A report commissioned by Google Australia titled ‘Crossroads 2015‘ says Australia’s startup sector could add nearly $109 billion to the Australian economy by 2033, and create nearly 540,000 new jobs in the process. Sadly, while developed economies globally continue to bolster startup sector funding, our government seems to be moving in the opposite direction.
Australian Startups Un-loved
The Australian government has not invested enough into the startup space when compared with other developed nations:
- Singapore: has guaranteed more than A$14 billion over a 5-year horizon to innovative enterprises
- China: has pledged A$8 billion fund for new technology-based ventures
- New Zealand: is expanding its network of government supported startup incubators and enhancing funding programs for startups
- South Korea: has implemented A$4 billion into a Creative Economy initiative
- USA: has embarked on a decade-long initiative to fund medical technologies and Artificial Intelligence (AI)-based industries
Meanwhile here at home, the Innovation Investment Fund was abolished in last year’s budget, and the new Entrepreneurs Infrastructure Program is underfunded by 50% compared to its predecessor.
On a per-capita basis, venture capital in Australia is 1/10th that of Israel or the US.
Technology-based startups produce a 1:5 knock-on effect on job creation (1 successful startup job = 5 additional jobs in other sectors). So why are we giving our startups the cold shoulder?
The Perfect Storm
There is a perfect storm brewing that can help lift Australia out of the startup stagnation climate that we are in:
- The perfect time: Look at the economies around the world and one trend is painfully apparent: we are in a time of ‘no to low growth’. Traditional sectors that have driven economies up until now (think mining & manufacturing) are struggling in this environment, meaning it’s time to pivot, adapt and change. If we want to grow with the rest of the world, we need “futuristic” startup businesses to ramp up – soon – as in right now, in order to start contributing to growth in 2-5 years down the line.
- The perfect conditions: Investors, at home and overseas, are looking for new investment ideas in a ‘no to low growth’ environment. A vibrant Australian startup sector could attract a lot of those investment dollars now, before it’s too late. Government inaction will drive that funding to startups in other countries in the region.
To sail through this perfect storm successfully, we need government-sponsored action…and we need it ASAP!
Action Is Needed – Now
We rank low amongst developed nations in terms of startup formations in the country. According to Australian-born Silicon Valley entrepreneur, and author of “Blue Sky Mining”, Adrian Turner:
“Australia is likely to miss out on the urgently-needed creation of new multi-billion dollar industries essential to maintain prosperity and complement the mining boom through federal government failure to understand the basic ingredients for innovation”
The Crossroads 2015 report confirms Mr. Turner’s assessment, but indicates that all may not yet be lost. It recommends some immediate action that our government, in concert with other private partnerships, can take immediately to transform us into a knowledge-based economy, including:
1) Creating a national innovation agency: to give centralised focus and direction to all other innovation and entrepreneurship initiatives.
2) Fostering a national network of startup communities: by encouraging infrastructure and support systems that tech based (and other) start ups can use to grow and thrive.
3) Increasing funding for startups: through programs such as grants, subsidies, tax incentives and matching-funding initiatives, to draw other funding, through angel investors and private venture capital, to flow into the sector.
The report has 20+ recommendations which spell out the short, medium and long term actions needed in order to reduce our dependence on low-impact manufacturing sector by stimulating startups in high-growth sectors.
We need action NOW. The consequences of delayed action or inaction are too grave!
Image Credit: Flickr/Sacha Fernandez