people willing to invest in their potential.
This chart shows the comparison of Australian start-up companies formed as a result of research done at our publicly funded research institutions, like universities, CSIRO, etc. What surprised me is that the number of start-ups formed in Australia has actually declined since 2001. And by a long, long way. We are so far behind the rest of the world it’s kind-of depressing.
It’s not a recent phenomenon, either. Check out this research paper from 1994.
Why does this happen?
Australia has a long heritage as an agricultural and mining exporter. There is tremendous innovation within those industries, and we even have a special company type just for exploratory mining companies: the Not Limited, or NL company. This is specifically because of the risks associated with mining exploration. But no other industry is supported in this way.
As a result, Australian investors know a lot about investing in mining and agriculture. They also know a lot about traditional business investment (loans to expand, mergers and acquisitions, etc.) because it’s just business as usual investing at fairly low risk, and so funding for those activities is generally not a major issue.
But anything new bumps up against a lack of knowledge and the inherent conservatism of the Australian culture.
The Australian culture contains a paradox. We are a young nation, and we are eager to adopt the latest technology, making Australia one of the great test markets of the world. But only for products from elsewhere. Locally created products aren’t really valued until after they have proved themselves overseas, at which point we will loudly and frequently point out that they were invented in Australia.
We are proud, yet paranoid; independent, yet insecure. We think we live in one of the best countries on Earth, yet constantly fret about what other nations think of us. Answer: They really don’t spend much time thinking about Australia at all. We’re a long way away from Europe, the US, and much of Asia, and there are only about 25 million of us, compared to other populations who number in the hundreds or thousands of millions.
Our egalitarian nature means that while we admire success, “too much” success is viewed with suspicion, leading to the infamous “Tall Poppy Syndrome”. Unless it’s for sporting success for reasons I don’t fully understand.
Failure is punished. Unlike other nations, particularly the US, where failures are viewed as learning experiences—stepping stones on the way to eventual success—in Australia to fail is to be proved incapable. If at first you don’t succeed, you obviously weren’t ever going to succeed, so just give up.
With risky ventures like start-ups you end up ‘failing’ multiple times before you eventually succeed. Each time you learn something new, change the design, improve things, and test it again. Each time improving. If you stop after the first not-a-complete-runaway-success, you never get anywhere.
It is this squeeze between not being able to fail, but not being able to really succeed either, that causes Australians to end up in a nondescript, egalitarian, conservative middle.
Not My Style
Fortunately or unfortunately, I don’t fit this mould. I am a risk taker by nature, and I understand well the difference between downside risk and upside risk.
And I figure that, like most things in life, sitting back lamenting that the world doesn’t work a different way does precisely zero to change anything.
So I’ve put my money where my ideals are, and I’ve invested in an Australian startup.
It may not succeed. I hope it does, and not just for financial reasons. It would be great to have a few locally funded successes, particularly ones with a high component of software or knowledge that’s easier to export overseas. Things certainly do seem to be heating up a little in the local start-up scene, so I’m more than usually optimistic that maybe this time we can build some momentum.
And then maybe the rest of the Australian investors will join us. After the early adopters like me have done all the hard work they don’t want to do. After we’ve taken all the early stage risk they don’t want to take. After enough time has passed and it’s not new and scary any more, and they’re suitably comfortable that maybe a portfolio approach to early-stage investing can actually work, and that hey the Americans can do it so why can’t we?
Maybe, in time, we can build up our own uniquely Australian early-stage investor industry and fund these great ideas ourselves.
But we have to start somewhere.