Tech incubator Stone and Chalk has acquired the Commonwealth-led cybersecurity Industry Growth Centre known as AustCyber in a boost for both organisations.
Under arrangements unveiled on Monday, AustCyber becomes a wholly-owned subsidiary of Stone and Chalk, although the CEOs of both organisations say that while the legal structure says ‘acquisition’, the not-for-profit operational reality of the integration makes it a merger.
AustCyber’s Michelle Price and Stone and Chalk’s Alex Scandurra say the combined resources and individual strengths of each organisation will deliver a scale and sophistication for industry growth programs not previously seen in Australia.
Both organisations would operate under their existing brands and run effectively separate accounting to meet obligations under government funding agreements. But the staff and day-to-day operations across multiple sites and cities will effectively be integrated.
Under the new structure, AustCyber becomes a wholly-owned subsidiary of Stone and Chalk. The organisations will maintain separate boards, although each will become “cross-fertilised with one board member from each organisation joining the other.
AustCyber will continue to operate as an Industry Growth Centre under the new ownership arrangements until the end of June 2022 and would continue to receive federal funding under that program. Ms Price said the organisation is committed to meeting all of its obligations under its current funding arrangement.
The AustCyber-Stone and Chalk tie-up has significant implications for the future of the Industry Growth Centres program. Other growth centres include the Advanced Manufacturing Growth Centre; Food Innovation Australia Limited (FIAL); METS Ignited for the mining engineering, technology and services sector; MTPConnect for the medical technology and pharmaceutical sector; and National Energy Resources Australia (NERA), for the oil, gas and energy sectors.
The Industry Growth Centres initiative was unveiled by former industry minister Ian Macfarlane in 2014 as part of the Abbott government. The Australian Cyber Security Growth Network (later AustCyber) was added later as a key recommendation of the original 2016 Australian Government Cybersecurity Strategy.
It was always intended that the growth centres become commercially viable, self-sustaining organisations. Funding for the current growth centres comes to a finish at the end of June 2022.
It is understood that none of the growth centres have to this point found commercial models that put them on a sustainable revenue trajectory that would allow them to continue to operate independently of government funding beyond than deadline.
AustCyber is a first mover in getting out in front of that looming funding deadline at the end of the next financial year and will look to secure its future within Stone and Chalk.
Whether the other growth centres move to restructure operations ahead or choose to run down the clock on the funding timetable or to shutter their organisations remains to be seen.
“It makes a lot of sense operationally,” AustCyber chief executive Michelle Price told InnovationAus. “Day to day its about growing the scale as well as the sophistication of the programs that the two organisations previously did separately.”
“There were already a lot of synergies that we were already focusing on,” Ms Price said, with AustCyber and Stone and Chalk having signed a partnership agreement during 2020.
“AustCyber was focused specifically on cybersecurity, but we were constantly being pulled across into other industries as well – not just because cybersecurity as needed elsewhere, but because of our expertise.”
“The same was happening with Stone and Chalk,” she said. “The issues and the challenges that we were experience from a delivery point of view – and not having enough scale to respond to the demand – and seeing where the ecosystems were up with the level of sophistication that’s needed in growth programs, it just became really obvious to us that we should pursue a merger.”
The merged organisations mean that the combined AustCyber and Stone and Chalk operation will operate in 11 locations across the country, as well as AustCyber’s international presence in Washington D.C. in the United States.
These locations include Stone and Chalk’s innovation hubs in Sydney, Melbourne and Adelaide, and the AustCyber network nodes in Western Australia, South Australia, Canberra, Tasmania and New South Wales, as well as an expected new node in Victoria.
“In those locations where Stone and Chalk has not had a presence, there is a renewed focus on how we can combine the AustCyber nodes with the Stone and Chalk approach to an innovation hub.
Stone and Chalk chief executive Alex Scandurra said the organisation, which began life with a specific focus on building companies in the FinTech sector, would continue to take the frameworks and approaches it uses successfully in FinTech to build companies across other areas of emerging tech.
“What we saw as the opportunity in AustCyber was quite a lot of depth around the national security piece, as well as giving us additional strength when talking about cyber as a horizontal [sector] across all emerging technologies in a similar way that we saw FinTech in terms of mobilizing money across a whole series of sectors,” Mr Scandurra said.
AustCyber’s Ms Price said Minister Karen Andrews’ office had been told of the plan to merge with Stone and Chalk in December, and that the organisation had worked in lockstep with both the minister’s office and the department to reshape its structure.
A spokesperson for Minister Andrews told InnovationAus: “In October 2020, Minister Andrews asked all Industry Growth Centres to submit a transition plan to the Department of Industry, Science, Energy and Resources, outlining their plan for self-sustainment beyond June 2022,”.
“The Industry Growth Centres Initiative is an ongoing program. The transition of individual Growth Centres to self-sufficiency once mature was always envisaged under program objectives and highlighted as part of the announcement of their establishment,” the spokesperson said.
To date, AustCyber has allocated $14.85 million in project funding through its $15 million Industry Growth Centres Project Fund.