Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. We've long been talking about the startup boom in Australia, and with Canva recently hitting a 40 billion dollar valuation, there's more attention on the local tech scene than ever before. Now venture capital firm, King River Capital, has revealed why they believe Australia and in particular, the Surry Hills area in Sydney is becoming the Palo Alto of Asia. Zeb Rice is one of the founding partners of King River Capital and joins me this morning from New York. Zeb, welcome to Fear and Greed.

Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. We've long been talking about the startup boom in Australia, and with Canva recently hitting a 40 billion dollar valuation, there's more attention on the local tech scene than ever before. Now venture capital firm, King River Capital, has revealed why they believe Australia and in particular, the Surry Hills area in Sydney is becoming the Palo Alto of Asia. Zeb Rice is one of the founding partners of King River Capital and joins me this morning from New York. Zeb, welcome to Fear and Greed.

Good morning.

Good morning.

You and one of your co- founders Chris Barter are both native Californians, notwithstanding you're in New York this morning. You've witnessed the rise of Silicon Valley. You've spent time in Tel Aviv, which of course is the other great IT capital of the world, I would argue. What is it about Australia's startup scene and particularly Surry Hills in Sydney that reminds you of California and of Israel, Tel Aviv particularly?

You and one of your co- founders Chris Barter are both native Californians, notwithstanding you're in New York this morning. You've witnessed the rise of Silicon Valley. You've spent time in Tel Aviv, which of course is the other great IT capital of the world, I would argue. What is it about Australia's startup scene and particularly Surry Hills in Sydney that reminds you of California and of Israel, Tel Aviv particularly?

Yeah. My last firm, I founded back in early 2000s. I remember back in those days, there was a number of firms going around Silicon Valley raising money for Israeli funds, and everyone thought, there was like an inside joke like, " Are they crazy? It's in the middle of nowhere. It's not Silicon Valley and they're never going to get off the ground." Well, fast forward 20 years, startup nation, you know no one even questions the fact that it's one of the greatest engines of innovation and building new technologies and billion dollar companies. If you look back at that time, there was two or three ingredients that separated out Israel from many other countries, and I would argue that Australia shares in all of those. So number one, I would say there's tons of smart people in Israel and Australia shares that. You've got 43, I think, universities in Australia. Israel, also like Australia, is in the top 10 countries that have people with PhDs.

Yeah. My last firm, I founded back in early 2000s. I remember back in those days, there was a number of firms going around Silicon Valley raising money for Israeli funds, and everyone thought, there was like an inside joke like, " Are they crazy? It's in the middle of nowhere. It's not Silicon Valley and they're never going to get off the ground." Well, fast forward 20 years, startup nation, you know no one even questions the fact that it's one of the greatest engines of innovation and building new technologies and billion dollar companies. If you look back at that time, there was two or three ingredients that separated out Israel from many other countries, and I would argue that Australia shares in all of those. So number one, I would say there's tons of smart people in Israel and Australia shares that. You've got 43, I think, universities in Australia. Israel, also like Australia, is in the top 10 countries that have people with PhDs.

Mm- hmm ( affirmative).

Mm- hmm ( affirmative).

If you do a count of the number of people with PhDs in different nations around the world, I think both Israel and Australia are in the top 10. And there's a lot of money in both the countries. They're wealthy countries.

If you do a count of the number of people with PhDs in different nations around the world, I think both Israel and Australia are in the top 10. And there's a lot of money in both the countries. They're wealthy countries.

Yeah.

Yeah.

Certainly, relative to their size, they are quite good. So I think when you have those ingredients and you combine it with this critical additional one, which is risk taking or innovators. Israel had that in spades. Really for survival, they had to be risk- taking and innovators and on top of technology. In Australia, I'm not an expert on Australian history, but I think if you look at the mining boom and the punters kind of mentality and that's worked so well. You have that kind of risk- taking kind of culture. When I moved to Australia eight or nine years ago, I could see all those similarities. It really struck me long before the venture boom here took off that it was in the cards.

Certainly, relative to their size, they are quite good. So I think when you have those ingredients and you combine it with this critical additional one, which is risk taking or innovators. Israel had that in spades. Really for survival, they had to be risk- taking and innovators and on top of technology. In Australia, I'm not an expert on Australian history, but I think if you look at the mining boom and the punters kind of mentality and that's worked so well. You have that kind of risk- taking kind of culture. When I moved to Australia eight or nine years ago, I could see all those similarities. It really struck me long before the venture boom here took off that it was in the cards.

Surry Hills, I'm just interested in why you're picking ... Now Surry Hills, for those who don't know, it's on the edge of the CBD of Sydney in the southeastern edge and it is a great area. It was a poor area 30 years ago. It went through gentrification. Certainly, it's amazing how many startups and VC firms, and... It's got a great vibe at the moment. What is it about Surry Hills?

Surry Hills, I'm just interested in why you're picking ... Now Surry Hills, for those who don't know, it's on the edge of the CBD of Sydney in the southeastern edge and it is a great area. It was a poor area 30 years ago. It went through gentrification. Certainly, it's amazing how many startups and VC firms, and... It's got a great vibe at the moment. What is it about Surry Hills?

Well, I'm obviously biased because that is where I work, but I think it's more than that. I went back and I added up the market capitalisation of companies within walking distance of my office in Surry Hills. So 20 to 25 minute radius from what our office happens to be located. You have about 150 billion dollars of market capitalisation. Now, admittedly, about half of that is Afterpay and Canva, but there are at least four other unicorns in that list, SafetyCulture, Campaign Monitor, Tyro, maybe Deputy fits into that category. There's a lot of these unicorns. There's a couple that we're invested in, actually several that I think are (soonicorns) , and there's-

Well, I'm obviously biased because that is where I work, but I think it's more than that. I went back and I added up the market capitalisation of companies within walking distance of my office in Surry Hills. So 20 to 25 minute radius from what our office happens to be located. You have about 150 billion dollars of market capitalisation. Now, admittedly, about half of that is Afterpay and Canva, but there are at least four other unicorns in that list, SafetyCulture, Campaign Monitor, Tyro, maybe Deputy fits into that category. There's a lot of these unicorns. There's a couple that we're invested in, actually several that I think are (soonicorns) , and there's-

Soonicorns.

Soonicorns.

Soonicorns.

Soonicorns.

I like that.

I like that.

Soon to be unicorns.

Soon to be unicorns.

Soon to be worth a billion dollars. I like that.

Soon to be worth a billion dollars. I like that.

Yeah. The reason I'm focusing on that is that coming from Silicon Valley, what I witnessed in the '90s and in the 2000s is that you get these iconic generational companies like an Afterpay, like a Canva, like an Atlassian that are a huge percentage of that market capitalisation.

Yeah. The reason I'm focusing on that is that coming from Silicon Valley, what I witnessed in the '90s and in the 2000s is that you get these iconic generational companies like an Afterpay, like a Canva, like an Atlassian that are a huge percentage of that market capitalisation.

Yeah.

Yeah.

What happens is you get a flywheel spinning and that flywheel is driven by not just the investors that have invested in these companies that are worth tens of billions of dollars, but also in the employees. It's not just the money, it's the ideas, it's the entrepreneurial spirit, it's the pattern recognition of how to build these billion dollar businesses very, very quickly. What I also notice is that happened around Palo Alto and Mountain View, and Saratoga, Sunnyvale, where companies like, Intel and Apple and Adobe and so on were headquartered, and you just would have these people, really smart people working at those places. They'd make a bunch of money and sure they'd buy a nice house, then they'd go, " Okay, well, what am I going to do? I'm going to hang out with my mates and come up with the next Atlassian or Canva or Afterpay," and they've got the money to back their ideas with and to back their mate's ideas with. The Palo Alto phenomena that I was talking about is driven by that money, that innovative culture, that innovative spirit, and it's driven by a group of people in that area. The final thing I'd say on that point is that it's in Asia. Increasingly, it's difficult to build these kinds of businesses in somewhere like China or Hong Kong, as we've all seen that's getting more and more difficult. So I think it's also the geography.

What happens is you get a flywheel spinning and that flywheel is driven by not just the investors that have invested in these companies that are worth tens of billions of dollars, but also in the employees. It's not just the money, it's the ideas, it's the entrepreneurial spirit, it's the pattern recognition of how to build these billion dollar businesses very, very quickly. What I also notice is that happened around Palo Alto and Mountain View, and Saratoga, Sunnyvale, where companies like, Intel and Apple and Adobe and so on were headquartered, and you just would have these people, really smart people working at those places. They'd make a bunch of money and sure they'd buy a nice house, then they'd go, " Okay, well, what am I going to do? I'm going to hang out with my mates and come up with the next Atlassian or Canva or Afterpay," and they've got the money to back their ideas with and to back their mate's ideas with. The Palo Alto phenomena that I was talking about is driven by that money, that innovative culture, that innovative spirit, and it's driven by a group of people in that area. The final thing I'd say on that point is that it's in Asia. Increasingly, it's difficult to build these kinds of businesses in somewhere like China or Hong Kong, as we've all seen that's getting more and more difficult. So I think it's also the geography.

I was going to ask you about that. Firstly, we've got a lot to thank Afterpay, Atlassian, and Canva for that's got the message out of that.

I was going to ask you about that. Firstly, we've got a lot to thank Afterpay, Atlassian, and Canva for that's got the message out of that.

Yeah.

Yeah.

The second though is just where we are geographically. The fact that we are so close to Asia, which is the fastest growing part of the world, but we are also a long way away from California and a long way away from Israel and Europe. Is that a good or a bad thing, our geography?

The second though is just where we are geographically. The fact that we are so close to Asia, which is the fastest growing part of the world, but we are also a long way away from California and a long way away from Israel and Europe. Is that a good or a bad thing, our geography?

Well, I think it's net a positive. You've got a whole tyranny of distance thing that's caused Australia to lag for many, many years on the technology scene. I remember in the '90s, people are trying to get startup Australia going and in the early 2000s, trying to get it going. Just didn't happen. What's changed is even before COVID, although everything's changed with COVID, but even before COVID, you had Zoom, you had Slack, you had WhatsApp and Telegram and Signal and so on. You had all of these tools that allowed you to be anywhere. What COVID has shown is that people that doubted that you could have remote workplaces or distributed organizations or decentralized organisations, those people have just been proven wrong because the economy not only continued to function, but at least in tech, it absolutely boomed even though people were working from wherever they really wanted to. So I think that people now don't care that you're in Australia versus in Hong Kong or Singapore. It is more are time zone focused. As long as you're within three to six time zones and you overlap for a significant enough chunk of the working hours, you can be anywhere in that zone. For much of the year, that encompasses the West Coast of the US and east coast of Australia. You have suddenly Australia as a VC. We invest most of our money in the US even though we're based primarily in Australia, and no one cares. They don't care that we're sitting on a Zoom from Sydney as opposed to from Austin, Texas or Mountain View, California. It just doesn't matter. So Australia's distance, just to finish, is it an asset? It's an asset because it's such a beautiful, clean, and fun place to live that suddenly becomes an advantage that it's far away.

Well, I think it's net a positive. You've got a whole tyranny of distance thing that's caused Australia to lag for many, many years on the technology scene. I remember in the '90s, people are trying to get startup Australia going and in the early 2000s, trying to get it going. Just didn't happen. What's changed is even before COVID, although everything's changed with COVID, but even before COVID, you had Zoom, you had Slack, you had WhatsApp and Telegram and Signal and so on. You had all of these tools that allowed you to be anywhere. What COVID has shown is that people that doubted that you could have remote workplaces or distributed organizations or decentralized organisations, those people have just been proven wrong because the economy not only continued to function, but at least in tech, it absolutely boomed even though people were working from wherever they really wanted to. So I think that people now don't care that you're in Australia versus in Hong Kong or Singapore. It is more are time zone focused. As long as you're within three to six time zones and you overlap for a significant enough chunk of the working hours, you can be anywhere in that zone. For much of the year, that encompasses the West Coast of the US and east coast of Australia. You have suddenly Australia as a VC. We invest most of our money in the US even though we're based primarily in Australia, and no one cares. They don't care that we're sitting on a Zoom from Sydney as opposed to from Austin, Texas or Mountain View, California. It just doesn't matter. So Australia's distance, just to finish, is it an asset? It's an asset because it's such a beautiful, clean, and fun place to live that suddenly becomes an advantage that it's far away.

Okay. Stay with me, Zeb. We'll be back in a minute.

Okay. Stay with me, Zeb. We'll be back in a minute.

I'm speaking to Zeb Rice co- founder of King River Capital. We're talking about the startup culture in Australia and how that is picking up and how it's certainly will improve our long term prospects, I think, if we can grow that industry. What about the legacy plays or legacy's a bad word, the bigger plays, the banks, the retailers, the miners in Australia. Do you think they're coming on board, I suppose supporting the startup culture in a sense because everyone has to disrupt themselves? I'm just interested in whether big business in Australia is on board on this.

I'm speaking to Zeb Rice co- founder of King River Capital. We're talking about the startup culture in Australia and how that is picking up and how it's certainly will improve our long term prospects, I think, if we can grow that industry. What about the legacy plays or legacy's a bad word, the bigger plays, the banks, the retailers, the miners in Australia. Do you think they're coming on board, I suppose supporting the startup culture in a sense because everyone has to disrupt themselves? I'm just interested in whether big business in Australia is on board on this.

I don't think so. I pause on that because I don't have the data to support that, but just anecdotally, what I've seen is that they are like any entrenched organisation or business, they're defending their profits. It's a classic innovator's dilemma. If they innovate too quickly or too dramatically, they're going to hurt their profits and that's the classic dilemma that these large incumbent organizations face. That's why so many startups have become big so quickly is that it's just not in big company's interest. So I don't think so. I think that they've been lobbying for rules and benefits that don't support innovation. I think that's particularly true. I used to run a clean energy fund and that's particularly true in the kind of fossil and mining sectors.

I don't think so. I pause on that because I don't have the data to support that, but just anecdotally, what I've seen is that they are like any entrenched organisation or business, they're defending their profits. It's a classic innovator's dilemma. If they innovate too quickly or too dramatically, they're going to hurt their profits and that's the classic dilemma that these large incumbent organizations face. That's why so many startups have become big so quickly is that it's just not in big company's interest. So I don't think so. I think that they've been lobbying for rules and benefits that don't support innovation. I think that's particularly true. I used to run a clean energy fund and that's particularly true in the kind of fossil and mining sectors.

Yeah. Zeb Rice, tell me a little bit about King River Capital then. It's your business, is that right? You've invested in companies like Immutable. We had Immutable on the show very recently, and Sendle, which does logistics. Tell us about King River Capital and what you're looking for when you are investing.

Yeah. Zeb Rice, tell me a little bit about King River Capital then. It's your business, is that right? You've invested in companies like Immutable. We had Immutable on the show very recently, and Sendle, which does logistics. Tell us about King River Capital and what you're looking for when you are investing.

Sure. I started King River with Megan Guy and Chris Barter. Chris and I are based in Sydney most of the time. Megan's in the US. We have a cross- national organisation spanning those two countries. That's where we invest is Australia and New Zealand let's say, and the US. We just focus on software companies. We like businesses that can get built to be billion dollar companies very, very quickly. It's tough to do that for anything other than software, but within that, we're agnostic. We're just looking for great people, great ideas, great technologies, and extraordinary growth. Thematically, we like health tech, we like logistics and eCommerce. We like HR tech, future of work stuff. We like social media gaming as in video game type companies.

Sure. I started King River with Megan Guy and Chris Barter. Chris and I are based in Sydney most of the time. Megan's in the US. We have a cross- national organisation spanning those two countries. That's where we invest is Australia and New Zealand let's say, and the US. We just focus on software companies. We like businesses that can get built to be billion dollar companies very, very quickly. It's tough to do that for anything other than software, but within that, we're agnostic. We're just looking for great people, great ideas, great technologies, and extraordinary growth. Thematically, we like health tech, we like logistics and eCommerce. We like HR tech, future of work stuff. We like social media gaming as in video game type companies.

Yeah.

Yeah.

Probably the area we've spent most time and have the most experience is FinTech, which nowadays, is increasingly all about crypto. So yeah, we do a lot in crypto. We do a lot in the areas that I just described. So that's us in the nutshell.

Probably the area we've spent most time and have the most experience is FinTech, which nowadays, is increasingly all about crypto. So yeah, we do a lot in crypto. We do a lot in the areas that I just described. So that's us in the nutshell.

Just quickly delving into FinTech because I find FinTech fascinating. So much of it I do not understand, but we've had regulation changes around open banking and those sorts of things, which I suppose is a bit different to crypto. Do you think that regulation in that whole FinTech area, and I suppose if you're talking about crypto is the chance of regulation and cryptocurrencies, is keeping up with the changes? I always think it's a really interesting dichotomy there between what the FinTech companies can do and what the regulators will allow them to do.

Just quickly delving into FinTech because I find FinTech fascinating. So much of it I do not understand, but we've had regulation changes around open banking and those sorts of things, which I suppose is a bit different to crypto. Do you think that regulation in that whole FinTech area, and I suppose if you're talking about crypto is the chance of regulation and cryptocurrencies, is keeping up with the changes? I always think it's a really interesting dichotomy there between what the FinTech companies can do and what the regulators will allow them to do.

You're talking about in Australia in particular?

You're talking about in Australia in particular?

In Australia in particular.

In Australia in particular.

We're at a crossroads right now. I think the answer is probably no, I don't think they're keeping up. I think actually, they're, so far, they haven't done anything dramatically bad, but they also aren't clearing up an enormous amount of confusion. We have companies like Immutable, they want to do the right thing. They have investors like us that are institutional grade. We're very serious people. We are fiduciaries with an institutional mindset and we want to follow the rules. But at the same time, if you interpret the securities regulations literally, the issuance of a token requires you to obtain... become regulated by the Australian financial securities regulators as a retail securities offerer. The problem with that is that if you go into a deli or a coffee shop and they have a little ticket you take to wait for your ...

We're at a crossroads right now. I think the answer is probably no, I don't think they're keeping up. I think actually, they're, so far, they haven't done anything dramatically bad, but they also aren't clearing up an enormous amount of confusion. We have companies like Immutable, they want to do the right thing. They have investors like us that are institutional grade. We're very serious people. We are fiduciaries with an institutional mindset and we want to follow the rules. But at the same time, if you interpret the securities regulations literally, the issuance of a token requires you to obtain... become regulated by the Australian financial securities regulators as a retail securities offerer. The problem with that is that if you go into a deli or a coffee shop and they have a little ticket you take to wait for your ...

Yeah.

Yeah.

That's a token. So that cafe or that pizza shop or whatever is a token issuer and therefore, according to the literal definition of that rule, would have to be regulated. But obviously, they're not going to be regulated as such.

That's a token. So that cafe or that pizza shop or whatever is a token issuer and therefore, according to the literal definition of that rule, would have to be regulated. But obviously, they're not going to be regulated as such.

Yeah.

Yeah.

So you have companies like Immutable that are issuing tokens, which are not financial securities, but there are NFTs, there are utility tokens in a game that are used. It's like a sword. NFT could be a sword in a game that you use to level up or whatever. It could be a playing card in a game that allows you to have higher health points when you're battling a monster or whatever. Those aren't securities. But the literal way that that could be understood is as something that needs to be regulated from a financial point of view, which doesn't make any sense. So I think that that needs to be resolved. There needs to be clarity, and there's obviously lots of bad actors and people that don't care about regulation, but companies like Immutable, investors like King River, we want to follow the rules, but it's impossible right now. I feel like Australia has this golden moment where many other countries like China are cracking down on crypto land and are becoming a huge impediment to innovation. That innovation is just going to go to another country.

So you have companies like Immutable that are issuing tokens, which are not financial securities, but there are NFTs, there are utility tokens in a game that are used. It's like a sword. NFT could be a sword in a game that you use to level up or whatever. It could be a playing card in a game that allows you to have higher health points when you're battling a monster or whatever. Those aren't securities. But the literal way that that could be understood is as something that needs to be regulated from a financial point of view, which doesn't make any sense. So I think that that needs to be resolved. There needs to be clarity, and there's obviously lots of bad actors and people that don't care about regulation, but companies like Immutable, investors like King River, we want to follow the rules, but it's impossible right now. I feel like Australia has this golden moment where many other countries like China are cracking down on crypto land and are becoming a huge impediment to innovation. That innovation is just going to go to another country.

Yeah.

Yeah.

You don't want to have it be like one of these Caribbean nation, anything goes or whatever kind of places.

You don't want to have it be like one of these Caribbean nation, anything goes or whatever kind of places.

Yeah.

Yeah.

But there's a middle ground that says, " Hey, we want legitimate rule following crypto innovators to be in our country, and here's a rule set that makes sense." Jury's out, but right now, it's very confusing.

But there's a middle ground that says, " Hey, we want legitimate rule following crypto innovators to be in our country, and here's a rule set that makes sense." Jury's out, but right now, it's very confusing.

Zeb, I have to ask you one more question. Before you became an entrepreneur, a venture capitalist, you mentioned the clean energy fund that you're involved in, you also worked on the Barack Obama 2008 presidential campaign.

Zeb, I have to ask you one more question. Before you became an entrepreneur, a venture capitalist, you mentioned the clean energy fund that you're involved in, you also worked on the Barack Obama 2008 presidential campaign.

I did.

I did.

How'd that come about? What's the background to that?

How'd that come about? What's the background to that?

Yeah. Well, look, my family's been in politics for almost 100 years. My grandfather was governor of California.

Yeah. Well, look, my family's been in politics for almost 100 years. My grandfather was governor of California.

Wow.

Wow.

He actually defeated Richard Nixon to become governor and-

He actually defeated Richard Nixon to become governor and-

Wow.

Wow.

... Ronald Reagan defeated him when he ran for his third term.

... Ronald Reagan defeated him when he ran for his third term.

Now that's the ultimate trivia question, isn't it Zeb?

Now that's the ultimate trivia question, isn't it Zeb?

Yeah, that is the ultimate Zeb Rice trivia question. But anyway, I have a long history in democratic politics. My mother, my uncle was most recent governor of California before Gavin Newsom. I was in Chicago when Obama was in the state legislature. Just a lot of people I really knew and trusted in the democratic politics back then said, " You got to meet this state legislator." So I took a lunch with the guy,-

Yeah, that is the ultimate Zeb Rice trivia question. But anyway, I have a long history in democratic politics. My mother, my uncle was most recent governor of California before Gavin Newsom. I was in Chicago when Obama was in the state legislature. Just a lot of people I really knew and trusted in the democratic politics back then said, " You got to meet this state legislator." So I took a lunch with the guy,-

Oh, wow.

Oh, wow.

... which was very big of me,-

... which was very big of me,-

Very big of you. I deemed to take lunch with Barack Obama.

Very big of you. I deemed to take lunch with Barack Obama.

... with the state legislator I'd never heard of. But I met him. I nearly fell out of my chair. I'd never met a political talent like that in my life.

... with the state legislator I'd never heard of. But I met him. I nearly fell out of my chair. I'd never met a political talent like that in my life.

Wow.

Wow.

From that moment, was smitten and did everything I could to help him become Senator and then president.

From that moment, was smitten and did everything I could to help him become Senator and then president.

Wow. Incredible. Zeb, thank you for talking to Fear and Greed.

Wow. Incredible. Zeb, thank you for talking to Fear and Greed.

Pleasure. Great to talk to you.

Pleasure. Great to talk to you.

That was Zeb Rice, co- founder of King River Capital. This is a Fear and Greed Daily Interview. Join me every morning for the full Fear and Greed podcast with all the business news you need to know. I'm Sean Aylmer. Enjoy your day.

That was Zeb Rice, co- founder of King River Capital. This is a Fear and Greed Daily Interview. Join me every morning for the full Fear and Greed podcast with all the business news you need to know. I'm Sean Aylmer. Enjoy your day.