Australia needs to be in the business of building pie factories

Those of you who have read my last few blog posts (here, here, and here) will detect my serious man-crush for all things David Cohen and Brad Feld (the co-founders of TechStars).

Recently in Boulder Colorado with Startup Catalyst, our group of 18 startup community leaders got to spend time with Cohen, who dropped several nuggets of wisdom on our group, each the topic of various blog posts from myself and other participants. When we caught up with David, he had literally just returned from a visit to Adelaide, Melbourne, and Sydney.

What David said about Australia

When asked what he noticed about our startup communities during his visit, he commented on how competitive the Australian cities are with rivalry over who has the best startup ecosystem and why. (It should be noted he was generally very positive of what he saw in Australia.)

He mentioned a moment he experienced at an event in Melbourne, where the discussion drifted as to why Melbourne was better than Adelaide, Brisbane, or Sydney. As his eyes glazed over, disconnecting from the conversation, he noticed the 99designs logo on the wall. He interrupted the conversation to ask why the 99designs logo was there, to which he learnt that 99designs was originally founded in Melbourne.

The point he made was that we need to stop talking about Melbourne or Sydney or Adelaide or Brisbane vs anywhere else, and start talking about our successes like 99designs. That’s a story we need to be telling the world (the need for better story telling is the subject of a future blog post too).

[Now I confess I wasn’t at that event in Melbourne, but this is the story as it was relayed to us, possibly with slight poetic licence, but it is awesome for making the point, so I’m sticking with it.]

It was at this point he made an awesome comment to our group about Australian startup communities: “you need to stop fighting over slices of the pie and get into the business of building pie factories”.

To continue the analogy, each of us in a startup community needs to determine our role as the niche suppliers of flour, sugar, milk, apples, staff, power, or baking equipment. That is, we should all take a niche focus as separate actors in the broader startup community.

During our time in Boulder, it was obvious that everyone there had a deep understanding of their niche role in the bigger startup ecosystem, and how all the pieces worked together. Indeed a phrase that came up multiple times in conversations across all our meetings in Boulder was a reference to the individuals and organisations as “actors in the ecosystem”. It’s a great phrasing, because it references an individual actor as part of an ensemble in the broader production.

Another phrase we heard repeated in Boulder was “intellectual honesty”, in reference to the need for individuals and organisations in startup communities to understand their role — what they are good at, and what they are bad at — and more importantly, what their role is not, and how they fit as one piece alongside the others in the community, to collectively deliver value to founders.

Lessons for Australia

Looking back at Australia from afar, the challenges and lessons were blatantly obvious, and I’m super keen to take more ecosystem leaders on similar missions so they can experience the same epiphany.

In Australia, we tend to competitively replicate startup and entrepreneurship programs across every city, and often across every space and hub within a city. Recently I’ve even seen it where the same startup programs/services are replicated by different organisations within the same physical hub!

In fact, I’ve mentioned this “pie factories” quote to a few folk here, and they think it means building more hubs that each deliver every startup program under the sun. That’s actually the exact opposite intent of the analogy. The “pie factories” are the ecosystems, and each actor should be one piece of it, and not attempt to be the sum total of all parts.

The observation from more advanced startup ecosystems I have visited — including Boulder, San Francisco, and London — is that there is absolutely a direct correlation between the success and size of the ecosystem, and the level to which individual startup community organisations are specialised into niche offerings.

I actually believe you could develop a telling ecosystem metric by measuring the average number of different or disparate programs being run by each individual organisation in each ecosystem. I predict that for successful ecosystems, that metric would approach an index of 1 (i.e. one niche focus/program per organisation), compared to 10+ in less successful ecosystems (hmm, perhaps something to study further).

For example, in a rural regional area, the one startup hub will typically be delivering a dozen programs for students, startups, investors and corporates, whereas in London or San Francisco, you have dozens of individual operators specialising in delivering each of those individual programs.

There was an interesting question raised by our group about whether this specialisation was a cause or effect of a successful startup ecosystem. I believe that organisational specialisation is both a cause and effect of building a successful startup ecosystem. Most importantly, I absolutely believe that early specialisation is a significant contributor to building a robust ecosystem, because it makes the system scalable and improves sustainability.

The lesson for Australia is that each actor in the startup community should specialise into their niche role. For example, one organisation should deliver the student educational programs across an entire ecosystem (city, state or country), and in doing so, secure the majority of the available funding, so they can reach sustainability, scale, and become the best subject matter experts in that field. They should connect to the other groups who specialise in other parts of the supply chain, and they should partner with international programs who have already built significant expertise and IP, to also improve our international connectivity, yet still adapt those programs for our specific domestic needs. And until we can achieve this sustainability and scale, we should avoid duplication.

[Don’t get me wrong, competition is healthy, but I get frustrated by new entrants with the wrong motives, particularly those who are seeking to make money by supporting startups. If you want to make money from startups, invest in them.]

As startup community leaders we need to adopt the very same strategies we preach to startups themselves, and that is to focus on solving one problem with one solution for one customer segment and execute the shit out of it (on the topic of focus, see all things Mick Liubinskas).

What we saw in Boulder was that when you get this right, it suddenly enables true collaboration, because no one is directly competing. The founders of the student program can work closely with the founders of the co-working spaces, who can work closely with the accelerators, who can work closely with those running educational programs for the investors, because they are all niched, without fear of competitive behaviour.

That is part of the reason why I love muru-d so much. Under the leadership of the awesome Annie Parker and Mick Liubinskas, when they decided to expand the muru-d accelerator into new cities in 2015, they didn’t simply setup a new standalone program, but rather they reached out and partnered with existing operators in those ecosystems, including River City Labs in Brisbane, and Spacecubed in Perth. This was a transformative act representing a conscious decision to focus on building pie factories, and not just taking slices of the current pie.

As I’ve commented previously, any new Government funding initiative for a new entrepreneurship program typically results in several new operators entering the market and receiving funding to develop something from scratch. As a result, multiple operators all receive a slither of funding, insufficient to make any one individual program sustainable let alone scalable, and each replicating the same mistakes as they individually build learnings in a new program which is simply one of the many other things they are also delivering.

Instead of this, I would love to see more of us doubling-down on our own specialised niche focus, understanding our individual roles in the broader ecosystem, and truly collaborating on projects and developing partnerships, to collectively play our role in the supply-chain of building more startup pie factories.

Our day in Boulder in January started some amazing conversations amongst the 18 startup community leaders on our mission. Genuinely motivated to do good, this group of leaders committed to no longer competing, and to instead collaborate on projects, and mutually agree on each others’ roles in the ecosystem — to focus on a niche, and partner with others to fill their gaps. I’d love to see that happening on a national scale.

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