​VC funder says startup community leaders must be entrepreneurs

The success of a startup ecosystem is dependent on having entrepreneurs lead the way, Brad Feld, managing director at Foundry Group and co-founder of Techstars, has said.
Written by Asha Barbaschow, Contributor

When it comes to building a successful startup community, Brad Feld, managing director at venture capital firm Foundry Group and co-founder of startup accelerator Techstars, believes the key is having the right people in the right positions, with entrepreneurs leading the way.

"I have a deeply held belief that any city with more than 100,000 people should be able to build a robust startup community," Feld said.

"The leaders of the startup community have to be entrepreneurs. All the other participants whether they be government, or university, or service providers like investors or accountants or lawyers, or non-profits supporting entrepreneurship are what I categorise as feeders.

"The feeders and leaders are just as important. We need lots of both but you need -- you have to have, it's essential that you have -- a critical mass of entrepreneurs playing a leadership role or else your startup community won't grow and evolve."

In May, Airbnb, Amazon, Atlassian, and Uber joined forces with over 40 Australian startups, global tech giants, and entrepreneurs in yet another attempt to convert Sydney into Australia's Silicon Valley.

The not-for-profit group TechSydney said at the time it would work to address what it considers the greatest challenge for Sydney's innovation ecosystem -- collaboration.

Despite efforts from major tech companies as well as state and federal government intervention, the consortium said Sydney's global startup ecosystem ranking slipped from 12 in 2012 down to 16 in 2015.

"Recent moves from all levels of government to support our startup and technology sector have been heartening, but we can't rely on them to carry it forward," Dean McEvoy, TechSydney CEO and founder, said. "By working together, we will drive the initiatives that will turn Sydney into a world class, top 10 hub for technology companies."

The federal government unveiled its AU$1.1 billion National Innovation and Science Agenda in December, which covers over 20 measures centred on its "Ideas Boom" rhetoric, which Prime Minister Malcolm Turnbull believes will incentivise innovation and entrepreneurship, reward risk taking, and promote science, maths, and computing in schools.

While Feld agrees the government has a place in the startup ecosystem, he believes it should not be in a position of authority.

"I think government can play a very active and important role but there's a big difference between that leadership role and a support role of that ecosystem as it develops," he said.

During his short time as Assistant Minister for Innovation, former MP Wyatt Roy said that Australia had a lot learn from thriving startup epicentres such as Tel Aviv in Israel.

"They have more startups per capita than any other country on earth, they have more investment in research and development per capita than any other country on earth, and more venture capital invested per capita than any other country on earth. They really are the global golden standard when it comes to innovation," Roy said previously.

Drawing on his years of experience in the heart of California's Silicon Valley, Adrian Turner, Data61 CEO, disagrees with Roy's assertion on capital funding.

"I don't think the problem is access to capital; capital will go wherever the good ideas are," Turner said. "The money is there, but I think the investors need education as much as the entrepreneurs."

Turner believes what Australian entrepreneurs actually need to do is think globally.

"We have the best in class, best in the world talent, but the framing is very domestic," he said.

"I think that another thing is a sense of alignment across different parts of the ecosystem and I came back to be a part of that solution.

"The definition of success is we tend to set out to build the Australian derivative of Airbnb or Uber. We're better than that. I think we need to set out to build fundamentally disruptive and new industries."

Feld agrees, saying that while there are challenges at different stages of financing, anywhere in the world you can generally develop very early stage capital.

"But if you think about the seed investing scene in any of the major cities in Australia there are seed investors. It might be harder to find, but it's available," he said.

"In addition, the growth capital, once a company is really growing quickly, growth capital doesn't really care where you're located geographically, it will find you.

"It's that intermediately stage, the sort of $2 million-$20 million that's often extremely hard to raise. But it turns out that it's hard to raise that no matter where you are in the world -- even if you're in Silicon Valley that's a challenging fundraising zone not because there's a lack of capital but because there's so many companies competing for the amount of capital that's available."

When it comes to Australian startups heading overseas to find funding, Feld believes it is a hugely beneficial move for the Australian scene, as the goal of the migrating startup should be to network across the world.

"You don't want to be isolated. If you're insular within your own geography you lose out on the ability to build a much larger network," he said.

"Technology is not limited by geography."

In 2010, Feld came across a little-known startup with a team of around 10 people pitching its wearables idea to Foundry Group. That company was FitBit. Feld joined the board and when the company went public, Foundry Group was the largest shareholder in the company.

"At the time that I invested, my partners and I, we were very interested in the notion of what we were calling human instrumentation and we didn't really know what exactly that meant other than the idea that as human beings we'd be increasingly integrated with computers and we'd be starting to instrument ourselves in lots of different ways," he said.

The FitBit investment followed on from the one Feld made in games manufacturer Zynga in 2007.

"One of the challenges of being an early stage investor is that you never know what's really going to be successful and I've yet to meet an early stage investor who has said, 'I really didn't think much of that company, I didn't think it was going to be successful but I went and invested anyway'," Feld added.

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