Spacecubed maps out ambitious plan

When a young Brodie McCulloch returned to Perth in 2010 after working overseas in the travel industry for four years, he aspired to set up his own business.

His plans included establishing a bike share business in Fremantle, but he soon discovered how hard it was to put his plans into practice.

“Going through that process, I saw how challenging it was to launch an idea in Western Australia,” Mr McCulloch told Business News.

He also discovered there were many other young entrepreneurs in Perth facing the same challenges, but with nothing to bring them together.

Drawing on what he had seen overseas, he set out to do something about it, leading to the opening two years later of Perth’s first co-working space for entrepreneurs.

“I wanted to build out a community and a space that could provide support, both a peer-to-peer network and access to events and programs,” Mr McCulloch said.

“That’s really where it started, and at the time I was pretty sure it would be a six-month project.

“It’s now been 10 years, but it has delivered everything I hoped it would.”

Spacecubed is an integral part of Perth’s innovation ecosystem and a substantial enterprise, with consolidated revenue last financial year of $7.9 million.

It operates four major co-working spaces across three locations along St Georges Terrace.

Its programs include the Plus Eight Accelerator, which has supported the development of more than 30 businesses worth an estimated $91 million.

And more than 5,000 women have learned how to code through the SheCodes program, with three quarters now employed in technical roles.

Mr McCulloch has ambitious plans to achieve much more in Spacecubed’s second decade, helped by substantial funding from state government agency Lotterywest.

“We have all the pieces here,” he said.

“We need to bring it all together to have a compound impact.”

The Lotterywest funding, announced last week, comprises a $5.9 million grant over three years. It will allow Spacecubed to expand its networking and funding programs and undertake detailed research on WA’s innovation sector, as detailed below.

Early days

Spacecubed’s early development was guided by a handful of key supporters.

Mr McCulloch, along with Arnold Stroobach and Tom Tapping, were the founding directors of Social Innovation in WA, the entity known today as Spacecubed.

“It was a nice adventure to be part of,” Mr Stroobach said.

“It resonated immediately when we opened up.” He also remembers the very early days when they struggled to gain backing.

“It was really tough and would have been nice to get more government support,” Mr Stroobach told Business News.

Mr Stroobach was able to draw on his prior experience, which included running the government-sponsored Technology Park in Bentley.

Tech Park had many of the same objectives as Spacecubed: to create a cluster of enterprises and learning programs to support innovators and entrepreneurs.

He believes one of the keys to Spacecubed’s success is that members pay fees to use its facilities without being locked into long-term leases.

“You need a roof above your head but it’s not a property deal,” Mr Stroobach said.

“You don’t have a 10-year lease around your neck.”

Spacecubed opened its first co-working space at 45 St Georges Terrace after striking a deal with property owner Stockland.

Mr Stroobach recalls it was not an attractive space: on the ground floor, at the back of the building, with no windows.

He said building company Northerly was a big help with preparing the 500 square metre space on a shoestring budget.

Mr Stroobach also commended former lord mayor Lisa Scaffidi for her early encouragement.

“She said [it was] great, she was a very important supporter,” he said.

Lotterywest was another early supporter, providing a $200,000 grant in 2012.

Mr McCulloch said the venture developed step by step.

“As we had more members joining, they staggered up the rent over two years,” he said.

“And as revenue came through, we could then hire staff.

“Then we got support from Lotterywest and the City of Perth.”

Mr McCulloch said the co-working space developed gradually.

“We designed things so we could test and prototype the space,” he said.

“We didn’t know what people would need so we built out the space as members gave us feedback.”

It has continued to apply feedback to the development of other spaces at 191 St Georges Terrace.

“FLUX grew from that corporate growth space and CORE came from the mining and energy industry and entrepreneurs wanting to connect with all the opportunities in that sector,” Mr McCulloch said.

Similarly, he said Spacecubed’s programs had met a need in the market.

“Plus Eight came about because there was a need for early seed funding for startups, because it didn’t exist here,” Mr McCulloch said.

“SheCodes came from the huge demand from women wanting to learn how to code.”

But not every initiative has worked.

The co-working space at 131 St Georges Terrace, above the Heritage Wine Bar, did not last long, nor did the agreement to run a CBD space for Murdoch University.

These are far outweighed by the successes, however.

Mr McCulloch said Spacecubed had become a partner for property owners wanting to manage their assets more flexibly.

At 79 St Georges Terrace, it struck a management agreement with property owner Mirvac to run the Fern co-working space across three levels.

At 45 St Georges Terrace, it continues to lease two floors, one of which is sub-leased by ASX-listed company Pentanet.

At 191 St Georges Terrace, it leases five floors from property group Hawaiian.

The provision of co-working spaces has become increasingly competitive, particularly after the entry of global player WeWork, but Mr McCulloch believes Spacecubed has a strong point of difference.

“It’s a diversified model, not just a desk and a chair,” he said.

“You can get a space anywhere. It’s the amenities and the collaboration that make the difference.”

This is reflected in the members using its spaces, whose operations extend far beyond aspiring startups.

ASX-listed drilling technology company Imdex, for instance, has a dedicated space at CORE, providing a small CBD base, the flexibility to use function spaces and the opportunity to interact with other innovative businesses in the resources sector.

RAC’s venture capital fund BetterLabs Ventures is also based at 191 St Georges Terrace, along with its expanding portfolio of investees.

These include IDEA Academy, which uses the basement level to run its educational programs.

As such, Spacecubed’s members reflect the innovation ecosystem that Mr McCulloch set out to cultivate a decade ago.

Innovation ecosystem

Further development of this ecosystem is central to Spacecubed’s plans.

With support from Lotterywest, it plans to launch Catalyst, which will provide grants of up to $100,000 to the not-for-profit sector.

The funding will go to organisations with programs, projects or events that will enhance WA’s capacity for innovation or develop the organisation’s own innovation capacity.

This will build upon another initiative: Lotterywest’s IdeaStarter will provide grants of up to $15,000 to not-for-profits delivering innovation incubators or accelerator programs or services.

These funds can be used to test an ‘early stage’ innovative idea, validate that the idea has an opportunity and progress it towards further investment or support.

Perth has been home to multiple programs of this type, including Curtin University’s Accelerate, HBF’s Activate and Amcom Upstart.

Plus Eight has been the most effective, with more than 30 startups completing the program since 2017.

It has enabled the participants to develop their ideas and obtain seed funding from program backers, which include BetterLabs, Woodside Energy, Capricorn Society, Visagio, Hawaiian and Eastcourt.

There will be a $500,000 pool of seed funding for the participants in this year’s program, adding to the $1.5 million invested in prior years.

More significantly, there has been $15 million of follow-on investment in Plus Eight participants, including the likes of U Group, Snackr and IDEA Academy.

Mr McCulloch said that investment underpinned the $91 million valuation of the Plus Eight portfolio companies.

He acknowledged data on WA’s innovation sector was deficient.

“We have data from looking at the companies and their valuations but there is no really deep research into this,” Mr McCulloch said.

That is why Spacecubed will be using some of the Lotterywest funding to support development of the Innovative Society Index, a 10-year project to research and measure development of an innovative society in WA.

This will include measuring the impact of grants programs and hosting an annual summit on the research results and future priorities.

All these initiatives will sit around Meshpoints, also known as the Innovative Society Constellation.

This is a grand name for the group of people that will develop networks and collaboration across the innovation sector in WA.

The individuals likely to play a lead role in guiding the sector were named last month, when the state government listed the 11 Western Australians who will participate in a two-year entrepreneurship program at Boston’s famed Massachusetts Institute of Technology.

They included Mr McCulloch along with Nicole Lockwood from Malka Foundation, Larry Lopez from Australian Venture Consultants, Jennifer Halton from the Centre for Entrepreneurial Research and Innovation, Paula Taylor from West Tech Fest and Rohan McDougall from Curtin University.

The participants also included representatives from the WA government, Rio Tinto and Woodside Energy, who have funded the program.

Innovation and ICT Minister Stephen Dawson said that, over the next two years, the WA team would undertake a thorough examination of the state’s innovation ecosystem and compare its performance with others around the world.

That work is likely to dovetail neatly with the planned Innovative Society Index.

Industry support

Woodside’s support for the MIT program and its sponsorship of Plus Eight are two strands of its backing for local innovators.

The oil and gas giant invested in six WA businesses from Plus Eight’s 2021 cohort and expects to invest in more from the 2022 group.

It has made much larger investments in three other WA tech businesses: Blue Ocean Seismic Services, which is developing autonomous vehicles for subsea surveying; GLX Digital, which has developed software for trading in commodities such as LNG and lithium; and cyber security provider Sapien Cyber.

Its head of corporate venturing, Rob Affleck, recently represented Woodside at the Global Corporate Venturing Summit in the US, signalling its interest in further investment.

Mr Affleck said WA attracted a lot of attention, particularly for its potential in new energy such as hydrogen and renewables, aerospace and remote operations technology.

Mr McCulloch said WA innovators needed more investment support, and he was hoping the Lotterywest money would help attract $30 million or $40 million of new funding.

The biggest player in the WA market is BetterLabs, which has invested $12 million across 22 businesses.

Its latest deal, announced this month, provides a model for what many hope will happen more often in WA.

Local startup WeMoney, which has developed a financial wellness app, raised $7 million.

Chief executive Dan Jovevski said some of the angel investors who backed WeMoney in its early days tipped in more money.

Similarly, BetterLabs made a follow-on investment after making a smaller commitment in 2020.

US venture capital fund Dream Ventures also contributed to the latest raising and, most notably, was joined by Perth gaming billionaire Laurence Escalante.

His company VGW Holdings is by far Spacecubed’s most successful ‘graduate’.

VGW was based at the FLUX co-working space early on and has become a major backer of SheCodes, co-funding the program and employing many alumni.

Mr Escalante has recently established a family office to start investing his rapidly made fortune.

Its hoped more WA success stories will follow his lead and support the next generation of entrepreneurs.