Check against delivery
I would like to begin by acknowledging the Wurundjeri people as the Traditional Owners of the land that we’re meeting on today.
I pay my respect to their Elders past and present and I recognise their continuing connection and custodianship of the lands, seas, and waters throughout Australia.
It’s great to be at The Age Innovation Summit in 3D this year after a couple of years of pandemic postponements.
It would be great to be coming out the other side to a better world, but it doesn’t really feel like a better world at the moment now does it?
- Last month the government published their State of the Environment report. CSIRO wrote half of it, but all of it was bad news.
- Last fortnight I was at the Press Club to launch CSIRO’s Our Future World report, which discusses the seven megatrends that will shape our world in 2042. It was also not uplifting reading. We’ve also just heard from ServiceNow in the session before me about their insights for the next decade, which touched on 2 of our 7 Megatrends , ‘Diving into Digital’ and ‘Increasingly Autonomous’, and you’ll hear from Adrian Turner next about our first Megatrend: Adapting to a Changing Climate.
- When you add the Reserve Bank, inflation, cost of living pressures and the impacts of geopolitical conflict, it can feel like a long time since we had any good news to celebrate.
It feels, in fact, a lot like the slow decline scenario that CSIRO predicted in our Australian National Outlook of 2019 if we don’t invest in innovation for our future.
So where is there solace to be found?
We won’t find it by burying our heads in the sand – although admittedly, that has been where we’ve found our wealth for the past 30 years.
Unfair advantages + the Valley of Death
I find hope for a better future by looking to Australia’s unfair advantages.
These are our unique strengths that, for too long, we have not turned into solutions to our challenges by supercharging them with science.
Strengths like our mineral wealth.
For too long, we’ve dug it out of the ground as a raw commodity and shipped it overseas for pennies on the pound, only to buy it back again as a developed product, like the batteries we need to power our low emissions future – but we could change that….like this nanostructured high efficiency anode, 3D printed from metal ink refined from sand.
Strengths like our renewable resources.
For too long, we’ve watched other countries commercialise our research in areas like solar and hydrogen, taking the lead on renewables when we have the tools and the raw materials right here.
Strengths like agriculture and food.
For too long, we’ve exported high quality crops only to see them turned into higher-value food products overseas when we could be strengthening and broadening our own jobs and export opportunities here.
Australia has so many opportunities to grow markets, create jobs, solve challenges and make life better for every Australian by value-adding across our strongest industries – which is also the aim of the Australian Government’s National Reconstruction Fund.
So why haven’t we realised the economic, environmental and social gains of these unfair advantages before now?
More often than not, our great ideas fall into the Valley of Death that exists between research and industry, and wither in its inhospitable climate.
It’s where startups fail for lack of investment to see them through product development, scale up, distribution, and all the other hurdles they have to jump before they can learn to feed themselves.
Rather than risk the Valley of Death, our best ideas go overseas, and we buy them back once someone else has taken the risk for us – and taken the value from us.
We’ve been able to get by using this strategy for decades – but COVID-19 changed all of that.
COVID-19
When COVID-19 arrived in Australia, we suddenly realised that waiting for the world to sell us vaccines and PPE was not going to work anymore.
Global supply chains dried up and we had to look to our own expertise.
When we looked to Australian science, we found not only answers to understanding and fighting the pandemic, but also ways of working better together and ways of reinventing and creating new industries that grew new jobs as well.
Australia manufactured 50 million doses of one of the world’s first vaccines by using science to solve a seemingly impossible challenge of sovereign supply.
We have momentum in these industries now that I hope will continue.
Later today, I will be joined by federal Minister for Industry and Science, Ed Husic, to officially open CSIRO’s National Vaccine and Therapeutics Lab right here in Melbourne, which is a flasher version of what we created to scale up that first COVID-19 vaccine in our time of crisis.
The new facility will supercharge our ability to produce vaccines and therapeutics right here in Australia, in fact right here in Victoria.
CSIRO is also looking forward to working with Breakthrough Victoria, who are here today, to accelerate event more investment in innovation and new technology to help Victorian industry seize new opportunities.
Biomedical manufacturing researchers will work alongside industry partners on vaccine candidates and drug discoveries to safely and precisely scale-up the products ready for clinical trials.
It will strengthen our ability to translate and commercialise research, contributing to bridging that Valley of Death that so often prevents our world-class research being turned into solutions from science that create new industries and jobs both locally and globally.
I am energised by the way we have turned COVID-19 into an opportunity to rebuild our sovereign skills in pandemic preparedness.
But I am worried about how we drive momentum on solving our other challenges, which are no less serious, complex, and urgent.
Often the Valley of Death stands in our way – but more often, and more cripplingly, it’s the fear of the Valley of Death that stops us even trying to leap across it.
Quantenna and the GFC
When we find ourselves in economic conditions like today – a recession narrowly avoided at the outset of COVID-19, and the RBA now playing catch-up with interest rates – the fear of investing in innovation is palpable.
But science-driven innovation – the kind of innovation that comes from creating something new to the world from breakthrough research – has a superpower when it comes to market cycles.
In fact, now is the most important and most beneficial time to invest in R&D.
When the world’s markets plunged during the Global Financial Crisis, I’d just taken my last company public and was working in venture capital in Silicon Valley.
One by one, the big VC firms watched their portfolios shrink as startups hit the wall.
The startups who fell first were the ones without real differentiation from their competitors, and in a bull market many similar startups get funded.
Our portfolio was decimated – but the startups left standing were the ones built on unique science to create a novel product that differentiated them from everyone else in the market.
One of those companies was a next-generation WiFi solution called Quantenna.
Quantenna brought people together with expertise in WiFi from what was then NICTA; from CSIRO, where WiFi had been invented 20 years earlier; and from Stanford University.
They invented next generation WiFi that could beam through stone walls, completely eliminating the need for cables to connect to the internet inside.
The excitement around what Quantenna was going to do meant that by the time the GFC hit, it had five venture funds around the table with a lot of capital and a lot of belief, so we all chipped money in to carry the company through the GFC, and it went on to IPO in 2016.
According to the Australian Investment Council, Quantenna is the only Aussie VC-backed company to IPO on Nasdaq since LookSmart in 1999, and the first to IPO using Australian science with WiFi.
In a downturn, you need something to really differentiate your startup. The best thing is being cashflow positive so you don’t need investment – but the next best is the deep tech differentiation gifted to you by science.
I’ve run startups through three recessions and 9/11, and I can assure you that having a unique technology that solves a seemingly impossible problem will push through even the most negative of markets.
The companies that survived the GFC were the science-driven ones that had set out to do impossible things and their uniqueness saved them.
Fear of failure and Chrysos
Fast-forward to 2022.
We saw the same thing happen just a few months ago when a company called Chrysos listed on the ASX in May.
Chrysos was created to commercialise CSIRO technology that delivers faster, safer, more accurate and more environmentally friendly gold analysis and extraction.
In the lead up to May, it raised the most money of any IPO this year at $183 million. This company defied gravity pulling off an IPO despite a war and economic instability.
Regardless of the ebbs and flows of the stock exchange, I am hugely excited about Chrysos’ future, because, like Quantenna, its value will not be buffeted by short-term market cycles.
Australian deep-tech innovation companies like Chrysos give me hope for our wider opportunity to add value to the minerals we dig out of the ground.
A company leveraging on of Australia’s unfair advantages.
FutureFeed and ON
Another relatively new Australian company, founded on science-driven innovation, gives me hope that we can leap over the Valley of Death to realise the full value of our unfair advantages.
FutureFeed is a company created to commercialise research that found adding a seaweed supplement to livestock feed can significantly reduce their methane emissions.
If cattle were a country, they would be the world’s third largest emitter, at 15 per cent of global emissions.
A few years ago, the researchers were among the earliest cohorts to go through a new program CSIRO had introduced called ON.
ON is the national science accelerator – it takes scientists with ideas through an intensive customer-focused program to develop startups, preparing them for the leap across the Valley of Death.
So far, we’ve taken more than 3000 people from across Australian universities and research organisations through ON programs, creating more than 60 new companies in just a few years.
FutureFeed did something we don’t often see in Australia, it compelled local Australian companies to fund its seemingly impossible idea, including retail giant and supermarket chain Woolworths, commodities handler GrainCorp, agrifood group Harvest Road, and accelerator operator AGP Sustainable Real Assets–Sparklabs Cultiv8 Joint Venture.
Earlier this year, FutureFeed celebrated a major milestone with the sale of its first products to livestock feed suppliers, and now have licensees so far in Australia, New Zealand, the US and in Europe.
FutureFeed leverages our unique advantage as one of the world’s largest livestock-farming and exporting nations, as well as having among the highest-quality meat in the world.
It’s a huge market opportunity as well as a critical solution towards achieving our goal of net zero emissions. Silicon Valley missed this one, but Australia didn’t.
V2food and Main Sequence
A third Australian company takes this unfair advantage one step further by not only taking on our environmental and climate challenges, but also the challenge that threatens the success of every other innovation: our fear of failure.
At the same time as CSIRO created ON, we also created a venture capital fund, just for Australian science. It’s run by Main Sequence.
As well as investing in startups, Main Sequence has developed a new model for deal creation that goes right to the heart of Australia’s risk-averse culture to custom-design investments for corporate Australia.
V2food was created by combining Australia’s opportunity to add value to our food before we export it; CSIRO’s food science research and manufacturing facilities and investment from Main Sequence – and then approaching an industry partner who could benefit from a product that looked and tasted like meat, but was made from plant protein.
The investment was tailormade for someone like Jack Cowin of Competitive Foods, which owns Hungry Jacks, who shared our vision and joined the company.
In the first two years, the company raised $182 million, and today, v2food products, including beef and chicken alternatives, are in Hungry Jacks stores, major supermarkets around the country, in-flight meals on Australian airlines, and plans are underway to export to Asia.
By harnessing CSIRO’s market vision and venture investment, we can de-risk investment opportunities for corporates in Australia, like Competitive Food, to invest in deep-tech startups that would otherwise struggle to find a way across the Valley of Death.
Silicon Valley didn’t miss this new market, but in only nine months, Australia caught up with – and then overtook – the Valley’s Impossible Foods company, despite their $800m capital raised. V2food is testament that it really does help when the National Science Agency is your R&D lab.
I don’t know of any science agency in the world that has a venture fund inside it, which makes this model of Venture Science perfect for an innovation-shy country like Australia – but also a powerful unfair advantage.
Other countries like Canada, Singapore, and even the National Science Foundation in the US are starting to look at our model and realise Australia is doing something interesting here. It’s not often we get them looking at us like that – which tells you, this may not be our unfair advantage for long.
In closing
FutureFeed and v2food were created when the economy was still strong – but Chrysos and Quantenna make me nervous about how gun-shy Australia’s appetite for investing in itself can be.
You’ll hear later from Niki Scevak of Blackbird Ventures, and from the founder of one of its portfolio companies, Didier Elzinga of Culture Amp. To hear from these success stories today, it’s hard to believe that when we started Blackbird, we were flat out raising $30 million to start the fund, and even that took 90 Australian entrepreneurs investing to reach the target.
Today, Blackbird is Australia’s most successful VC fund, with backers including Australian super funds, who have been reticent for a long time to invest in science-driven innovation because it is an inherently riskier investment strategy – rewarded by a much stronger return when they deliver.
My fear is that, just as risk-averse investors like superannuation funds are leaning into science-driven startups, short-term economic tightening could undo the progress we’ve seen in the startup ecosystem in recent years, and we’ll miss our opportunity.
When you look at all the company creation programs CSIRO supports for Australia over the past few years, we’ve helped create more than 250 companies and thousands of new jobs from Australian science.
That’s 250 times we’ve leapt over the Valley of Death and made it to the other side – but it only takes a few falls to make us question ourselves again.
If we let fear of the fall stop us from backing our own ideas, they will keep going overseas and crossing the valley there – delivering value and solutions for other countries.
We are top ten in the world for science excellence, and we haven’t even scratched the surface of unleashing its power to solve our challenges.
That’s how we will deliver what is perhaps our greatest market vision, the bright future forecast in CSIRO’s Australian National Outlook report.
An Australia that doesn’t slowly decline into the sunset, but rather an Australia that grows its GDP by backing its own innovations, like low-cost renewable energy to power our own strong manufacturing industry and creates jobs of the future for our children.
We have 7 massive megatrends to turn into opportunities, but if we keep our eyes on the solutions from science, and trust in the power of deep-tech innovation to deliver unique value that pushes through interest rate and economic cycles, we can deliver many, many more ideas across the Valley of Death and into a brighter future for the nation.
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