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Alex Scandurra discusses the Australian startup ecosystem's exceptional growth
Episode 9426th September 2022 • The History of the Australian Startup Ecosystem • Welcome to Day One
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Alex Scandurra is the founding CEO of Stone & Chalk, a not-for-profit organisation which aims to support Australian startups, scaleups, corporations and governments at every stage of their innovation journey. Alex is also Co-Founder and Director of Spark Festival, a two week program of events covering all things startup, innovation and entrepreneurship. In his conversation with guest host Will Tjo, Alex discusses the aspects of Australia’s start ecosystem growth that have exceeded his expectations, as well as some of the areas he thinks we could be improving.

See full show notes: https://w2d1.com/alex-scandurra



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Transcripts

Adam Spencer [:

Hi, I'm Adam Spencer and welcome to Day One, the podcast that spotlights Australian startups, founders, and the organizations that empower Australian entrepreneurship. We go back to the beginning to tell a story of Australia's most inspiring founders and how they built their companies. You're listening to a special interview series as part of a documentary W2D1 is producing about the history of the Australian startup ecosystem. This episode was conducted by guest host, Will Tjo.

Will Tjo [:

Hi, everyone. Welcome back to the Australian Startup Series interviews. Our guest today is Alex Scandurra. So good to have you on, Alex.

Alex Scandurra [:

Thanks, Will. It's great to be here.

Will Tjo [:

So could you introduce yourself and tell us a bit about what you're working on now?

Alex Scandurra [:

Yeah, sure. So my name is Alex Scandurra, and I'm the founding CEO of Stone & Chalk and the co-founder of Spark Festival, both of which are non-for-profits. The concept of Stone & Chalk was born on the back of a report, which was actually commissioned by the Committee for Sydney to understand what would be needed to help build a leading FinTech ecosystem here in Australia. KPMG led the research and compiled the report with key input from Reinventure and HD Ventures in particular.

Alex Scandurra [:

And so what was founded in FinTech in 2015 as this humble little FinTech hub has grown and evolved to bring together founders, investors, mentors, as well as industry and government stakeholders into one powerful emerging technology impact workers as we refer to it. And it's all focused on obviously driving growth, advocacy for the sector, and commercialization as well.

Alex Scandurra [:

Also, founded in 2015 was Spark. I returned to Sydney from overseas. One of the things that we, and I say we, very quickly met up with a few great people at Meridein at the time, and we were really seeing the lack of density and flow of startups that were entering the startup ecosystem. And so we wanted to create something that would help bring greater awareness, careers, and opportunities in startups. And so that's what Spark was all about. And it has one large culminating festival every October.

Will Tjo [:

I'd love to dig into these later on in our conversation. Although to start us off, Alex, these are some of the most iconic names in the Sydney startup ecosystem. I want to take us back even towards your university days. Would you say that you've always been an entrepreneur?

Alex Scandurra [:

It's interesting. Before I really understood entrepreneurship and before it became a thing, I certainly didn't identify as an entrepreneur. To be honest, when we were at uni, we really didn't know anything about Silicon Valley. We didn't really know anything about tech startups. Technology was something that was done in the engineering department and we were all civil engineers. And so we at the time thought that life looked like X in terms of going out and working for large organizations and building a really big infrastructure. And so it was only really something that I got involved in kind of by accident or serendipity as we would have it in our community.

Will Tjo [:

What year would you say this was?

Alex Scandurra [:

It would've been 2013 over in London.

Will Tjo [:

So when you first got into the ecosystem around 2013, what was your first impression? Did it seem like what you expected it to be or completely different?

Alex Scandurra [:

I didn't quite understand what I was to expect, but instantly I fell in love with it. I've never really enjoyed bureaucracy. I've always had the reputation for finding faster ways to do things, find things that fundamentally needed fixing to improve the way we actually executed, and ultimately the outcomes we were able to generate. And so without realizing it, I was kind of like a closet entrepreneur or serial intrepreneur, if you will. I went from the military to construction with Lendlease for five years. Then I spent seven years with Nokia, both in Australia and the Middle East, which eventually took me to London for three years.

Alex Scandurra [:

And we were there post GFC. And we were charged with helping to reinvent banking. We were one of the first people to be hired by the bank to really create a whole new function and team that would sit across its 50,000 employees globally. We were trying to develop digital product. We came out with Pingit, which is very similar to Ka-Ching here in Australia. And as a newcomer to banking and what is a very conservative risk averse sector, we were literally banging our heads against the wall trying to figure out why we couldn't get product out the door quickly. And that is what led me to startups and that is what led me to entrepreneurship.

Alex Scandurra [:

And so what ensued from that is flipping the model and rather than trying to do everything from the inside of an organization out, we went, well what if we could collaborate with startups and scale ups and innovate from the outside in? And that's what really led to launching and creating Barclay's Rise in the UK, which in many respects of the precursor to Stone and Chalk as well as the accelerator programs with Text Us. And that was really my first introduction with entrepreneurship and the startup ecosystem.

Will Tjo [:

Yeah, I know what you mean when you said that it was by serendipity or accident because you worked in these large corporations, became frustrated at ice bureaucracy, maybe the speed of which things changed and then decided to go out there and capitalize on opportunity that you saw.

Alex Scandurra [:

Oh, absolutely. And frankly, I've never looked back. The speed at which we're able to accomplish things, the impact we're able to make from relatively minute levels of inputs and resources is just incomparable and I found it to be just so satisfying as well as working with founders. That's one of the greatest pleasures I've had in just helping these guys succeed and really achieve their dreams.

Will Tjo [:

What brought you back to Australia?

Alex Scandurra [:

We'd been overseas as a family for about seven years and my oldest son was in year eight. And at the time we were thinking, Gee, we're almost at that point where if he continues in high school, you'd have to see it through. The grandparents are getting older. And at the time I'd also met some of the people from KPMG and Reinventure that had come to London to check out what had led to the FinTech boom, what were some of the key things and key learnings that they could then bring back to Sydney as they contemplated creating what was then to become Stone and Chalk. And so it was from those conversations actually that really got things started and we crystallized their decision to come home. And it was just fantastic timing that they were then looking to take Stone and Chalk from an idea to something that could then become at a reality in the immediate future. And one thing led to another and they kicked off the process in January of 2015, in terms of opening up for the candidates and I ended up being the lucky guy.

Will Tjo [:

Yeah, that's awesome. Coming back to Australia after being involved in the startup ecosystem in London must have been a huge difference, wasn't it?

Alex Scandurra [:

Oh look, it was massive. And in many respects it was similar because in the UK it was on the back of the GFC, imagine thousands of jobs in London were completely displaced, literally what felt like overnight. So you had experts and big guns and people from every level of experience literally losing their jobs overnight. And you've got a country again in particular with London that has a lot of inherited wealth. And so in many respects, they had almost like this Tinder box that was ready to ignite in terms of what then became the FinTech boom. You had the talent that was available and in some ways desperate to do something. You had access to money and you had problems, real problems to solve. And Europe was in a really bad way still post GFC with huge numbers of unemployment and recessions across the board.

Alex Scandurra [:

And so coming back to Australia, it was kind of almost same saying yet different. I found that there was still a lot of complacency here, and in many respects, certainly at least until COVID, there still was and has been. And what I mean by that is in the UK, two of the big banks collapsed and became state owned, whereas Australia relatively sailed through it. And so there didn't seem to be anywhere near the kind of burning platform for change. But what was really similar was that from an ecosystem perspective, we really started to see what I thought were the kind of embers of growth and embers of potential where we'd already seen the air taskers emerge. Atlassian was a giant Freelancer had listed, you had Canva that was starting to become a bit of a name. And we'd only really had Afterpay, SocietyOne and companies like Rate Setter for example, that had really just launched and Airwallex around the similar timeframes.

Alex Scandurra [:

So we already started to have a little bit of momentum, but in terms of what was FinTech and what was startups and their relevance to productivity, GDP growth, and no one really understood its relevance and no one therefore really understood well why they should care or pay to pay any attention.

Will Tjo [:

Yeah, it's interesting that you compare the London ecosystem after a great reset to Australia's because I suppose during that great reset, which happened post GFC in London, it became sort of like a new ecosystem in a sense. There was a burning platform, there was a need to change and Australia was similar to that, but we didn't have such a great impetus like the GFCs impact, but it was nevertheless the birth of a new ecosystem back then.

Alex Scandurra [:

Yeah, that's right. And even just from a FinTech context for example, cause we had the data available, KPMG had produced a report that looked to survey how many FinTechs do we have across Australia? And at the time we launched there was only about a hundred and it would've been a hundred at best. And several years later, I think it was at the end of 2018 or 2019, there were well over 800 FinTechs in Australia. And we're not talking about startups only, we're talking about significant scale up. And some of those had listed and had various successful exits. And so in that period of time, we've seen a huge amount of growth.

Alex Scandurra [:

And like London, one of the things that I saw that FinTech could bring to any economy or jurisdiction, it acts as both a vertical and a horizontal. And what I observed over there is as FinTech grew, it pulled up other adjacencies like digital marketing, all aspects of computer science, data science, branding. And I think we've seen to a large extent those types of spillovers and benefits happen here in Australia as well. And we've got a fairly robust and diverse ecosystem that's taking place now, which is super exciting.

Will Tjo [:

Has the growth been what you expected it to be over all those years since coming back to Australia?

Alex Scandurra [:

Look, to be honest, I think it's exceeded my expectations. Coming back really early '15, we really just had what I considered to be some very large and already mature successful startups that had become listed organizations or soon to be, and this huge gap of gazelles, companies that were mature scale ups. And so there seemed to be almost like this canyon in between a whole bunch of accelerators that were looking to pump out very early stage startups. And a lot of the conversations we were having across the ecosystem was, how can we help generate more gazelles, how do we take these graduates from accelerated programs and help them continue to mature and scale and grow so that we've developing this healthy pipeline of companies that would potentially become unicorns.

Alex Scandurra [:

And I remember sitting there together going, Man, I don't know how we're going to do this. We're trying to convince governments that this is important, we're trying to get regulations changed, legislations changed, incentive schemes adopted. And I'd have to say, looking back on just these last six years, it's incredible what Australia's achieving. And yeah, I'm amazed how it feels sometimes on a weekly basis. There's like another news article coming out on a company that's just become another unicorn or a company that's now worth in excess of a hundred million with investment that's also coming from overseas. I mean series B or series C for example, and it just makes you pumped.

Will Tjo [:

Yeah. What are some of the catalysts that are driving that growth?

Alex Scandurra [:

Look, I think one of the key things that I've seen, and this is just one of I'm sure many, is that we are becoming much more inherently global in our thinking. Initially I think we were really struggling to teach and expound to founders that Australian market is small and it's just an initial stepping stone to achieving greater success, greater relevance for your business. And that thinking and designing and architecting for that type of globe mindset is for fundamental from day one.

Alex Scandurra [:

And so I think the first wave or the first several waves of startups that we were seeing were still narrowly focusing on the Australian market and thinking about an exit strategy along those lines. Whereas I think increasingly, certainly from across the country, more and more we're seeing founders that are looking to build global businesses as well as investors that are taking that perspective as well. And I think becoming a little more patient in the way they're deploying their capital. And the combination of those two with access to overseas investors, I think is really helping to provide a pathway for Australian startups and scale ups to enter new markets with a soft landing, which wasn't available before.

Will Tjo [:

Yeah. Is there any particular reason we suddenly shifted that perspective wanting to be more global?

Alex Scandurra [:

Look, I think it's just belief, right? I think it just takes one. And then others that start to be successful, remember seeing Airwallex have early successes with investors overseas and the way that they were building channels internationally. Afterpay has been a regular news asset and many have seen just how much over the last several years their focus has grown and their success has grown in the US, and I think last time I had a look at least 50 if not more, percent of their revenues were now coming from the US market, and that was before they had announced their M&A deal. And so I think that starts to build in everyone's minds that actually it's possible.

Alex Scandurra [:

I think that coupled with back in 2015, if you had have asked a US investor or even a UK investor about investing in Australia, I think they would've had a very different perspective on that versus what they're seeing now in terms of the amount of activity, how hot our market is in terms of the amount of talent that's here, the ingenuity that's here, and also the applicability of what's being built here for the US market. And yeah, I think it's just this awesome hot pot of all these key ingredients.

Will Tjo [:

Yeah, absolutely. I like how you mentioned how key drivers was, in essence, our unicorn examples, how we look towards them and see that they've done it and our founders are getting more confident thinking that they could do it also.

Alex Scandurra [:

Yeah, absolutely. And it goes across everything, employees in big corporates and governments going, and maybe I can have a crack at working in a startup. And then you see students doing the same, seeing these successful names going, Oh, maybe I can be a founder. Or rather than being a graduate in a corporate, being a graduate in a startup or a scale up. And I say, I think this starts to build momentum and becomes a really positive vicious circle.

Will Tjo [:

I'd like to shift gears a little bit to discussing what we could still be doing as an ecosystem. What could we still be doing better?

Alex Scandurra [:

Yeah, look, it's a really good question and we can always be doing stuff better. One of the things that comes to mind, and this applies absolutely to me as well, is I think we could be collaborating a lot more. One of the observations I've had, and we all talk about other ecosystems and stuff like this, but I don't think it really requires any comparison any longer. I think as a national startup community now, we're sufficiently connected and we're sufficiently mature. And what I've observed is we all still tend to stay within our circles of comfort. So you know how after a while it's just natural that you just continue to network and operate within your own kind of circles of influence?

Alex Scandurra [:

I think one of the things reflecting back on my time as CEO of Stone and Chalk is I was so head down, busy on trying to help it grow, help the founders that were residents and help create this sense of an impact network that my capacity and I guess focus or prioritization on collaborating outside of our immediate sphere just wasn't there. And I think we missed out on opportunities as a result, and I think we missed out on how effectively we were able to partner and collaborate across the ecosystem. And so that's one of the things definitely that I think we can do much better.

Will Tjo [:

Yeah. I'd love to dig into this a little bit. When you see collaborating more, do you mean collaborating within the ecosystem such as with other founders, or do you mean collaborating with other industries like in banking and government and so on?

Alex Scandurra [:

I think there's both. And so there's definitely within the community or within the ecosystem for sure, how do program providers increasing, how space providers and others are actually working together are investing in groups and so forth. I think there's a lot that we can improve by doing and opening that a lot more. But probably one of the biggest areas for improvement. There's, in my mind, two, one talks to your point there around accelerating commercialization. And this is really in my mind that one of the two biggest gaps. Now, what I mean by that isn't the minutiae of how do you help an individual founder or company to commercialize. What I'm talking about is a much wider macro point, which is today and for some time the Australian economy has been led by and dominated by oligopolies in a whole range of industries. And that has two key ramifications.

Alex Scandurra [:

One, it makes it very difficult for new emerging companies to sell to these enterprise organizations. The B2B or the B2B to C is challenging, but likewise, it becomes really difficult for new entrants that have new novel offerings or business models to compete. I think there's a huge opportunity on the table for the government to look at a different form of R and D tax incentive that isn't about R and D, but is about incentivizing commercial collaboration between large organizations and Australian startups and scale ups.

Will Tjo [:

So Alex, as you know, what we're trying to do on this podcast is to document as historically as possible the history of our ecosystem just so that we can look to the future and we're trying to reach all corners from founders, investors, policy makers, and academics. Is there something that's on your mind that you're constantly thinking about that they need to hear?

Alex Scandurra [:

Yeah, it's a great question. I think that point around commercialization incentives between big and small is really key because I've seen a lot of companies that are really high quality companies that could have made it really big on a global scale that weren't able to get the traction they needed locally here and didn't have the capacity largely to do with capital to access international markets on time. And so introducing anything that can improve the success rate of Australian companies, and by that I mean startups and scale ups, selling to large organizations, including government and corporates. Government as a customer is something that I think is still being given lip servers to and the DTA or the DTO was a classic example of that. And then from a corporate perspective, we've got an R and D tax credit regime that still isn't incentivizing the right outcomes.

Alex Scandurra [:

And so from my perspective, fixing that and supporting or enhancing the ability of startups and scale up to work with large organizations domestically, I think will have huge benefit in both increasing the evidence around product market fit, customer traction, and therefore reducing the risk profile that's perceived by investors, increasing investment flows and then helping them position for greater both national and international growth. That's the kind of thinking and thesis that I've had behind that, which I think is still an area that we could address and potentially make a significant impact in.

Will Tjo [:

And lastly Alex, if a brand new founder came to you, given all your wins, your mistakes and your experience, what's one piece of advice you'd give them to increase their chances of success?

Alex Scandurra [:

A brand new founder, and it's interesting, right, because I've worked with founders that are also very close to launching and in some cases have even launched, is to make sure, number one, before you build anything, before you spend any money, is really understand the problem you're trying to solve and is the problem you think you're solving actually the problem that needs to be solved? Really understand the customer and the difference between who is the user and who is the customer of the solution that you're looking to pull together. And then finally, as you think about the solution, really do your research in terms of, do you genuinely have a unique selling proposition? What aspects that you're pulling together already exist and what aspects are novel, new, defendable or easily scalable? Because I've seen a lot of founders get the first two right, but then they get excited too quickly and develop a solution or an MVP or even further than that and find themselves in a position where they're essentially, when you really look at it, a me too.

Will Tjo [:

Alex, it's been so great having you on the show today. Thank you so much.

Alex Scandurra [:

Oh my pleasure, William. Thanks for having me.

Adam Spencer [:

I hope you enjoyed that interview. More interviews are on the way. Follow the podcast wherever you're listening right now. Stay tuned for more interviews with many, many more amazing people from the Australian startup ecosystem. Thanks for listening and see you next time.

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