9 years of Spacecubed and 3 billion reasons to keep building

On the 13th of March 2012, Spacecubed opened the doors to our first coworking space with big plans to support entrepreneurs, innovators and changemakers. I don’t know if I would have believed you if you told me that one of our early members would grow with us for over five years, and would conservatively be worth $3 billion dollars just nine years later. 

This is exactly what VGW did. I remember clearly when Laurence Escalante met Kevin Brown at a Spacecubed members breakfast, who then introduced Sam Brown, and for a number of years, it was just a small but dedicated team on the rollercoaster to build VGW. 

With Laurence now number 49 on the Australian Rich List and 12 months since a global pandemic turned everything upside down, I thought it was a good opportunity to zoom out and see the progress that has been made in the last nine years of building the innovation ecosystem in Western Australia (and increasingly nationally) along with exploring what will be required to take it to the next level. 

Building the Spiral Engine, revving the Flywheel and filling the Funnel

I wanted to provide some context and frameworks that we have used over the last nine years to ensure we are on track...links provided if you would like to read more as I am keen to get onto what has been done and what is next.

Startup Communities by Brad Feld 

This was published just after Spacecubed opened and was key to framing what space we occupied and where we should focus. You can listen to a podcast with Brad Feld here to get the key insights and I recommend reading the book.

Innovative Models to Scale Social Impact by Me 

I was very fortunate to be awarded a Churchill Fellowship to explore innovative models to scale social impact just after we opened the doors in 2012. It was focused on Social Enterprise however applies to the whole innovation ecosystem. Having a quick read through again everything in here still holds true and helped me frame up what the next 20 years would look like. You can read it here, it is short and has some good things from Brad Feld’s book especially for Government, Corporates and Universities.

2015 WA Startup Ecosystem Report by StartupWA

The 2015 / 2016 WA Ecosystem Report provides a measuring stick for how the ecosystem is going and outlines what it would take to build a thriving, self sustaining ecosystem...the progress in just five years is amazing. You can read all the other StartupWA reports here. Notice VGW in the growth stage...now it is at triple unicorn status.

Each stage has grown exponentially in the past nine years and the last four years have seen the most growth. It is worth remembering that in 2010 there was already eGroup and Morning Startup….that was basically it from a community perspective. Below is a photo of one of the first Morning Startups in our newly opened space, prior to this it was in a cafe in Subiaco, things have changed significantly.

Talent 

We are seeing two key ways to build the talent pipeline, the first, attract global talent and the second, invest in developing local talent. 

The first challenge of attracting talent from overseas has been helped by COVID-19 which has made Western Australia (and Australia) one of the safest and most successful places on the planet, and this is driving highly skilled and experienced talent back to Perth who are looking to stay here for the foreseeable future. 

We now need to leverage these opportunities in Australia, making it super sticky, market the advantages globally, and do everything we can to support these people to stay here, through building local ventures, and by creating great products and services. This will start attracting others to Australia to do the same. 

Secondly, we have a more developed learning ecosystem to build local talent however it is currently under-resourced and not getting the support to meet demand. This is the single greatest area where we can invest and get the highest impact. 

She Codes is one of the programs driving this. They have now supported over 5,000 women to develop coding skills, and connected them directly into job opportunities. With the backing of BHP, Robert Walters, RAC, JTSI, VGW, Murdoch and other local companies who hire graduates, She Codes provides the local upskilling and reskilling in software development. 

Even with this support, She Codes receives over 180 applications for only 22 positions per cohort so this means there is huge demand from both industry and people wanting to reskill, but not the support to run more programs. At this stage there is only support to run in Port Hedland and Brisbane for 2021.

Education and technology company, Skills of the Modern Age is another great example of how individuals and organisations are embracing upskilling for the future of work. We are also seeing companies like Rio Tinto and Oz Minerals embrace future skills within their workforce with data science skills through CORE Skills. 

Universities are in the process of reinventing themselves and Spacecubed has partnered with Murdoch University to deliver a range of activation and industry connections into the CBD. This helps to further engage students and staff while working with Murdoch to connect better with industry. Study Perth has setup its international student hub at FLUX to better connect international students with industry and provide alternate space to socialise and study.

There is much more to do to align the skills gaps with courses, workshops and training however, the relationships and many programs are already established, and now the resources need to be turned up to attract and retain talent that can transform both Western Australia and Australia.

Local Programming

Local programming and access to capital is where we have seen the most growth over the last nine years showing a dramatic increase in the number of spaces, programs and support for entrepreneurs, innovators and change makers. All of this growth in Western Australia has been market driven with program support through Client pays, Corporate Sponsorship, and Local, State and Federal Government. 

There are now opportunities for someone who has an idea (or is even pre-idea) to obtain support all the way to Series A investment. Someone who has worked for 20 years and has a novel idea or a university student can now take the journey below. 

If you are at school there is an increasing level of support through organisations like the Fogarty Foundation or IDEA Academy along with school programs ramping up around entrepreneurship.  If you are a student or young person you can obtain support through Bloom, or if you are a researcher you can access support to commercialise your research and build skills through CERI. 

Head along to a Morning Startup to hear from an entrepreneur about their journey and building their network. There are over 40 meetups a month where you can network and build skills. You can then take the idea to a Startup Weekend (happening at Murdoch x Spacecubed) to pitch to 80 people, build a team and then prototype by the Sunday. Take the idea from Startup Weekend and join a Plus Eight Sprint (coming up with the City of Canning) to refine the idea while continuing to build skills and your team.

If you are an indigenous entrepreneur there are programs and communities through the WiraHub, Impact Seed and Minderoo Foundation. If you are a female entrepreneur there is WiTWA and CORE Female Founders programs along with a range of industry specific networks. 

There are amazing spaces across the state where you can work, network, access mentors, recruit talent, attend events and grow your team. If you are in Port Hedland there is the WEB Business Hub, Mandurah has Make Place, Geraldton has Pollinators City Hive and Yanchep has Yhub. Spacecubed has built a range of spaces in the CBD including Riff, FLUX and Fern with each types of space suitable for different types of people and communities.

If you are in mining and energy there are industry specific spaces and communities such as CORE Innovation Hub which recently expanded to Adelaide. The Blockchain Center in West Perth, opened two years ago along with other industry focused programs like Quantum TX for cross sector collaboration and Agristart supporting agtech. 

If you are in regional WA there is Meshpoints supporting a regional network of hubs and innovators to have an impact in their local communities. 

Finally you can cap off the year by meeting venture capitalists and entrepreneurs from the US during West Tech Fest in December which brings the whole community together. 

I know there are so many more but the above gives you a sample of the activity and you can view over 140 hubs, programs, funds etc on Startup News here.

Capital

There is always a complaint about there not being enough capital, this has changed for the better in the last four years. 

Plus Eight Accelerator is kicking off it’s 5th year after already investing $1.08M in 26 companies who have gone on to raise an additional $10m representing a portfolio value of $81 (which is increasing almost every second week with new raises and company growth). Plus Eight has a mix of Spacecubed, Hawaiian, RAC BetterLabs, East Court, Woodside, DFK Gooding Partners and Jackson MacDonald who invest in the companies and operations of the program. We are now seeing both corporates and family offices using Plus Eight as a vehicle with a proven track record of returns to get started in early stage funding.

There is still a huge opportunity for WA corporates to invest and we are seeing it done best through vehicles like RAC BetterLabs who have established a $23 million fund to invest in both external and internal businesses. Woodside recently launched Spark! as a way to invest in startups and innovation that can improve its business. At the moment I would say corporate investment isn’t where it should be and is much more ad hoc rather than structured like RAC BetterLabs which has been on a 7 year journey. 

Along with the Perth Angels, who are growing in memberships, we are seeing growth in the interest from family offices and successful founders reinvesting their funds. This is driven by portfolio diversification strategies, a generational shift and investors seeing runs on the board with some of the rising stars and success stories below.

Examples of this in play are funds like Afterwork Ventures and Upswell Ventures, the first is founders reinvesting and the second is a family office focusing on tech. I expect we will see more of these over the coming years as there is wealth transfer from both exits and traditional investors looking to diversify. 

Don’t get me wrong, obtaining funding is hard, but if you have a great idea, traction and team there are more opportunities than ever to bridge into funding through Blackbird Ventures and other funds both nationally and internationally.  

Rising Stars

There are so many great individuals, teams and companies that fit into this category, you can see their stories on Startup News, Business News and The West but I wanted to share a few below.

Tom Young setup uDrew as the world's first building technology platform that makes designing, planning and building your own projects faster and more affordable. After joining our Plus Eight program in 2018, uDrew has gone on to receive an Australian Federal Government's Accelerating Commercialisation Grant, win the SPUR award for best innovative use of Landgate and government location data, win the 2019 Telstra Emerging and Energised Finalist award for 2019, take out WA Innovator of the Year in 2018. uDrew has customers all over Australia and New Zealand and has raised funding rounds to keep growing. 

The Ladies’ Project completed the Plus Eight program in 2020 and within weeks of completing the program, went on to secure $500k in investment through RAC BetterLabs Venture Fund. The Ladies’ Project is a powerful platform for intelligent, determined, strong, inspiring women who are learning English as a second (or third, fourth, fifth) language. Their focus on community has driven their success and empowered women, with over 3.8M women from around the world subscribing to their Youtube channel.

Stuart Hall and Claire McGregor started Appbot after Claire moved back from the UK and was freelance marketing and established the Perth chapter of Founder Institute. Stuart was the CTO of Discovr and built the 7 min workout app. He met Claire through the startup ecosystem and they built Appbot which now services fortune 500 clients around the world to help them analyse and review their mobile applications. 

Leigh Travers moved back to Perth during the crypto winter of 2015 and took over as CEO of DigitalX. Leigh then built the business to provide blockchain services which now has a market cap of $53 million. Leigh also established the Blockchain Center to support blockchain companies startup up in Perth. 

Marcus Tan and his team launched HealthEngine from Sync Labs in 2012 and grew it into one of Australia's leading appointment booking applications. Initial investment was from Larsen Ventures with follow on from Seven West Media and Telstra. International investors through Sequoia Capital made the next funding round. HealthEngine has been contracted to manage the COVID-19 vaccine bookings and continues to grow. HealthEngine has a valuation “north of $100 million” according to the AFR.

Success Stories 

We now have some big success stories that simply didn’t exist in 2015 and prove that investing in the broader ecosystem, building a positive environment, not picking winners (industry or company) and lifting all boats is a model that works. 

There is significant Government focus on Hydrogen, Space, Data, Biotech and Cyber Security which are easier to package and put a box around however three of the most successful companies to come from Perth in the last 10 years wouldn’t have fit into any of these categories. 

Olivia Humphrey has moved back to Perth from the US in 2020 after selling her streaming service Kanopy. Olivia is now contributing back to the Perth ecosystem with roles at Curtin and taking on a number of director positions. Having this expertise from someone who started an entertainment business here and who is now easily accessible is an asset to Western Australia. 

Melanie Perkins and Cliff Obrecht started Canva in 2012 after they pivoted their year book business Fusion Books. Their initial investment and advisor introductions came through the Univation conference which then turned into Oz Apps which is now West Tech Fest through introductions Larry Lopez made to Bill Tai. 

Canva started in March 2012, the same month Spacecubed opened its doors. It makes me wonder if they had started today would they need to consider a move to the east coast?, For some businesses the answer is still yes, as they need to go to where their market, talent and capital is, however I think if Western Australia can increasingly provide access to talent and capital then the markets are just a zoom call away.

Laurence and VGW is a great example of a company that stayed head officed in WA and we are now seeing the full flywheel in action. VGW is hiring graduates of She Codes and investing back into the program. The initial team from VGW is now contributing their skills and expertise back into other growing companies in the ecosystem. I believe over the coming years we will see this support ramped up once there is liquidity events and reinvestment back into the ecosystem and the startups it supports.

Tipping Point Opportunities 

Now the real question is how do we level up the environment to enable 10 Laurence’s, Cliff’s and Melanie’s, 50 Marcus Tans, 100 Olivia Humphries and Leigh Travers, 1000 Claire and Stu’s, 10,000 Tom Young’s and Emma Jakobi’s?

This is what it will take to solve some of our big social, environmental and economic challenges while providing infinite fuel to fill the funnel and drive the flywheel faster. 

Entrepreneur Inspiration and reinvestment 

Over the next 1 - 3 years, we will see the full flywheel in effect at both a state and national level. A few liquidity events in Perth will mean that local investors will be rewarded for their 10 years of investment and belief in tech companies. These investors, employees and supporters will then go on to invest further in startups and the ecosystem as a whole with both capital (and time) for mentoring and providing advice. 

Making this an easy process that is well connected and maximises the opportunity for this reinvestment of time and money will be key to driving the flywheel faster and telling the stories that mean more people commence the entrepreneurial startup journey. 

Family Offices and Corporate Venture 

We are just starting to see the beginning of Family Offices and Corporates investing in startups and innovation in a more structured way. This is driven by the fact that there are clear returns being demonstrated by local companies and an ecosystem that can reduce the risk of investing locally. 

The emergence of RAC BetterLabs, Woodside Spark, Afterwork and Upswell are all indicators that this shift is happening and there are many more opportunities over the coming years as successful founders turn into investors and the increasingly rapid changing world demands corporates invest in innovation. 

Transformational Government  

It is too early to tell the approach the McGowan Labor Government will take but I am an optimist and there is the opportunity for a truly transformational impact that sets up the state for the next 50 years. WA Labor has a majority in both houses along with both GST and Mining royalty incomes adding around $6 Billion more per year than was budgeted on. 

The WA State Government spending on Innovation, Startups, Entrepreneurship has been around $20 million in the last 5 years, even including other State Government spending that could be put into the innovation/new industries bucket it would be generous to say it was $40 million ($8 million per year) over 5 years. 

The good news is that there has been 10 years of work done, infrastructure built, programs running, networks established and billion dollar companies created with less than 5% of what it will cost to construct the $840 million Bunbury Ring Road. 

There is an opportunity for the new Ministers responsible for economic diversification, job creation, innovation, science, small business, regional and skills development to leverage the knowledge and experience of this community to supercharge the ecosystem for a long term and sustainable shift that will diversify the state and smooth out the boom bust cycle. 

Talent pipeline 

This is where I think there is the biggest potential for the highest leveraged impact across industry, government and the community. If we can attract and retain international talent and continue to grow local talent we will be well positioned to reinvent industries and build new companies that put money and skills back into the local economy.

Great entrepreneurs and people with the skills and experience to help them grow their businesses faster is the key combination in creating and scaling new companies. 

We are very lucky that off the back of COVID-19 there is already a flow of talent back to Perth, Western Australia and Australia, however we now need to focus on making it easy for these people to connect with opportunities and community. 

There is also an opportunity to ramp up reskilling and upskilling as many people could be out of work once JobKeeper ends this month. Spacecubed launched #AdaptDontStop last year mid COVID-19, and this campaign and associated programs could be even more important over the coming months to prepare people for the available jobs now and into the future. 

Leveraging our Natural Competitive Advantage 

Western Australia already has a competitive advantage in relation to natural resources, highly skilled population, time zone and geography. All of these things mean we are better placed than most to invest significantly into the new businesses and wealth generators of tomorrow while supporting people to upskill. 

Reinvesting a significant portion of the expected $6 billion of mining royalties into diversifying the economy would more than do it. This could be on infrastructure, investment, skills and attraction to close the loop. 

Western Australia is in the fastest growing region in the world both from a population and economy perspective. We talk a lot about engaging with our region however there is little to demonstrate relationships are being built for the long term. This needs to change to position for the next 50 - 100 years and ensure we ride this wave rather than being dumped by it.

Entrepreneur Led 

From lessons learnt in Brad Feld’s book the most important factor is that all of this support needs to be entrepreneur led, as soon as corporate, government and universities think they are leading the change it runs into issues. 

You can look at examples across Australia and the globe where sustainable ecosystems have too much Government intervention in the wrong places. This causes everything to slow down and those who built the ecosystem to leave because there isn’t a market or product any further. This is probably the biggest risk for WA with new funding entering the market from both Investors and Government. 

Without all of the above aligning, capital being applied to the right places, skills being developed and the entrepreneurs who have succeeded reinvesting in the ecosystem it will take longer for Western Australia’s potential to be realised- or, it won’t be realised at all as talent and capital flow elsewhere. 

The Next Nine Years 

Spacecubed, started with my personal funds, $40k from the City of Perth and $200k from Lotterywest and in-kind support from Stockland, and it has grown through partnerships with great forward-thinking companies like Hawaiian (who are now investors). Spacecubed established a foundation which is reinvesting its funds in entrepreneurship, education and regional entrepreneurship through programs with Impact Seed and IDEA Academy, which I consider closing our full loop of impact, ensuring this is being generated from every part of our organisations. 

The 2nd and 3rd order impacts like job creation, company formation, economic development, economic diversification, and wealth creation represent one of the more impactful investments in Western Australia which is now extending to Queensland and South Australia. 

The last 12 months have been the toughest in nine years for the ecosystem nationally. It has been really tough for Spacecubed running coworking spaces which were hit hard during lockdown along with our programs needing to pivot remotely. 

This is a great time to give a huge thank you to our members who have continued to support us and contribute to delivering on our vision by returning to the spaces and growing with us. We couldn’t have done what we have without their support.

Our team has done a great job of adapting to the changes COVID-19. The team has continued to grow and support the new ways our members work and learn and I want to thank them for staying the course and focusing on members and how we continue to support them. The whole team has been critical in delivering on the above vision and building a culture of support for that vision.

We have also had our existing and new program partners come onboard during this time and have begun ramping up 2021 programs which is amazing when you consider similar programs and spaces are shutting down all over the world.

The best thing about this point in time is that there are direct and simple ways that you, your startup, business or organisation can help deliver on the above vision through partnering with organisations like Spacecubed and investing in the local ecosystem. This could be by becoming a member, using our amazing spaces, running events, funding and supporting programs and mentoring then investing in entrepreneurs and startups.  

Spacecubed is now nine years into what was always going to be a 20-year journey to build, enable and support an innovation infrastructure to increase the probability of ideas being successful. 

We have a great team, community, members, partners, and board who are dedicated to taking on the above challenge and growing the pie, fill the funnel, and drive the flywheel to significantly transform the opportunities for entrepreneurs, innovators and changemakers by 2030. 

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I am interested in your thoughts, ideas and any opportunities you see and I know I will have missed tagging in people and organisations who have helped build and support the ecosystem so please add them in the comments...this is by far the longest reflection I have written since the Churchill fellowship in 2013 and I enjoyed looking back through nine years of photos here, so thank you for reading and I need to get back to delivering on the next nine years!