The most dangerous thing for our startup ecosystem is fear. 

Fear of failure changes behaviour. Founders become less willing to attempt the things most likely to matter, and investors make safer bets, optimising for avoiding losses rather than finding outliers.

Australia's venture ecosystem is growing up just as the technology landscape is changing at a rapid pace. We're seeing a broader range of outcomes and founders are navigating more risk and opportunity than ever. 

We need to mature without losing sight of the ambition that built this ecosystem in the first place.

The moment we’re in

AI is reshaping products, business models and competitive advantages in real time. For some established software companies, that creates an opportunity to reinvent themselves. For others, it creates a new source of competitive pressure.

At the same time, Australia's venture ecosystem is entering a new phase. Many of the companies backed during the early years of Australian venture are now reaching maturity and established venture firms are increasingly doing two things at once: backing the next generation of companies while actively managing the investments they made a decade ago. 

The best global venture ecosystems have long operated in this equilibrium between investing and divesting, building new portfolios while returning capital from older ones. It is a sign of progress that Australia is getting there too, even if navigating it at scale is new.

The people carrying the greatest personal weight through these transitions are the founders.

Some founders who have spent the better part of a decade building their companies are now being asked to reinvent significant parts of them, while navigating a market very different from the one in which they started. That is an enormous ask. 

Some will evolve and emerge stronger, building enduring companies that produce great outcomes for founders and investors. Some will build valuable businesses that don't ultimately produce venture-scale returns. Some will fail.

We're seeing more difficult outcomes than we're used to as technology shifts and the ecosystem matures. 

This isn't a moment for reading founders the riot act; it’s a moment to lean in alongside them.

What fear costs us

Venture is built on an uncomfortable truth that you can’t pursue extraordinary outcomes without accepting significant risk. Because the upside of the very best companies can be outsized, the venture model is predicated on a relatively small number of those companies driving the returns of an entire portfolio. 

If fear changes our willingness to take those risks in the first place, we trend towards the status quo. Innovation suffers, ambition goes elsewhere, and Australia loses.

As investors, we have portfolios. Founders have a portfolio of one. For us, any individual investment is one part of our overall return. For a founder, their company represents years of their life, enormous personal sacrifice and the ambitions of the team they’ve brought with them. When the outcome isn’t what they hoped for, it can be devastating. And when years of your life's work are reduced to a negative headline, it's brutal. 

If public judgement becomes the price of falling short, we shouldn't be surprised if fewer people are willing to take the risk of trying in the first place.

We should be able to describe those outcomes honestly and hold ourselves accountable, but also be thoughtful about the lessons we take from them.

A disappointing financial outcome at exit doesn't erase everything that was built along the way. A founder may have spent a decade creating a company, employing hundreds of people, serving thousands of customers, developing new technology and giving a generation of people the experience and confidence to go on and build again. Talent gets stronger, networks deepen and knowledge spreads. Every generation of Australian founders builds on the one before it, including those whose companies never became billion-dollar outcomes. 

As investors, we accept that not every company will produce an outsized financial outcome. At Airtree, we've often stayed quiet on this, leaving it to founders to decide if and when they want to tell their story publicly. But by staying quiet, we risk contributing to a culture where the nuance of a difficult outcome gets lost in the headlines and the founder becomes a cautionary tale. That makes founders understandably reluctant to tell those stories themselves. We’re committing to speaking up more, and sharing more.

That's part of how an ecosystem matures. And we need to mature how we talk about it. 

The case for ambition

None of this should make us less ambitious. If Australia is to remain the lucky country, we can't rely on luck. We have to back the people willing to take the risks that create our future prosperity. The frontier is moving incredibly quickly. The same technological shift forcing some established companies to reinvent themselves is creating extraordinary opportunities for the founders starting today. Risk and opportunity are two sides of the same coin.

We have world-class technical talent, a generation of founders and operators who have learnt inside globally successful Australian technology companies, and more ambition than I have seen at any point in my career. Through Airtree Pathfinders, we meet some of Australia's most entrepreneurial young people who aren't waiting until they've built a career to become founders. They're starting companies in their teens and early twenties, with ambitions to build world-leading companies. These are the founders my own young kids will grow up looking to for inspiration.

Ultimately, our job as venture investors is to generate strong returns for the people who entrust us with their capital. That’s the standard we hold ourselves to and the standard we expect our investors to hold us to.

Over the past twelve years, Airtree has had the privilege of partnering with some of the most successful founders and companies our region has produced. We’ve seen first-hand what can happen when extraordinary founders pursue enormous ambitions.

We've also had investments that haven't worked, and we will have more. That risk is inherent in venture, but it doesn't absolve us of accountability. There are decisions we'd make differently with hindsight, and we regularly look back at those decisions and learn from them so we can better support the ambitious founders who come next.

Our commitments

We are building Airtree to be a generational venture firm that outlives any one cycle, any one success and any one failure. That requires being clear about what we stand for and how we want to operate. Here is what this generation of Airtree will commit to:

‍To our founders. We'll back your ambition and do everything we can to help you realise the full potential of what you're building. We'll have honest conversations along the way, including the hard ones. We'll do more to elevate and celebrate what you build, both because those achievements deserve recognition and because the next generation of founders needs examples of what is possible. And if the ultimate outcome isn't what anyone hoped for, we'll talk about what you built, not just what it sold for.

To our investors. We'll stay disciplined on returning capital and maximising returns from the investments we've already made, while staying at the frontier of where the next generation of exceptional companies will be built. We’ll tell you plainly when something isn’t working, and keep sharing more about each exit, including the ones that don’t deliver the returns we hoped for.

To the ecosystem. We'll keep talking about how venture works, including the parts that are uncomfortable, and we'll speak up when we think the conversation risks creating a culture of caution. We'll take feedback seriously and keep getting better. Most importantly, we'll keep putting capital behind the most ambitious founders and ideas emerging from this region, and doing everything we can to help them build companies of global consequence.

Venture is a long game built on long relationships. This is the moment we're in, and we'd rather face it in the open, alongside our founders and investors.

Australia has spent years building a world-class technology ecosystem. The next chapter should be even more ambitious with more Australian founders building at the frontier of technology, and more globally significant companies emerging from this region. 

We'll get there by building a culture that celebrates ambition, accepts the risk that comes with it, and inspires the next generation to aim even higher.

Elicia McDonald