Startup Muster’s annual report is very useful within its scope and as one perspective on the strengths, challenges and size of the startup ecosystem. And for me this year the the associated communications, assumptions and commentary were very interesting. They provoked some thinking about what could be better enabling of more effective reporting and advocacy for the benefit of startups and Australian society more widely.
The four considerations are:
- Appreciation for contribution
- Maturity more than growth
- Wholes and limits
- Global being normal
So, I'll explain in more detail what I read, saw and am proposing as alternatives.
Three cheers for reporters, contributors and commentators! And, one boo
Three cheers, one each for the reporters, contributors and commentators:
Hurrah for StartupMuster, TechBoard, StartupAus, StartupWA, startupstatus, their corporate and government sponsors, the university centres and VCs and others all reporting on aspects of the startup ecosystem. It's hard work and needs their multiple perspectives because startups and the ecosystem are abstract, complex, virtual, ephemeral and rapidly evolving. Much like botanists and soil scientists have differently valuable data about the same natural system, we can all understand the startup ecosystem better for having a mix of self-reported experiences, investment data analysis, expert opinion and community validation.
Hurrah to the thousands of founders and supporter who voluntarily share their data with Muster (a for-profit, commercial entity). According to the report itself, founders are already busy and possibly stressed: 33.1% have no revenue, more than 50% less than 9 months of runway, and are being kept awake at night by ‘everything’. ‘Supporters’ are often just as busy, with just as marginal business models, and frequently volunteers. A great effort to contribute data that helps put our individual efforts in context.
Hurrah for the commentators. A strength and limitation of Muster's report is it has very little interpretation - just data and infographics. It's a bit like trying to learn how a child is developing from their height chart and test marks. So journalists and people like Charlie Gunningham, Alan Jones and Daniel Petre, Aaron Birkby and Neil Glentworth all helped me make sense of it. I’ve highlighted them because for me, their commentary added value and seems to come from a genuine desire to increase understanding.
And, unfortunately I think, a Boo for Muster’s seemingly click-driven media strategy and emotive commentary that seemed to devalue their own good work and the work of those listed above. Playing to media preferences may maximise short-term coverage but runs the real risk of undermining long-term interest, making the audience less-educated and making advocacy ineffective as those aiming to represent the sector sound (annually) like attention-seeking cheerleaders or whingers. For Muster, it may also run the risk of reducing the affection of the community and their future inclination to complete the survey: Muster’s only source of data.
Muster's response to queries about their data collection, validation methods also seem defensive and focused on their methodological rigour not the appropriateness of their methods or to what they give attention. Great statistics, but perhaps not such a great strategy?
Even if you feel differently about the boo and hurrahs above, I'd say the data in the report also signals this is a good time for reflection, learning and maturing for the sector and advocates.
More about maturity than growth?
Let’s say that ‘maturity’ means broadly to an increasing level of development or advancement, and may correlate with increase in health, sustainability, complexity, capability and efficiency. For humans, ecosystems, or economies, maturity is different from growth but equally measurable or adoptable as a goal. I’m going to say, “maturity” is a more appropriate aspiration for the startup ecosystem, the advocates for it, and potentially startups within it. I think even simple models and assessments of maturity add layers to nuance over growth which is often a singular, linear metric e.g. a very mature ecosystem in a small regional area may be ‘smaller’ and less ‘growth’ than an immature ecosystem in a capital city; a startup in a mature market may have a larger valuation but smaller market share than a startup with a larger market share in a small and emerging market.
Headlines predicated on an “growth is always good and only metric” assumption don’t serve this aspiration towards maturity and fail to account for context e.g. only focusing on changes in % of female founders, # new startups.
Looking at the 2018 survey results and comparison with previous years there’s a fair argument that the ecosystem as a whole is rapidly moving to a new level of maturity and health e.g. average age of startups is 36 months up from 19 months. Maturity could even be a cause or correlate of a “decline in startups” as mature ventures may: no longer self-identify as startups, are focused on growing their ventures rather than community surveys, or there have been mergers, acquisitions and aggregation of talent (potential founders) into rapidly scaling ventures. Investing in maturity is likely a less linear relationship than growth, and I'm hopeful that evaluations of government's investment in the sector may take that into consideration(otherwise, on a growth basis and this survey results they may more quickly and unfortunately decide to invest less.
The accompanying maturity in commentary and advocacy is also probably necessary of those advocates are to remain effective. Advocacy is contextual, of a certain time and place. The same core principle or message may be in focus, but it's best to tweak it a bit if you are pitching in a context of 15% vs. 5% unemployment, or an optimistic environment of financial security and certainty vs. a stressful environment as the value of the stock and housing marketing tumble.
As an illustration of this principle in practice, imagine you are a government funder or commercial investor considering supporting the startup sector and the sector as a whole is pitching to you. I’m sure you will recognise the sort of immature and untrained pitch against the more mature, and prefer one over the other:
|Aspect||Immature pitch||Mature pitch|
|Customers||“Everyone!”||Currently, our main ‘customers’ (founders) are males aged 30-45 living in cities who have experience in business, technical or marketing skills and the financial security to be able to take a risk. And our plan is to increase the percentage of diverse founders e.g. gender, age, location, skills and industries.|
|Competitiors||“None!”||Competition for startup talent includes corporates, universities, high-growth scale-ups and internationally. Competition for investment into the sector includes: housing speculation, mining stocks, and for governments: growing existing SMEs, industries and infrastructure.
We have a strong evidence and clear strategy for how we can beat the competition, but we do acknowledge their existence.
|Value Proposition||“We’re self-evidently awesome”||Specific sectors of the Australian economy are at risk of disruption by both losing market share to innovative overseas competitors or losing job losses through technology-driven efficiencies.
Our proposition is to develop local companies that deliver those efficiencies and create Australian jobs, while also increasing export earnings through new globally-competitive industries and globally-beneficial products and services.
Startups are an ideal vehicle for driving this innovation and job creation as they can efficiently conduct experiments, commercialise ideas, and proven generators of new jobs. So more startups are the solution Australia needs, and there’s independent and widely accepted evidence to support that proposition.
|Ask||“Money to do stuff, affirmation of our importance, and for government to prioritise fixing the problems we’ve defined”||Cooperation with government to develop fair and effective policies that de-risk starting innovative ventures and maximise the benefits of their growth to the economy.
Stronger partnerships with large existing businesses in established or emerging industries who are our potential customers, sources of challenges that we can turn into venture, or investors in early-stage technologies.
Strategic investment in sector development. The sector is new and emerging and working with a very ephemeral community. Understanding and working with the sector in itself needs investment.
Some startups, advocates and even investors seem to believe that infinitely vast growth potential is immediately available. I infer this when I see people suggesting they can take a huge percentage of a multi-billion dollar global market with a hundred thousand dollar investment and belief that no-one else is going after it. Or when, as above, immature thinking discounts the possibility that startup founders have (competing) options to make a living other than a startup which is so evidently difficult and risky.
Any business or customer will always have multiple options for achieving their outcomes or meeting their needs, and limited budget to fulfil them. It's theirs, the customers or whole-system or market context that matters, not the context of your unfounded aspirations. There are limits to how many SaaS subscriptions a business will sign up for of any type, or how many useful apps of any type a human will use weekly.
Some startups are going into clearly limited markets and aiming to increase efficiency, while others are creating entirely new domains of value that are additive, creative and expand the sense of the whole or its limits. For example, there’s a chance that the growth in AI startups is because they are focused on delivering efficiencies to businesses or consumers in existing markets. That is, they are going to be taking another slice of a limited purse, be competing with other sources of efficiency for the same dollar. Easier, though within a limited existing market compared to the way a Deep Tech startup may be attempting to create a whole new market, category, currency or settle new planets.
The same context of wholes with limits is true in national job markets for talent, national budgets for economic development, or global markets for startup investment. There are strategies other than startup investment the government can invest in to grow the export economy. There are limits to growth of ventures, the sector and talent pool, actually, presently (even if not theoretically). There are other nations competing to both produce startups, fund them, fill them with great talent and in exactly the same sectors, timezone, language and timeframes as Australia. Just as we all live on a limited planet, there are limits in markets, economies and ecosystems within that. With that in mind, understanding the whole and positioning intelligently within it becomes of strategic importance and ignoring it and assuming it's all 'infinite' is ineffective.
Global being normal
We are, whether we like it our not, born global. If we don’t realise the truth of this, as humans or startups, then we are already relating to our reality ineffectively. In the case of reporting and commentary around Startup Muster there’s a risk that in obsessing over statistics within our nation or interstate comparison that we do exactly what we advise startups against: miss the big picture of our international position and our potential.
Internal Australian policy and investment and our international trade performance both need attention, but functionally one is more obviously seen as an output and one is an input. For startups, this sector and our nation, outputs and outcomes are what matter to most people. Australia is a relatively tiny, dispersed population in an isolated location that punches above its weight in many areas, and while commercialisation and startups is not (yet) one of them most agree it needs to and could be.
What that means is that while some of us are primarily concerned with number and % of startup founders, most inside and outside the sector are probably really interested is how those startups benefit Australia socially and economically. That the ‘funnel’ of founders and startups is healthy is critically important (just like your don’t get healthy adult populations without births, childcare and decent education), and it must be considered in the context of the health of the larger social and economic ecosystem within which it is situated.
For reporting, it means a more nuanced and considered questioning and understanding of: our context, our strengths, bench-marking to learn from other nations, relationship between investment in the early part of the “funnel” and great company formation are all as important as pure numerical characterisation of the early stage founders.
A more mature muster
The considerations above, combined think lead to need for a more mature positioning and advocacy within the sector. What we have - both factual data from multiple perspectives, and advocacy - is amazing currently, and yet it also may not serve us in the next phase of development, or Australia’s broader economic, social and cultural development. Some suggestions for changes in tone and focus are below, and require little effort, pose no risk and may only benefit future development and advocacy:
- Be appreciative and respectful of the foundations of history, trailblazers, successes and contributors that grew and are growing the ecosystem.
- Consider context, of others and systems beyond the startup bubble and their perceptions. Appreciate their views as significant and they may reciprocate.
- Act maturely, strategically and in alignment in data collection, communication and any advocacy.
- Orient globally and be concerned primarily with how our local behaviour and existing strengths can position us to contribute and benefit at scale, long-term.
And, if we want to put in some effort beyond individually shifting our mindset and communication, then the community of analysts, advocates and community leaders may need to be more collaboratively, deliberately, strategically, nationally in their efforts. Coming together and communicating more coherently, could be a more mature muster. Precedents abound in other industries and movements, both progressive and conservative.
Reporting like Muster and the associated commentary and advocacy has great potential to positively shift mindsets and culture in Australia. For those outside the sector moments like this can be educational about that which is not obvious or self-evident: about what startups are, who leads them, what they do and for what benefit. More maturity and humility, more respect for the ecosystem and those outside it, will, I think, more effectively deliver the broad support needed for our talented, creative, risk-taking, value-generating, industry-transforming founders and supporters.