Ruth Drinkwater On Getting Ideas Into The Market & The Investment Environment In Australia
Ruth has 20 years experience in management, business development, marketing and commercialisation, investment in emerging technology companies and capital raising.
She has been at the forefront of change in Angel investment and start-up activity. As an experienced non-executive Director, Ruth sits on several Boards and Advisory Panels. She is Chair and CEO of Alkira Software Pty Ltd, a Director of Angel Loop Ltd, member of three start-up advisory panels and an active angel investor and member of Brisbane Angels.
Ruth shares her broad experience on turning ideas into impact, provides advice for entrepreneurs and discusses opportunities and challenges within the Australian investment landscape.
Highlights from the interview (listen to the podcast for full details)
[Tom Allen] - Could you please share a bit about your background and what led to your passion in startup strategy and investment?
[Ruth Drinkwater] - Well, basically, I have always been interested in science and technology in all forms and I started with a career in science. And I have been very, very fortunate throughout my life and career to be effectively in the right place at the right time. And I've worked with some amazing people, people like Peter Andrews who was one of the former Queensland Chief Scientists. He and another researcher by the name of John Mattick started up an institute at UQ called the Institute for Molecular Bioscience.
Peter had always been very, very passionate about getting outcomes from research into the market, and working with him really opened my eyes to the opportunity that was there to commercialise everything.
So it's not just about the idea, it's about actually getting it into the market.
There's a whole range of other things around that that are slightly problematic, shall we say, in getting new things into the market and readily acceptable. And that has really become my entire purpose in career and life.
It sounds like that was very influential in shaping your career path. So tell us a little bit about your current role as Chair and CEO at Alkira Software. What sort of work are you doing in helping blind and vision impaired people?
Well, Alkira Software has been a wonderful journey to start with. We actually started as an accessibility solution, where our founder, Ray Guy, had a friend who went blind overnight with retinal detachment and he was an engineer and needed to retrain. He had looked at the technologies available to help Rob when he asked. And Rob was finding it very, very frustrating to manage his own business on his own and being dependent.
The challenge that Ray found, was the existing assistive technologies were actually very cumbersome. They gave an appalling experience. They were really old tech. They had not evolved with the design of online e-commerce and as websites evolved with design. And really, it led to the point where anyone who has low or no vision was really totally excluded from anything online. So they were effectively way back in the dark ages. They had to go and speak to people.
There was a piece on the 7:30 Report last week if anybody managed to see that called ‘Blind Spot’, where the Commonwealth Bank lost a case in a Federal court with discrimination on their new terminals, the Albert terminals. That was the problem that Alkira set out to solve.
The evolution of smart speakers coming into the market has meant a whole change of things, and Alkira, being a startup, needs to pivot and adjust to the market. So we pivoted to work with the smart speakers and adapt to those. So we have a parallel solution, if you like, one that goes into mainstream voice-driven commerce. We are currently transitioning from the total accessibility approach to a seamless offering where everybody can be included in online e-commerce and voice commerce in a totally inclusive way and a new solution has full security, two factor authentication, and we are hoping it's going to be a huge success.
It sounds like a really empowering solution, Ruth. So in your experience in working with hundreds of startups then, where have you seen common gaps in the knowledge of founders and what advice would you give to help them to turn their ideas into impact?
First of all, I think, ideas are always wonderful. And I've come to the conclusion that in many ways, there is no significantly original idea anymore. It is really what is the problem that everyone's trying to solve. So there are nice to do's and there's need to haves.
With respect to any entrepreneur, we actually need to make it a ‘need to have’, because the current environment means that there is so much out there. There is so much online. We have a plethora of sources of information. We have stuff bombarding us every day. It's too much for people to absorb.
So if any entrepreneur now, social or otherwise, and to a certain extent I'm now forming the conclusion that every entrepreneur is a social one because everything that they do really impacts the way that we are doing things and we are running our lives.
So for entrepreneurs per se, it's:
Find what your problem is.
Don't over-invest in the solution to that problem.
Take the lean startup approach.
Find your ideal customer. Get that first one, work with them.
Adapt, modify it because the idea you first have and the solution you first have is never going to be the final one. There will always be several iterations.
And then you pivot and you keep pivoting.
You listen to your mentors and evaluate that advice and apply it.
Perseverance. Perseverance. Perseverance.
And cash flow is the absolute practical one that they all need to be aware of in turning their ideas into whatever it is going to be.
Some great advice. And I think the cash flow area is one that entrepreneurs can typically miss. So talk a little bit more about the finance side of things then please Ruth. With your experience in angel investment, can you please tell our listeners the difference in angel investment and venture capital and reflect a little bit on the current investment environment in Australia?
Very definitely. The current investment environment in Australia is a growing one. There is still a lot of slight misunderstandings about what stage does everybody invest at. Angels tend to be the first ones who invest. VCs tend to be slightly later. They are both members of the same class of investment; it's called private equity. So within that class, there's a whole range of investors. And yes, there's a lot of money around.
Is there a lot of money for startups? There is more than there used to be many years ago. But by the same token, there are also more entrepreneurs and more deals being proposed now than there were say 10 years ago.
So while the investment environment is improving, there is still a lot that needs to be done to actually make it relevant for the early stage.
So angel investors are people who invest their own money. They are there, they are the long patient capital. They work with companies. They are hands-on. They mentor, they don't get paid until there's an exit from that company.
Venture capitalists tend to invest with funds. They invest through a fund. They are licensed investors. If you compare them to angel investors, they invest larger amounts of money.
Angel investors are not necessarily licensed investors. They are called sophisticated of wholesale investors. It's a different piece of the legislation. Private equity people who invest through funds need to have an ASFL licence which means that they are quite often financial investors, not necessarily strategic investors.
Angel investors are always strategic investors first, financial investors second. They are the people that you want with you because they're the ones who usually invest in their sector and can open many doors for you. They're the friendlies in general terms. There are some who have made and historically provided some not very nice responses in the market, but hey, you're always going to get a couple bad eggs. Same thing happens with VCs.
VCs are governed in the legislation and they invest larger amounts of money. Some will take fees out of that. Some will have some terms in their agreements that are not necessarily in all shareholders interests. They invest for their own purpose and they put a lot of controls in place.
So my advice to entrepreneurs in seeking investment from either of those parties, you always look at the terms, you always look at the documentation, you do your own due diligence on them. It doesn't have to be due diligence going one way. You should actually talk to companies that have been invested in by those parties and see what their experience is.
More broadly then, where do you see that there's some great opportunities in the Australian startup ecosystem to provide better support for these entrepreneurs then?
There's an amazing amount of support now for entrepreneurs, and that's fabulous, because entrepreneurs need to learn so much in terms of a whole culture change of head space for them to work in... to do what they're doing and they do need a lot of support.
By the same token on the investment side where investors might have money, it doesn't mean to say they're a smart investor. It does not mean to say they understand the whole risk in that sector. It doesn't mean to say that they know how to invest their money.
In Australia, we have investors who are more interested investing in property and mining than we have in technology and social things because they don't understand it. So I see the whole opportunity here to actually educate the investor side. That's really, really difficult because people who have money don't necessarily want to be told they need to learn something new. So it's a very subtle exercise.
But basically, entrepreneurs are ever-renewing and ever-regenerating and the programs that are there are actually really, really good because there's a lot of things that we know they have to know.
More broadly then, where do you see that there's some great opportunities in the Australian startup ecosystem to provide better support for these entrepreneurs then? (Continued…)
The investor community is learning more what not to do every day, what not to invest in. So it's sort of a negative side. If investors lose their money, they don't keep reinvesting.
And that's where they need to learn from a totally different perspective but also, the entrepreneurs need to understand as well, that investors are getting smarter all the time. It's their money that they're investing. With angel investors, it's their own money. So if I put money into a company, it's my hard earned cash. It's not anybody else's.
I personally make very careful choices about what I invest in and it's all about the people.
There’s some great insights there. Talking about people, you've had some really broad experience in a range of different senior roles. I'm really interested to hear from your experience about how you can build and manage these important relationships. From your experience then, what do you think are the essential skills and traits that are required to manage relationships, whether it be between an entrepreneur and an investor, or at these senior levels, and where have you seen leaders get it wrong in the past?
In terms of building relationships with investors, and if you consider that an entrepreneur is going to a business, for example, as a customer, they're asking for investment from that business. So they need to understand what that investor is looking for.
So entrepreneurs need to go in with an inquiring mind, and this applies irrespective of the level that people operate at, you need to approach it with an empathetic approach, friendly, collaborative, openness, willingness to learn, discuss, and share, if you like.
Far too many people tell and it's not about telling. It's about inquiring and it's the style of communication. So communication is key.
But also with respect to leaders, (and the entrepreneur needs to think of themselves as a leader because they are promoting a new concept, sometimes a new market or a new approach in the market), they need to really understand that it's not so much... they don't make mistakes per se, it's more that they fall into traps that are perfectly understandable, but they’re actually finding things out all the way along. So it's actually how do you get all the information. You've got a vision. The entrepreneur's got a vision there that they want to achieve something fabulous, and they want to get into the market, but that vision needs to be balanced with the short and long-term activities and requirements and things that they need to do to demonstrate what they can do, to prove themselves, to build trust with everybody that they're in discussion with.
So they really need to keep that front of mind that it is their ethics, trust, openness, and willingness to work together that they need to convey.
How do you do that? Well, I think that's the never-ending question, isn't it, for everybody.
Totally. In terms of these traits; you mentioned a few really great and important traits that you would recommend for entrepreneurs a little bit earlier, but are there any that you'd really like to reiterate as really important traits of entrepreneurs?
Perseverance and tenacity and personal resilience is always my number one. They need to be, because they're going to get knocked back and they're going to get a lot of no's.
What's the old saying, you've got to kiss a lot of frogs before you find a prince. You're going to really learn things about yourself that perhaps you didn't really ever understand before, and you need to be willing to take that onboard, and you need to reflect. So perseverance and reflection are key ones there. Learn from the feedback that you actually get.
Don't keep doing the same thing all the time. The definition of insanity is you keep operating the same way, acting the same way, using the same language, and expecting a different outcome. So always change what you're doing. Follow your own path and build your business. Focus on your business and get everybody in on the same page that you want to be on to get win-win outcomes. It's not about winning and losing, it's about a win-win.
That's fantastic advice, Ruth. Were there any pieces of advice that you wish you had known earlier in your life?
Probably all of the above I'd say. It takes a long time. I mean, you can read the theory, you can have ideas in your head, and you grow up with particular family and social cultures. And I think it's just go out.
Another piece of advice; travel, go overseas, do that earlier. Don't sit in Australia and be an entrepreneur. I would say look at what's happening around the world because there is so much happening out there.
Australia is really very, very fortunately, we are in a little bit of a bubble. But go overseas, do business overseas, that's probably the piece of advice I wish I had had earlier.
That's a good piece of advice to follow. So Ruth, what inspiring projects, beyond Alkira, have you come across recently which are creating great, positive social change?
I think there are probably so many at the moment that it's very, very hard to keep up, and I'll probably want to consider that from a different perspective. Because in many ways, I would like to believe that everyone is a good person, that everybody sets out to create a social change and positive activity in our community and our environment.
It is the commercial reality, that I'm finding, is the biggest struggle.
There aren't any really inspiring projects or initiatives that help people address that commercial reality. It's more of a gap than an opportunity. Well, it's a gap and an opportunity.
The level of risk-adverseness in business and potentially also in government in this country in particular, dare I say it, makes life very, very difficult for a lot of people. Culture change, business change, all those things, it takes a very, very long time.
If more business, government, et cetera were prepared to adopt an entrepreneurial approach such as a lean startup approach, it would have a massive impact in our market.
So if that happens somewhere, that would be wonderful. So in a way it's yes, there's so much that is happening out there that's positive, it's inspiring, and it's really, really good, but that other side, which is addressing that risk adverseness that is still a mission. So the positive things that are happening are never ever going to get to market and be really, really successful unless a lot of that negativity is going to be addressed. So that I think is our challenge.
To finish off then, what books would you recommend to our listeners?
Well, firstly, read The Lean Startup. That's always my number one recommendation. But over and above that, read anything and everything because one person's perspective doesn't work for everyone and each individual takes different points from different readings, whether they are non-fiction or fiction, there's a lot of stuff out there. Just read everything and reflect, that would be my number one recommendation to everybody.
Consider what you learn and apply. You might read something in one particular area and that concept can be translated into something that you're directly doing it will change the way you do things. So I would just say read broadly, don't just focus on your business, take time out, read everything, anything and everything, newspapers included. And not just online.