Flying the Kiwi startup flag in Sydney

SXSW Sydney, the inaugural Asia Pacific offshoot of the iconic Austin, Texas festival and conference for tech and the creative industries, can generally be considered a success.

 The seven-day event that ran throughout last week featured more than 700 speakers, hundreds of conference sessions, music gigs and film screenings, anchored around the sprawling Sydney International Convention Centre.

 Having never been to the Austin version of SXSW, it was hard to know what to expect. I was hoping for more provocative, thought-provoking talks and edgier panel discussions; only one I attended, about generative AI and the future of the news media, saw the panellists in passionate disagreement. I also wanted a broader collection of big names on the bill.

 “SXSW Sydney was no Austin, but that’s not a fair metric,” was the Sydney Morning Herald’s verdict. 

 “What they accomplished was to pull off a successful and ambitious multi-industry assemblage that sets the stage for year two.”

 That’s a fair summary. There were logistical issues and the energy seemed to sag at times during the week. But those things can be fixed. Some of the 2024 headliners for SXSW Sydney have already been announced. All going well, the festival will become a fixture of the conference circuit for years to come.

 New Zealand had a small official presence at this year’s festival in the form of the Aotearoa NZ @ SXSW Sydney ‘three-day activation’ hosted within the festival precinct by Creative New Zealand, Te Māngai Pāho and the New Zealand Music Commission.

‍

But our startups also had a decent showing, thanks in large part to Maria Jose Alvarez, managing partner at Tauranga-based venture capital firm WNT Ventures. In February, hearing nothing about New Zealand-centric sessions at the upcoming festival, Alvarez pitched two ideas for panel discussions to SXSW Sydney.

 “I thought it would be a long shot; there were almost 2,000 applications,” she says. “But in late July I got an email saying that both of the sessions had been accepted.”

 The two sessions, featuring a collection of New Zealand-based deep tech startup founders and investors, went down well, says Alvarez, with the venue around 60 percent full for both of them despite being up against some stiff competition. 

 “At the tail end of one session we were competing with getting into the queue to see Nicole Kidman,” says Alvarez.

 She sees SXSW Sydney as a useful forum to show Australian investors that New Zealand’s startup scene has built some critical mass and is worthy of a closer look. 

 “The Australian VC market is very, very well-funded so the conversation could just stop there. I kind of wanted to make a point about why people should care about New Zealand,” says Alvarez.

 “There aren’t more advanced companies [in Australia] necessarily, but they get a lot more money when they are at a similar stage –like three times more.”

The issues

 The views from startup founders canvassed some familiar issues: the challenges of going global from a tiny country at the bottom of the world, finding the talent to bolster a small team, and accessing the capital required to scale-up quickly in fast-moving areas of emerging technology.

 “New Zealanders have a can-do kind of spirit that I didn't see during my research career in the US to the same degree,” said Cather Simpson, a professor of physics and chemical sciences at the University of Auckland, serial startup co-founder, and acting CEO of Orbis Diagnostics, which she described as Theranos done right.

“We are proper scientists, and we're making it high quality instead of trying to race for everything all at once,” she said.

 “In this blood diagnostic space, which is now in a race, there's a lot of companies that are coming out, and I know for a fact that some of them have ten times as much investment as my startup in New Zealand has. And we are farther ahead,” added Simpson.

 The prevailing narrative is that a lack of capital makes our fledgling companies leaner and more resourceful. But it also means we are less able to take risks.

 “Some of the things that we have to say no to internally and that might find that nugget of gold, we just can't take the risk,” Simpson pointed out.

‍

The Startup Genome report on New Zealand’s startup scene last year pointed out that gaps in early-stage funding are holding our startup sector back. Fewer startups reach seed round stage than in peer countries, and it takes them longer to get there. The median Series A round for our startups is also comparatively small.

 Still, the push towards the more rapid global integration that the Startup Genome recommended our early-stage companies pursue, is certainly front of mind for deep tech startups.

 Tijs Robinson, CEO of Hot Lime Labs, a Wellington-based cleantech horticulture scale-up, said the company was in a global search for talent and would look to appoint board members from Europe 

 “We've just accepted that to get those unicorns you have to look beyond New Zealand. It's just part of your plan,” he said.

 “You need chemical engineers, you need all the staff and we're now pushing the limits of what we can do ourselves.”

  Hot Lime Labs was “on the cusp” of pursuing its series A fundraising round.

 For clean hydrogen startup B.spkl, government initiatives in Europe and the US meant the company’s advanced catalysts, crucial for improving the efficiency of making hydrogen from water, would be made offshore.

 “We've had to acknowledge that we are going to need to establish, probably in both Europe, and North America, manufacturing facilities to produce our catalyst coated membranes, driven by what these much larger global economies are doing,” said co-founder and CEO Christina Houlihan.

 WNT Ventures is in the midst of raising investment for its Fund 4 – a $35 million fund to support deep tech companies from seed to series A. WNT Ventures has funded 26 companies across three funds so far.

 “We have outstanding returns; we’ve paid moneyback to our investors every year for the last six years. Our IRR [internal rate of return]and [TVPI] Total Value to Paid-In are really good. So that opens a lot of doors,” says Alvarez, who met with potential investors during her time at SXSW Sydney.

 “Our approach is to take a step back and try to understand the sector. Why is New Zealand doing this? Can we win? Because if there are six startups in New Zealand doing it, in the US there will be 20.”  

Don’t believe the hype

On the Discovery stage at the Sydney convention centre, Xero’s chief technology officer, James Bergin, was dispensing some advice for startup founders trying to cut through the hype around technologies such as AI and Web3.

 “If you're going to go after a new technology, just because it's hyped up, I mean,good luck to you. Like, I wish you all the best, but you're in for quite a ride,” he said.

 The usefulness of technology, Bergin reminded them, is intrinsically linked to innovation, which is the process of solving a problem, creating something new in the process to improve on the conventional way of doing things.

“When I think back to our company, Xero, where it began 17 years ago, around a kitchen table in little old Wellington, New Zealand, the worldwide web and the internet was really only emerging from the trough of disillusionment that was caused by that dotcom bubble that burst a few years prior,” said Bergin.

 “Our founder Rod [Drury], saw an opportunity to help to create something new, in order to change something established.”

‍

Drury had clunky accounting software in his sights and cloud computing platforms were the enabler to create a better way of delivering accounting tools to small businesses. Xero drew the blueprint for how New Zealand-developed software can go global.

 But Simpson said our deep tech companies were also much more globally focused than when she branched out from her academic career into startups over a decade ago.

 “It has changed dramatically in New Zealand, in the hard tech space, where if you build something and drop it on your foot, it hurts right? We're now much more globally focused, we're much more ambitious, we’re thinking much clearer about the impact that we have outside of our borders.”

Five tips for making the most of SXSW Sydney 2024

1. Start thinking now about pitching a session to get onto the conference agenda for 2024. Landing a session or a place on a panel at SXSW Sydney can help you attract the attention of potential collaborators and investors.

2. Consider claiming a spot in the Startup Village. This area of the conference showcases startups and, positioned alongside the innovation showcase dominated by big tech companies, gets a lot of traffic. Auckland brand tracking startup Tracksuit had a presence there this year. 

3. Build in time for queueing to get into the big-name keynotes. I missed out on Charlie Brooker, Nicole Kidman and several other in-demand sessions as I was racing from previous sessions and failed to get a seat.

4. Choose your ticket strategically. A full-access pass to SXSW Sydney cost around A$1,900 this year. But there’s no way you’ll be able to get to a fraction of the sessions on offer. The industry-specific tickets for tech and innovation, gaming, music, screen and culture were much more reasonably priced and coupled with some meet-ups, may be enough to make the trip worthwhile. Sydney accommodation prices were through the roof last week, so book early or find a Sydneysider’s couch to crash on.

5. Don’t overload yourself. The magic of SXSW is the mix of music, culture, tech and film. Sit in the festival area, have a beer, take in a gig. The impromptu meet-ups and discussions with friends and strangers alike on the fringes of the festival were as thought-provoking  as the official sessions I attended.