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Sean Aylmer: Welcome  to  the  Fear  and  Greed  Daily  Interview.  I'm  Sean 

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Sean Aylmer: Aylmer.  We've  long  been  talking  about  the  startup  boom  in 

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Sean Aylmer: Australia,  and  with  Canva  recently  hitting  a  40  billion  dollar 

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Sean Aylmer: valuation,  there's  more  attention  on  the  local  tech  scene  than 

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Sean Aylmer: ever  before.  Now  venture  capital  firm,  King  River  Capital,  has 

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Sean Aylmer: revealed  why  they  believe  Australia  and  in  particular,  the  Surry 

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Sean Aylmer: Hills  area  in  Sydney  is  becoming  the  Palo  Alto  of 

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Sean Aylmer: Asia.  Zeb  Rice  is  one  of  the  founding  partners  of 

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Sean Aylmer: King  River  Capital  and  joins  me  this  morning  from  New 

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Sean Aylmer: York.  Zeb,  welcome  to  Fear  and  Greed.

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Zeb Rice: Good  morning.

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Sean Aylmer: You  and  one  of  your  co- founders  Chris  Barter  are 

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Sean Aylmer: both  native  Californians,  notwithstanding  you're  in  New  York  this  morning. 

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Sean Aylmer: You've  witnessed  the  rise  of  Silicon  Valley.  You've  spent  time 

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Sean Aylmer: in  Tel  Aviv,  which  of  course  is  the  other  great 

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Sean Aylmer: IT  capital  of  the  world,  I  would  argue.  What is it  about 

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Sean Aylmer: Australia's  startup  scene  and particularly  Surry  Hills  in  Sydney  that  reminds 

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Sean Aylmer: you  of  California  and  of  Israel,  Tel  Aviv  particularly?

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Zeb Rice: Yeah.  My  last  firm,  I  founded  back  in  early  2000s. 

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Zeb Rice: I  remember  back  in  those  days,  there  was  a  number 

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Zeb Rice: of  firms  going  around  Silicon  Valley  raising  money  for  Israeli 

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Zeb Rice: funds,  and  everyone  thought,  there  was  like  an  inside  joke  like, "

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Zeb Rice: Are  they  crazy?  It's  in  the  middle  of  nowhere.  It's 

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Zeb Rice: not  Silicon  Valley  and  they're  never  going  to  get  off 

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Zeb Rice: the  ground."  Well,  fast  forward  20  years,  startup  nation,  you 

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Zeb Rice: know  no  one  even  questions  the  fact  that  it's  one 

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Zeb Rice: of  the  greatest  engines  of  innovation  and  building  new  technologies 

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Zeb Rice: and  billion  dollar  companies.  If  you  look  back  at  that 

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Zeb Rice: time,  there  was  two  or  three  ingredients  that  separated  out 

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Zeb Rice: Israel  from  many  other  countries,  and  I  would  argue  that 

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Zeb Rice: Australia  shares  in  all of  those.  So  number  one,  I  would 

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Zeb Rice: say  there's  tons  of  smart  people  in  Israel  and  Australia 

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Zeb Rice: shares  that.  You've  got  43,  I  think,  universities  in  Australia. 

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Zeb Rice: Israel,  also  like  Australia,  is  in  the  top  10  countries 

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Zeb Rice: that  have  people  with  PhDs.

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Sean Aylmer: Mm- hmm ( affirmative).

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Zeb Rice: If  you  do  a  count  of  the  number  of  people 

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Zeb Rice: with  PhDs  in  different  nations  around  the  world,  I  think 

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Zeb Rice: both  Israel  and  Australia  are in  the  top  10.  And  there's 

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Zeb Rice: a  lot  of  money  in  both  the  countries.  They're  wealthy  countries.

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Sean Aylmer: Yeah.

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Zeb Rice: Certainly,  relative  to  their  size,  they  are  quite  good.  So 

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Zeb Rice: I  think  when  you  have  those  ingredients  and  you  combine 

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Zeb Rice: it  with  this  critical  additional  one,  which  is  risk  taking 

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Zeb Rice: or  innovators.  Israel  had  that  in  spades.  Really  for  survival, 

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Zeb Rice: they  had  to  be  risk- taking  and  innovators  and  on 

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Zeb Rice: top  of  technology.  In  Australia, I'm  not  an  expert  on  Australian 

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Zeb Rice: history,  but  I  think  if  you  look  at  the  mining 

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Zeb Rice: boom  and  the  punters  kind  of  mentality  and  that's worked  so 

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Zeb Rice: well.  You  have  that  kind  of  risk- taking  kind  of 

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Zeb Rice: culture.  When  I  moved  to  Australia  eight  or  nine  years 

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Zeb Rice: ago,  I  could  see  all  those  similarities.  It  really  struck 

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Zeb Rice: me  long  before  the  venture  boom  here  took  off  that 

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Zeb Rice: it  was  in  the  cards.

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Sean Aylmer: Surry Hills, I'm just interested in why you're picking ... Now

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Sean Aylmer: Surry Hills, for those who don't know, it's on the

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Sean Aylmer: edge of the CBD of Sydney in the southeastern edge and

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Sean Aylmer: it is a great area. It was a poor area

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Sean Aylmer: 30 years ago. It went through gentrification. Certainly, it's amazing how

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Sean Aylmer: many startups and VC firms, and... It's got a great

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Sean Aylmer: vibe at the moment. What is it about Surry Hills?

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Zeb Rice: Well, I'm obviously biased because that is where I work,

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Zeb Rice: but I think it's more than that. I went back

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Zeb Rice: and I added up the market capitalisation of companies within

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Zeb Rice: walking distance of my office in Surry Hills. So 20 to 25

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Zeb Rice: minute radius from what our office happens to be located.

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Zeb Rice: You have about 150 billion dollars of market capitalisation. Now, admittedly,

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Zeb Rice: about half of that is Afterpay and Canva, but there are

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Zeb Rice: at least four other unicorns in that list, SafetyCulture, Campaign Monitor, Tyro,

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Zeb Rice: maybe Deputy fits into that category. There's a lot of

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Zeb Rice: these unicorns. There's a couple that we're invested in, actually

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Zeb Rice: several that I think are (soonicorns) , and there's-

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Sean Aylmer: Soonicorns.

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Zeb Rice: Soonicorns.

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Sean Aylmer: I  like  that.

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Zeb Rice: Soon  to  be  unicorns.

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Sean Aylmer: Soon  to  be  worth  a  billion  dollars.  I  like  that.

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Zeb Rice: Yeah. The reason I'm focusing on that is that coming

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Zeb Rice: from Silicon Valley, what I witnessed in the '90s and in the 2000s

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Zeb Rice: is that you get these iconic generational companies like an Afterpay,

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Zeb Rice: like a Canva, like an Atlassian that are a huge percentage

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Zeb Rice: of that market capitalisation.

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Sean Aylmer: Yeah.

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Zeb Rice: What  happens  is  you get  a  flywheel  spinning  and  that  flywheel 

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Zeb Rice: is  driven  by  not  just  the  investors  that  have  invested 

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Zeb Rice: in  these  companies  that  are  worth  tens  of  billions  of 

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Zeb Rice: dollars,  but  also  in  the  employees.  It's  not  just  the 

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Zeb Rice: money,  it's  the  ideas,  it's  the  entrepreneurial  spirit,  it's  the 

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Zeb Rice: pattern  recognition  of  how  to  build  these  billion  dollar  businesses 

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Zeb Rice: very,  very  quickly.  What  I  also  notice  is  that  happened 

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Zeb Rice: around  Palo  Alto  and  Mountain  View,  and  Saratoga,  Sunnyvale,  where 

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Zeb Rice: companies  like,  Intel  and  Apple  and  Adobe  and  so  on 

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Zeb Rice: were  headquartered,  and  you  just  would  have  these  people,  really 

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Zeb Rice: smart  people  working  at  those  places.  They'd  make  a  bunch 

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Zeb Rice: of  money  and  sure  they'd  buy  a  nice  house,  then 

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Zeb Rice: they'd  go, " Okay,  well,  what  am  I  going  to  do? 

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Zeb Rice: I'm  going  to  hang  out  with  my  mates  and  come 

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Zeb Rice: up  with  the  next  Atlassian  or  Canva or  Afterpay,"  and  they've 

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Zeb Rice: got  the  money  to  back  their  ideas  with  and  to 

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Zeb Rice: back  their  mate's  ideas  with.
 The  Palo  Alto  phenomena  that 

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Zeb Rice: I  was  talking  about  is  driven  by  that  money,  that 

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Zeb Rice: innovative  culture,  that  innovative  spirit,  and  it's  driven  by  a 

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Zeb Rice: group  of  people  in  that  area.  The  final  thing  I'd 

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Zeb Rice: say  on  that  point  is  that  it's  in  Asia.  Increasingly, 

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Zeb Rice: it's  difficult  to  build  these  kinds  of  businesses  in  somewhere 

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Zeb Rice: like  China  or  Hong  Kong,  as  we've  all  seen  that's 

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Zeb Rice: getting  more  and  more  difficult.  So  I  think  it's  also 

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Zeb Rice: the  geography.

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Sean Aylmer: I was going to ask  you  about  that.  Firstly,  we've  got  a  lot  to 

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Sean Aylmer: thank  Afterpay,  Atlassian, and Canva  for  that's  got  the  message  out  of  that.

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Zeb Rice: Yeah.

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Sean Aylmer: The second though is just where we are geographically. The

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Sean Aylmer: fact that we are so close to Asia, which is

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Sean Aylmer: the fastest growing part of the world, but we are

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Sean Aylmer: also a long way away from California and a long

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Sean Aylmer: way away from Israel and Europe. Is that a good

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Sean Aylmer: or a bad thing, our geography?

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Zeb Rice: Well, I think it's net a positive. You've got a

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Zeb Rice: whole tyranny of distance thing that's caused Australia to lag

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Zeb Rice: for many, many years on the technology scene. I remember

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Zeb Rice: in the '90s, people are trying to get startup Australia

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Zeb Rice: going and in the early 2000s, trying to get it going.

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Zeb Rice: Just didn't happen. What's changed is even before COVID, although

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Zeb Rice: everything's changed with COVID, but even before COVID, you had Zoom, you

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Zeb Rice: had Slack, you had WhatsApp and Telegram and Signal and

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Zeb Rice: so on. You had all of these tools that allowed you

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Zeb Rice: to be anywhere. What COVID has shown is that people

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Zeb Rice: that doubted that you could have remote workplaces or distributed

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Zeb Rice: organizations or decentralized organisations, those people have just been proven

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Zeb Rice: wrong because the economy not only continued to function, but

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Zeb Rice: at least in tech, it absolutely boomed even though people

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Zeb Rice: were working from wherever they really wanted to. So I

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Zeb Rice: think that people now don't care that you're in Australia

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Zeb Rice: versus in Hong Kong or Singapore. It is more are

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Zeb Rice: time zone focused. As long as you're within three to

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Zeb Rice: six time zones and you overlap for a significant enough

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Zeb Rice: chunk of the working hours, you can be anywhere in

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Zeb Rice: that zone. For much of the year, that encompasses the

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Zeb Rice: West Coast of the US and east coast of Australia.

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Zeb Rice: You have suddenly Australia as a VC. We invest most

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Zeb Rice: of our money in the US even though we're based

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Zeb Rice: primarily in Australia, and no one cares. They don't care

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Zeb Rice: that we're sitting on a Zoom from Sydney as opposed

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Zeb Rice: to from Austin, Texas or Mountain View, California. It just

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Zeb Rice: doesn't matter. So Australia's distance, just to finish, is it

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Zeb Rice: an asset? It's an asset because it's such a beautiful, clean,

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Zeb Rice: and fun place to live that suddenly becomes an advantage

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Zeb Rice: that it's far away.

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Sean Aylmer: Okay.  Stay  with  me,  Zeb.  We'll  be  back  in  a 

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Sean Aylmer: minute.


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Sean Aylmer: I'm speaking to Zeb Rice co- founder of King River Capital.

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Sean Aylmer: We're talking about the startup culture in Australia and how

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Sean Aylmer: that is picking up and how it's certainly will improve

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Sean Aylmer: our long term prospects, I think, if we can grow

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Sean Aylmer: that industry. What about the legacy plays or legacy's a

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Sean Aylmer: bad word, the bigger plays, the banks, the retailers, the

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Sean Aylmer: miners in Australia. Do you think they're coming on board, I

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Sean Aylmer: suppose supporting the startup culture in a sense because everyone

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Sean Aylmer: has to disrupt themselves? I'm just interested in whether big business

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Sean Aylmer: in Australia is on board on this.

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Zeb Rice: I don't think so. I pause on that because I

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Zeb Rice: don't have the data to support that, but just anecdotally,

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Zeb Rice: what I've seen is that they are like any entrenched

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Zeb Rice: organisation or business, they're defending their profits. It's a classic innovator's dilemma.

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Zeb Rice: If they innovate too quickly or too dramatically, they're going

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Zeb Rice: to hurt their profits and that's the classic dilemma that

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Zeb Rice: these large incumbent organizations face. That's why so many startups

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Zeb Rice: have become big so quickly is that it's just not in

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Zeb Rice: big company's interest. So I don't think so. I think

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Zeb Rice: that they've been lobbying for rules and benefits that don't

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Zeb Rice: support innovation. I think that's particularly true. I used to

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Zeb Rice: run a clean energy fund and that's particularly true in

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Zeb Rice: the kind of fossil and mining sectors.

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Sean Aylmer: Yeah. Zeb Rice, tell me a little bit about King River

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Sean Aylmer: Capital then. It's your business, is that right? You've invested

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Sean Aylmer: in companies like Immutable. We had Immutable on the show

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Sean Aylmer: very recently, and Sendle, which does logistics. Tell us about

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Sean Aylmer: King River Capital and what you're looking for when you

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Sean Aylmer: are investing.

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Zeb Rice: Sure. I started King River with Megan Guy and Chris Barter.

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Zeb Rice: Chris and I are based in Sydney most of the time.

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Zeb Rice: Megan's in the US. We have a cross- national organisation

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Zeb Rice: spanning those two countries. That's where we invest is Australia and

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Zeb Rice: New Zealand let's say, and the US. We just focus

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Zeb Rice: on software companies. We like businesses that can get built

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Zeb Rice: to be billion dollar companies very, very quickly. It's tough

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Zeb Rice: to do that for anything other than software, but within that,

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Zeb Rice: we're agnostic. We're just looking for great people, great ideas,

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Zeb Rice: great technologies, and extraordinary growth. Thematically, we like health tech,

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Zeb Rice: we like logistics and eCommerce. We like HR tech, future

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Zeb Rice: of work stuff. We like social media gaming as in

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Zeb Rice: video game type companies.

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Sean Aylmer: Yeah.

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Zeb Rice: Probably  the  area  we've  spent  most  time  and  have  the 

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Zeb Rice: most  experience  is  FinTech,  which  nowadays,  is  increasingly  all  about 

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Zeb Rice: crypto.  So  yeah,  we  do  a  lot  in  crypto.  We 

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Zeb Rice: do  a  lot  in  the  areas  that  I  just  described. 

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Zeb Rice: So  that's  us  in  the  nutshell.

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Sean Aylmer: Just  quickly  delving  into  FinTech  because  I  find  FinTech  fascinating. 

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Sean Aylmer: So  much  of  it  I  do  not  understand,  but  we've 

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Sean Aylmer: had  regulation  changes  around  open  banking  and  those  sorts  of 

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Sean Aylmer: things,  which  I  suppose  is  a  bit  different  to  crypto. 

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Sean Aylmer: Do  you  think  that  regulation  in  that  whole  FinTech  area, 

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Sean Aylmer: and  I  suppose  if  you're  talking about crypto is  the  chance  of  regulation 

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Sean Aylmer: and  cryptocurrencies,  is  keeping  up  with  the  changes?  I  always 

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Sean Aylmer: think  it's  a  really  interesting  dichotomy  there  between  what the  FinTech 

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Sean Aylmer: companies  can  do  and  what  the  regulators  will  allow  them 

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Sean Aylmer: to  do.

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Zeb Rice: You're  talking about in  Australia  in  particular?

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Sean Aylmer: In  Australia  in  particular.

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Zeb Rice: We're at a crossroads right now. I think the answer

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Zeb Rice: is probably no, I don't think they're keeping up. I

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Zeb Rice: think actually, they're, so far, they haven't done anything dramatically bad,

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Zeb Rice: but they also aren't clearing up an enormous amount of confusion.

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Zeb Rice: We have companies like Immutable, they want to do the right thing.

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Zeb Rice: They have investors like us that are institutional grade. We're

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Zeb Rice: very serious people. We are fiduciaries with an institutional mindset

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Zeb Rice: and we want to follow the rules. But at the

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Zeb Rice: same time, if you interpret the securities regulations literally, the

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Zeb Rice: issuance of a token requires you to obtain... become regulated

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Zeb Rice: by the Australian financial securities regulators as a retail securities offerer.

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Zeb Rice: The problem with that is that if you go into

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Zeb Rice: a deli or a coffee shop and they have a

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Zeb Rice: little ticket you take to wait for your ...

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Sean Aylmer: Yeah.

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Zeb Rice: That's  a  token.  So  that  cafe  or  that  pizza  shop 

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Zeb Rice: or  whatever  is  a  token  issuer  and  therefore,  according to the  literal 

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Zeb Rice: definition  of  that  rule,  would  have  to  be  regulated.  But 

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Zeb Rice: obviously,  they're  not  going  to  be  regulated  as  such.

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Sean Aylmer: Yeah.

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Zeb Rice: So you  have  companies  like  Immutable  that  are  issuing  tokens,  which 

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Zeb Rice: are  not  financial  securities,  but  there  are  NFTs, there  are  utility 

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Zeb Rice: tokens  in  a  game  that  are  used.  It's  like  a 

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Zeb Rice: sword.  NFT  could  be  a  sword  in  a  game  that 

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Zeb Rice: you  use  to  level  up  or  whatever.  It  could  be 

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Zeb Rice: a  playing  card  in  a  game  that  allows  you  to 

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Zeb Rice: have  higher  health  points  when  you're  battling  a  monster  or 

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Zeb Rice: whatever.  Those  aren't  securities.  But  the  literal  way  that  that could 

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Zeb Rice: be  understood  is  as  something  that  needs  to  be  regulated 

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Zeb Rice: from  a  financial  point  of  view,  which  doesn't  make  any 

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Zeb Rice: sense.
 So  I  think  that  that  needs  to  be  resolved. 

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Zeb Rice: There  needs  to  be  clarity,  and  there's  obviously  lots  of 

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Zeb Rice: bad  actors  and  people  that  don't  care  about  regulation,  but 

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Zeb Rice: companies  like  Immutable,  investors  like  King  River,  we  want  to 

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Zeb Rice: follow  the  rules,  but  it's  impossible  right  now.  I  feel 

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Zeb Rice: like  Australia  has  this  golden  moment  where  many  other  countries 

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Zeb Rice: like  China  are  cracking  down  on  crypto  land  and  are 

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Zeb Rice: becoming  a  huge  impediment  to  innovation.  That  innovation  is  just going 

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Zeb Rice: to  go  to  another  country.

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Sean Aylmer: Yeah.

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Zeb Rice: You  don't  want  to  have  it  be  like  one  of 

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Zeb Rice: these  Caribbean  nation,  anything  goes  or  whatever  kind  of  places.

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Sean Aylmer: Yeah.

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Zeb Rice: But there's  a  middle  ground  that  says, " Hey,  we  want  legitimate 

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Zeb Rice: rule  following  crypto  innovators  to  be  in  our  country,  and 

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Zeb Rice: here's  a  rule  set  that  makes  sense."  Jury's  out, but  right 

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Zeb Rice: now,  it's  very  confusing.

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Sean Aylmer: Zeb,  I  have  to  ask  you  one  more  question.  Before 

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Sean Aylmer: you became  an  entrepreneur,  a  venture  capitalist,  you  mentioned  the  clean 

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Sean Aylmer: energy  fund  that  you're  involved  in,  you  also  worked  on 

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Sean Aylmer: the  Barack  Obama  2008  presidential  campaign.

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Zeb Rice: I  did.

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

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Zeb Rice: Yeah.  Well,  look,  my  family's  been  in  politics  for  almost 

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Zeb Rice: 100  years.  My  grandfather  was  governor  of  California.

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Sean Aylmer: Wow.

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Zeb Rice: He  actually  defeated  Richard  Nixon  to  become  governor  and-

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Sean Aylmer: Wow.

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Zeb Rice: ...  Ronald  Reagan  defeated  him  when  he  ran  for  his 

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Zeb Rice: third  term.

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

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Zeb Rice: Yeah, that is the ultimate Zeb Rice trivia question. But anyway, I

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Zeb Rice: have a long history in democratic politics. My mother, my

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Zeb Rice: uncle was most recent governor of California before Gavin Newsom.

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Zeb Rice: I was in Chicago when Obama was in the state legislature.

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Zeb Rice: Just a lot of people I really knew and trusted

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Zeb Rice: in the democratic politics back then said, " You got to

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Zeb Rice: meet this state legislator." So I took a lunch with

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Zeb Rice: the guy,-

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Sean Aylmer: Oh,  wow.

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Zeb Rice: ...  which  was  very  big  of  me,-

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Sean Aylmer: Very  big  of  you.  I  deemed  to  take  lunch  with 

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Sean Aylmer: Barack  Obama.

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Zeb Rice: ...  with  the  state  legislator  I'd  never  heard  of.  But 

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Zeb Rice: I  met  him.  I  nearly  fell  out  of  my  chair. 

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Zeb Rice: I'd  never  met  a  political  talent  like  that  in  my  life.

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Sean Aylmer: Wow.

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Zeb Rice: From  that  moment,  was  smitten  and  did  everything  I  could 

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Zeb Rice: to  help  him  become  Senator  and  then  president.

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

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Zeb Rice: Pleasure.  Great  to  talk  to  you.

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Sean Aylmer: That  was  Zeb  Rice,  co- founder  of  King  River  Capital. 

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Sean Aylmer: This  is  a  Fear  and  Greed  Daily  Interview.  Join  me 

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Sean Aylmer: every  morning  for  the  full  Fear  and  Greed  podcast  with 

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Sean Aylmer: all  the  business  news  you  need  to  know.  I'm  Sean 

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Sean Aylmer: Aylmer.  Enjoy  your  day.