The Smart Move into A.I. – H2 Venture’s Toby Heap speaks with Techboard on the opportunities in data and the advantages of a long-term VC play.

Dr Toby Heap is a scientist turned entrepreneur. In 2015 he co-founded H2 Ventures — an Australian start-up accelerator. Toby is also a member of Techboard's Panel of Experts for New South Wales H2 Ventures has worked with a number of successful FinTechs including HashChing and Equitise. With their newest cohort of teams, H2 Ventures has waded into the world of data and AI. MitchelLake’s Robin Block sat down with Toby to discuss the timing of this move and how the industry is expanding.

Toby: “The most important decision we make is who to work with. This is a process that we have refined over the years — learning the negative and positive traits that indicate success. The biggest one might be the ability of the founders to take feedback. That is not only important for their relationship with us, but indicates how well they will be able to relate with investors down the road. The last thing an investor wants is an arrogant founder that doesn’t want any advice.”  

Robin: Why are you looking to expand into AI and data now — what has changed?

Toby: My background in AI has made it a focus from the start. However, Ben and I have been very conscious of the importance of timing. Start-ups that come into a market too soon often spend all of their capital and effort trying to educate people on why they matter. Companies that come in a few years later are able to capitalise on that education. It is only really now that the importance of data has seeped into the general consciousness. Because data and AI are a technological horizontal, it will enable us to expand into other verticals — making it an exciting and logical step.

There are three things that have been changing over the last few decades. One is the volume of data being collected. In the last 18 months, society has collected more data than in the whole of prior history. This is being enabled by both the increasing affordability of data storage and the number of devices in the market capable of collecting data.

The second change is the advancements in algorithms. The transition from complex decision trees to neural networks has vastly increased the power of machine learning. The reason this is only happening now is the third leg of the stool — computing power. Neural networks were actually first hypothesised back in the 1950s — but it is only recently that they have become a real possibility. When I did my PhD, the neural network training programs I ran took 3 days to compute. Now they could be completed in minutes. Quantum computing is the further change on the horizon. Not only does that allow for an exponential increase in computing power, it allows for parallel calculations — something neural networks currently need to simulate.

Robin: What do you offer the start-ups you bring on board?

Toby: I have experience starting businesses. My co-founder and brother Ben has a background in institutional banking. That juxtaposition has served us well. We provide start-ups with funding, but also a 6-month programme that provides direction, counselling and skills training. I think that a lot of people who found companies don’t know what they are up against. Being able to help them go through the journey is a very rewarding process.   

Since our founding, we have been able to systemize that process to the point that we now take on 16 teams with each intake. One aspect I particularly like is a simulator that we built which allows the different teams in each cohort to mock invest in each other's businesses — getting a glimpse of what it is like to be on both sides of the table. As someone who has been both an investor and a founder, I think there are important lessons to be learned there. At the end of the day, the founders are there to build their businesses. We don’t want to have any elements in the programme that waste their time.  

Robin: What is the future for H2 Ventures — is there an ‘end-game’?

Toby: I often say that I have the best job in the world — I get to work with passionate founders on a daily basis. There is nothing else I would rather do. The vision for the company is to keep scaling — to become the go-to accelerator, at least regionally. In VC, it is key to be the first stop. If you aren’t able to see the good companies before they are snatched up, then you have lost before you’ve even started.

We have intentionally structured the business to be a long-term growth play. Particularly because we invest in companies so early, we see ourselves investing alongside the founders. We go on the entire journey with them. We then look to continue those relationships throughout that person's entire career. Part of the benefit of having built a business with my brother is that I know we can keep doing it forever — no matter what is thrown at us we have to move past it because we are family. This is my life. It is what we love doing.  

Techboard Interviews

Robin Block is Head of Engagement at the MitchelLake Group in Sydney. Robin explores the human stories behind digital transformation and how they are changing the future of business.