From Rust Belt to Rockets: Adelaide’s Great Leap Forward
Last week’s announcement by BAE Systems that it is establishing its local HQ at Adelaide’s Lot Fourteen innovation district was a shot in the arm for the state innovation hub, a linchpin of the former government’s innovation policy.
BAE will take up the anchor tenancy at Lot Fourteen and eventually plans to house around 500 employees in the precinct, which has attracted ~A$750m in government investment and is now home to 100 organisations including 60 startups.
This move will help assuage industry concerns that the new State government has deprioritised the project, evidenced by the fact that it has yet to replace the state's most recent chief entrepreneur, Andrew Nunn.
South Australia's innovation community doesn’t see its government as opposed to initiatives like Lot Fourteen – just indifferent.
It may simply be a case of "not invented here" according to the industry insiders who spoke to North Ridge Partners privately.
Lot Fourteen on the site of the old Royal Adelaide Hospital was the brainchild of Steven Marshall, the previous South Australian Premier. It was modelled on the Station F precinct in Paris, which is home to hundreds of startups, accelerators, and venture capitalists.
Marshall tells North Ridge Partners that Lot Fourteen was an important initiative because South Australia was generally regarded as a laggard state.
"Most of the fast-growth states were really getting away from us and we were falling further and further behind that peloton.”
Historically, the state was focused on manufacturing. However, as the nature of manufacturing changed, the sector shrank and lost its critical mass as an employer in SA.
When elected in 2018, Marshall wanted to address this, and SA’s brain drain.
“We knew that we had a net migration out of South Australia. Our best and brightest were leaving every single year to go interstate or overseas for jobs. We knew that we needed to focus on good employment and job creation opportunities in South Australia, and we decided to focus on future industries.”
That meant betting on industries like defence, space, cyber, machine learning, blockchain and the creative sectors. “All of the industries were growing faster than the sectors which we had been relying on.”
Nor was it lost on Marshall and his team that the traditional sectors underpinning the SA economy, such as Automotive, required massive federal government subsidies to remain competitive.
“So, we flipped the strategy completely.”
Early days
The vision for the state’s innovation policy began over dinner at Marshall’s house, according to Mohan Koo, cofounder of DTEX, an Adelaide cybersecurity success story.
Just two days into the job Marshall rang Koo, then based in San Francisco, and invited him to dinner in Adelaide that Sunday.
“He cooked us a three-course meal and gave us the run of his wine cellar.”
(This, by the way, is something the former Premier excels at – we know!)
More importantly, Koo and the other half a dozen participants were sold on Marshall’s vision and enthusiasm and agreed to form the board that would oversee the foundation of Lot Fourteen and the ongoing innovation vision for the state.
Despite the travails of Covid - which first arrived barely a month after it officially opened - the precinct initially focused on defence, cyber security, and Adelaide’s rapidly emerging space sector. It also benefited from the fact that South Australia suffered minimum disruption relative to other states, experiencing only a very short lockdown period.
Today, Lot Fourteen is home to the Australian Space Agency, the Australian Cyber Collaboration Centre, and the Australian Institute for Machine Learning. Big Tech has bought in as well. Google Cloud, Salesforce, Cisco, Microsoft, and Amazon Web Services all have a presence.
Most importantly it has spawned or attracted successful and growing local private enterprises, including:
Fleet Space⁽¹⁾, which develops advanced space technologies and solutions for mineral exploration, space exploration, and defence;
Space Machines Company, a space technology firm focused on developing in-space logistics solutions. Their core offering is spacecraft designed to deliver payloads, reposition satellites, and facilitate orbital servicing;
Alauda Aeronautics⁽¹⁾ designing and building high-performance, electric vertical take-off, and landing (eVTOL) aircraft putting it at the forefront of the emerging air mobility market;
MyVenue, providing advanced point-of-sale (POS) and venue management solutions for large-scale entertainment and sports venues that streamline operations by integrating ticketing, food and beverage sales, and merchandise purchases into a single platform;
Tiimely, a fintech and non-bank home lender whose platform quickly integrates disparate data sources to configure customer fulfilment journeys, process automation, and exception-based credit decisioning;
Fivecast, specialising in open-source intelligence (OSINT) solutions that leverage AI and machine learning to analyse large volumes of publicly available data; and
DTEX, specialising in workforce intelligence and insider threat management to detect and mitigate potential insider threats, data leaks, and compliance violations.
Koo was particularly instrumental in establishing the Australian Cyber Collaboration Centre.
“The idea of the Centre was to bring together trusted entities from the enterprise community, from the government community, and from the academic community, all under one roof where we can brainstorm about cyber security issues.”
“American startups are brash, bold, and willing to sing from the treetops when what they've got is really vapourware. We're the opposite in Australia. We like to build stuff and be very confident that we know it's going to do what it says on the tin, and then we think about how we're going to go and market it.”
But a little more of the American pizazz doesn't hurt, he suggests.
And the recipe is working.
“The amount of impressive tech coming out of Adelaide now is unbelievable,” says Koo. “We've crossed that very difficult gap where Australian tech startups are led by people who are really switched on by the tech, and they are clearly inventors for want of a better term but they are not commercially sound.”
Lot Fourteen helps close that gap.
Local entrepreneurs attribute the success of Lot Fourteen to enabling cross-industry collaboration, a key feature of successful innovation hubs overseas.
It’s a point echoed by George Freney, co-founder and Chief Development Officer at Space Machines Company who says this approach, “provides connectivity across different types of innovation focuses.”
“Space capabilities impact all industries and great innovation comes from connecting unobvious dots.”
That is far more likely in a multi-industry hub, he says.
“The South Australian Innovation Places strategy which includes Lot Fourteen as the major site location provides incredible connectivity across multiple industries and universities.”
For Space Machine specifically, he says, “Having Defence Space Command, other parts of the ADF, and the Space Agency are huge benefits for Space Machines Company as key people from these organisations are easy to access.”
Successes
While he is no longer involved in state politics, Marshall can point to evidence of the success of the strategy.
“They have recently been building satellites in the centre of the city, not in an industrial park, not in Texas or the West Coast of the US or in France, but actually the CBD in Adelaide.”
“One of the great things we learned from Station F was having that spontaneous interaction across multiple genres. We didn't want to just create a Defence Park or a Space Park. We wanted to have some of our best and brightest from different areas all bumping into each other at the local coffee shop, sharing ideas in a non-competitive way,”
Ultimately, the success speaks for itself he believes. “New capital inflows to South Australia. DTEX for instance secured $US50m in funding from Capital G, Google's VC arm which bought 12 per cent of the company. That is monumental.”
“Hopefully now we will see tech unicorns coming out of South Australia. That couldn't have even been envisaged 10 years ago when we just had a different strategy for our state,” says Marshall.
⁽¹⁾North Ridge Partners clients