This week, early stage venture community StartupAUS released the Crossroads report. It asks a simple question. What would you prefer to see for Australia: an economy forever based on resources, primary industries and domestically focused businesses, or one increasingly based on high-growth knowledge-intensive businesses that compete globally in a technology-driven world? The report points out that while resources and agriculture will always be an important component of Australia’s economy, no sector other than high technology has the proven ability to accelerate innovation, productivity, job creation, and wealth.
The Startup Economy report projects high-growth technology companies could contribute 4 per cent of GDP (or $109 billion) to the Australian economy by 2033 from a base of approximately 0.2 per cent of GDP today – as well as add 540,000 jobs. Some of Australia’s star businesses such as Seek, Carsales.com.au and Campaign Monitor have shown the value tech companies can create here in Australia. Similarly, the overseas growth of these companies and the likes of Altassian, Bigcommerce, and Freelancer have demonstrated Australia’s tech start-ups can have a global impact while creating massive value back home.
Despite these success stories, Australia has not kept pace with other countries around the world where high-growth, tech-based businesses are important drivers of economic growth. These countries have purposely created an environment that encourages start-ups and places emphasis on STEM (science, technology, engineering, and mathematics) education. Australia has under-invested in supporting our high-tech industries and as a result, now has one of the lowest rates of start-up formation in the world and one of the lowest rates of venture capital investment.
The percentage of students enrolled in STEM subjects is low and needs to increase. It has been hampered by a need for more trained teachers in STEM areas including computer science and a lack of awareness that students with a STEM/computer science education create most start-ups. On the funding side, Australia is also behind. We invest just $4.5 per capita in start-up capital compared to $120 in Israel, $85 in the US, $20 in South Korea and $15 in the UK. This needs to increase. We have also witnessed the trend of fast-growing Australian start-ups leaving Australia in search of talent, capital and more favourable regulatory environments.
It’s not all bad news. Over the last three years Australia’s fledgling start-up scene has experienced substantial growth. There is much enthusiasm and strong growth in the number of accelerator and incubator programs available to help entrepreneurs start their business. Many of the top universities have begun to create incubators and build entrepreneur curricula. And a number of Australia’s successful entrepreneurs and business leaders are now re-investing their own time and money into a new crop of start-ups. We’ve also seen increased media interest in start-ups and a broader general awareness of the industry.
I believe there is a genuine will among successful and budding entrepreneurs, industry, education, and policy makers to create a vibrant ecosystem in Australia. We do, however, risk failure if we don’t take action now to address several areas of market failure relating to culture, skills, markets, funding and regulation.
This was highlighted by a recent World Economic Forum report, that noted Australia’s start-up ecosystem lags behind those of many other developed nations. This is due in part to a lack of emphasis on entrepreneurship education, limited engagement with universities, and low cultural support for entrepreneurs. If we want to really make a difference, innovation and entrepreneurship must become a national priority.
Australia has the necessary ingredients to make the transition to a knowledge-intensive, technology driven economy, but we need to change the national view of entrepreneurialism and foster better tech skills in our younger generation. We have six universities ranked in the top 100 in the world. We have a strong spirit and history of building things and a culture of “giving it a go.” We need to build on these foundations starting with kids in primary school. Parents, kids and teachers should all know that being an entrepreneur is a viable, rewarding career path. We also need to adjust our regulations around start-up investment and taxation, and create a framework that will encourage new tech businesses to think big, and help investors to back their ideas.
The Crossroads report outlines immediate and far-reaching steps to address market failures that are impeding the maturation and growth of our start-up ecosystem. It also sets out an action plan for accelerating our transition from being consumers of technology to being creators of globally relevant technology companies. We’re taking this report to all constituents including and are hopeful that the recommendations will be taken on board.
It is not just a question of just one sector taking action. All parts of the Australian start-up ecosystem have a role to play including entrepreneurs, government, business, parents, and universities. Concerted effort is required to develop and implement policies and programs to systematically grow Australia’s technology sector so that it can drive economic prosperity for future generations.
Australia’s startup ecosystem is at a crossroads, and it’s time to step forward together.
Bill Bartee, is a StartupAUS board member and co-founder of Blackbird Ventures and Southern Cross Venture Partners.
