THERE is a 'brain drain' afflicting the Australian economy, and while inroads have been made with our startup ecosystem, StartupAUS says the government still has a lot to answer for.
The journey to a knowledge economy is taking longer than it should for Australia according to the peak industry advocacy body in its second annual Crossroads Report, which details the state of our startup ecosystem.
This is troubling considering technology-based jobs are reported to have a larger multiplier effect than jobs in any other sector, and focusing exports on resources has already resulted in the fall of other global economies.
StartupAUS says there is no intention to replicate Silicon Valley in Australia, but we can draw from data to quickly realise that we are missing out on a significant opportunity.
Of the 2400 companies listed on the ASX that deliver a total market capitalisation of A$1.65 trillion, software companies comprise 4 per cent by number, much like how female CEOs drive only that percentage of Brisbane's biggest companies. Comparatively, the top 150 companies in Silicon Valley are all technology-based and have a collective market capitalisation of A$2.4 trillion.
We need to mine knowledge too
"Our future economy depends on our learning how to mine our knowledge and commercialise that resource, just as much as it depends on finding and extracting oil and gas or mining coal," says Peter Bradd, StartupAUS director and entrepreneur-in-residence at Fusion Labs.
The Crossroads 2015 report labels government startup involvement and encouragement as substandard, stating that "it is widely accepted that the government has decreased its overall level of support for startups in recent years".
The StartupAUS committee says extensive consultation between sector and government hasn't effected critical action.
"Most of the proposed actions in Crossroads have not been progressed since its first release in April 2014, and indeed there is little evidence that the government has fully grasped many of the issues facing startups or is seeking to address them with any sense of urgency," states the report.
"Notwithstanding the realities of the current fiscal climate, StartupAUS is concerned that Australia's fledgling startup ecosystem is falling further behind in an international context, and that without urgent action from the government it will become increasingly difficult for Australia to transition to a knowledge economy in which startups play an important role."
Small business is worlds apart from startups
StartupAUS says the sentiment that Australia is an entrepreneurial nation is flawed, and warns against assuming local startup success stories are commonplace, such as Brisbane-born Wotif and Ezidebit which sold to US companies A$703 million and A$305 million respectively.
Crossroads 2015 reveals the best estimate available is that there are 1,200 tech startups in Australia, or 0.06 per cent of all Australian businesses.
"Most of Australia's 'entrepreneurs' are pursuing self-employment or needs-based businesses," the report says.
"Countries with higher rates of self-employed entrepreneurs, like Australia, tend to have relatively few high impact entrepreneurs according to a study by the Research Institute of Industrial Economics.
"Care needs to be taken not to succumb to an availability bias, in which we incorrectly assume that successful startups are common in Australia because we are readily able to bring several examples to mind."
Let's turn this around
China, South Korea, the UK and New Zealand have been singled out as showing exemplary investment in their startup sectors, through seed-stage funding allocation, innovation incubators and precincts, and funding programs.
Moreover, the UK, Ireland, Singapore and New Zealand are being held in equally high regard for the financial incentives they give overseas startups to relocate.
StartupAUS proposes a number of actions to be undertaken in the near, medium and long term for the sustained health of our economy, which are discussed at length here. Some of the most pressing include:
- Create a national innovation agency. Australia is one of only three OEC countries without a science or innovation strategy.
- Encourage high-opportunity youth entrepreneurship in school and university students, considering risk tolerance decreases over time. A Young Entrepreneur Scholarships program has been proposed, where government provides $5000 scholarships to 100 final year university students per annum to encourage them to launch startups.
- Create an Entrepreneur Visa.
- Increase the availability of early stage capital to startups. Stimulate greater levels of angel investment and venture capitalism (as an aside, Australians bet more on the Melbourne Cup than the entire Australian VC industry invests in startups a year).
- Implement a national Visiting Entrepreneurs Program to improve access to startup expertise, and simultaneously immerse Australian entrepreneurs in Silicon Valley and other startup hubs.
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