In 2013, Google commissioned a PricewaterhouseCoopers (PwC) research to identify ways to accelerate the growth of Australian tech startup sector. The research found that this sector has the potential to contribute $109 billion or 4% of GDP to the economy and create 540,000 jobs by 2033 – with a concerted effort from entrepreneurs, educators, the government and corporate Australia.
As the mining boom draws to a close, Australian tech poster kids such as Atlassian, Freelancer.com and Canva could lead the next startup revolution. In a tight economy faced with declining interest for our minerals from China, dismal retail revenues and disappearing automotive manufacturing, labour productive industries such as tech could be our salvation.
Although our tech ecosystem is not as progressive as Silicon Valley, or even India and China, we do have the foundation and innovative spirit for future growth. After all, this is the country that invented Wi-Fi. But, if this sector is to flourish, create new jobs and be relevant on a global scale, a few considerations and actions are required.
Quality and quantity of people in tech
If you look at investment vs revenue, tech companies have a far better value proposition than most other industries. Companies such as Apple, Google, SEEK, Facebook, Wotif and others generate between $1.7 million (Apple) to $500,000 (Wotif) per employee. In contrast, the Australian mining industry generates under $200,000 and the tourism industry around $50,000 per employee.
As a nation, we need to shift our focus to future growth platforms. If we combine the fact that Australia is one of the most connected and mobile countries in the world to our steady increase in the Global Innovation Index (23rd in 2011, 19th in 2013 and 17th in 2014), we have the right formula for a robust tech industry – that just needs a little more meat on the bones.
One way to increase productivity is by creating more awareness about technology and entrepreneurship from a young age – helping fuel more interest and participation in the tech startup space. In a recent column, AFR’s education editor Tim Dodd argued that kids should be taught coding from a young age. This month, England became the first country in the world to make computer programming mandatory for primary and secondary school kids. In another article here, I’ve talked about the importance of teaching kids entrepreneurship and creating their own jobs.
Technology is more pervasive than ever and deeply ingrained into today’s youth, and will get more so in future. Kids should be taught to apply tech thinking to any industry around them, so they can come up with more productive and efficient solutions. Tech-based entrepreneurialism should become a mainstream career option. The government and support industries need to do more with the youth of today so they can be drivers of growth in 2033.
Access to capital
Most tech startups such as Atlassian and Canva have looked outside Australia for funding. Canva recently raised $3.6 million from US based Shastha Ventures and Founders Fund.
The lack of venture capital (VC) and angel funding in Australia is nothing new. Although the situation has been getting marginally better the last 2 – 3 years with the entry of new angel investors such as Scale Investors (investing in women in tech) and increased activity by Melbourne Angels and Sydney Angels, we still have a long way to go.
The Ferriers Focus report states that Australia has one of the lowest rates of venture capital in the developed world, with only $79 million invested across 97 startups in 2013. In the US, one venture capital firm alone invested more than that in a 12-month period. Australia’s betting value on Melbourne Cup surpasses its VC investments.
While US venture capitalists show keen interest in Australian tech companies, with most major VC’s travelling down under regularly to look for the next big thing, the local funding market is not as supportive. Local companies are often caught in a catch 22 situation of needing to show global growth to secure funding, but needing funding to grow globally.
Banks and traditional institutions are slowly starting to come around and participate in this space. Westpac recently launched the Innovation Challenge inviting tech start-ups to come up with unique ideas for the SME enterprises and commercial real estate customers – offering the winner a $40,000 cash prize and a six-month placement in the BlueChilli start-up accelerator program.
With more tech startup success stories, the sector could find a middle ground that capitalises on the market size, access to global markets through the US, use world-class talent and strong knowledge of Asian markets – it’s a win-win for all.
Where traditional bricks and mortar industries (except mining) have struggled with exports, tech could be the game changer. The country and its policy makers need to come out of the mining shafts and aim for the clouds – literally and figuratively.