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High-growth tech sector left out as government picks areas for grant

HISTORY tells us bureaucrats are not in the best position to assess value for investment when it comes to channelling government funds into industry.

A case in point is that the latest stream of the government’s Entrepreneurs Investment Program (EIP) support is restricted to just five sector types — none of which relate to the area which holds the greatest growth potential for our economy; high-growth technology enterprise.

Earlier this year, StartupAUS published a research paper that brought together a wide overview of the Australian ecosystem, and highlighted that not only are we among the least active developed economies when it comes to backing high-growth new ventures — but that our public investment lags that of countries such as Singapore and South Korea.

That is why it is bitterly disappointing to see the government tag just five sectors as areas worthy of research grants under the latest stream of the EIP.

They are food and agribusiness, advanced manufacturing, medical technologies and pharmaceuticals, mining equipment, technology and services, and oil, gas and energy resources.

The sector bias in the EIP might have made sense 20 years ago, but it does not today.

We cannot judge our future by our successes of the past. The global possibilities today within the high-growth technology sector are huge. Twitter, Facebook, Google — none of these enterprises even existed 20 years ago.

Today, they are not just multi-billion-dollar companies, they have created entire new industries that employ tens of thousands of people. By 2033 high-growth tech companies could be contributing $109 billion and 540,000 jobs to the Australian economy.

What would happen if an Australian Twitter, Dropbox or Facebook tried to launch on our shores?

Looking at the support available, they would receive a clear message that the government does not value them, and they would see a dearth of local venture capital. Most likely, they would either give up or move overseas as quickly as possible, and Australia would have lost a billion-dollar opportunity.

The list of sectors to be supported by the EIP is dominated by low labour-productivity industries such as agriculture that have been historically important to Australia but which are not likely to be a source of economic growth in 10 or 20 years time.

No other developed economies are preferentially supporting their “old economy industries” in this way — even New Zealand is firmly on the path to supporting tech companies and has visibly shifted its emphasis from primary industries and tourism to knowledge-intensive companies, regardless of their sector.

Our government needs to understand that tomorrow’s companies often arise from industries that don’t exist today. If we are to take advantage of the wave of global disruption that is coming to every sector in every developed economy, we need to have open and smart processes and support for innovation.

All is not yet lost, however. Despite the challenges, we are seeing the birth of a vibrant and sustainable tech start-up ecosystem in Australia, with new companies and ideas with huge potential to create value not just at home, but also derive it from overseas markets.

It also appears that rules on the taxation of employee share schemes and venture crowd-funding are about to be changed to bring Australia in line with the rest of the world.

Finally, the details on the most vital stream of the EIP for Australia’s start-up ecosystem, the “Commercialising ideas stream”, has not yet been announced.

In a recent open letter, StartupAUS called on the Department of Industry to ensure that the funding cap is at least $1 million, that no sectors be favoured, and that input from investors and trusted advisers be strongly taken into account.

Regardless of what happens with the EIP, exciting new start-ups will continue to be born in Australia. Whether they get an even playing field, and the same funding and development opportunities as start-ups founded in countries such as New Zealand, South Korea, Singapore and the United Kingdom, remains to be seen.

The government has a huge opportunity to show the tech industry, and the public at large, that it gets the way the world is changing.

I have been lucky to have founded and developed some successful businesses within Australia. I would like to see others repeat this success and see Australia gain its rightful place in the world economy. Like many of the most active supporters of Australian start-ups, I am pushing for Australia to wake up and put some support into digital innovation because it is a national imperative.

Australia’s long-term economic future is in grave peril if our government insists on concentrating support for commercialisation of innovation in industries that rely on taking diminishing resources out of the ground, and excludes new ideas and industries that are changing the world.

This article first appeared on The Australian. View the original here.

Opinion: Wotif a great example to our state’s future entrepreneurs

WHEN Wotif was snapped up for more than $700 million by global travel juggernaut Expedia last month, it was a proud moment for our state.

Born and bred in Queensland by local businessmen Graeme Wood and Robbie Cooke, the success of this pioneering online brand is a fantastic example of what’s possible for local entrepreneurs with the courage to dream big.

Wotif was set up in 2000, powerfully defying the crash-and-burn statistics of the global dot.com bubble. Today’s Australian tech entrepreneurs live in more certain times, with the capacity to be in the global export business from the outset – tapping into a ready-made business network such as the Apple App store, with its 570 million registered credit cards.

Wotif is just one example of the potential that exists within our state borders, with an estimated community of more than 100 start-up entrepreneurs in Brisbane alone.

Queensland has the fundamentals in place to become Australia’s leading start-up state in the coming decade. We have a thriving business community with a strong SME culture, a history of business leadership and innovation and one of the world’s most attractive lifestyles for entrepreneurs.

But this is not about more small business serving Queenslanders only, this is about high-growth globally dominant businesses started here, employing people in this state and exporting smarts to the rest of world, that is the allure of the tech start-up sector. If we take control
of the growth of our entrepreneurial community, the returns to Queensland and Australia could be enormous.

The recent Crossroads Report by StartupAUS identified that high-growth tech start-ups could account for $US109 billion and 540,000 new jobs by 2033. To say it is a huge opportunity is an understatement.

So what’s holding us back?

There are three important steps for our government and the local business community must take:

wotif_img
Wotif was set up in 2000, powerfully defying the crash-and-burn statistics of the global dot.com bubble.

1. Commitment to an ambitious state business vision. It’s time to shift our focus beyond the traditional sectors – mining, agriculture and tourism. While these remain important, they are largely dependent on commodity prices and currency – two factors we can’t control. We need to embrace a new wave of innovation – this wave is coming to us, delivered by tech start-up businesses in San Francisco, Tel Aviv, Berlin and London. We need to own our share of those successes so that the next Facebook, Instagram, WhatsApp, DropBox etc are a Queensland success story. New business innovations will come, they will disrupt the status quo but are we really content to merely be digital consumers of somebody else’s good idea?

2. We need to build the start-up network. Start-up cultures don’t thrive in isolation, they require a supportive network of people. Networking and activity hubs are a vital part of this mix.
We need to encourage our entrepreneurs out of the garage and plug them into a network of people who can help them succeed. We need to encourage risk taking, back them with capital and support them.

3. Our young people must become more entrepreneurially enthusiastic. Queensland must support future entrepreneurs as entrepreneurialism becomes more popular among our university and TAFE student population. We need an education system that produces lots of high quality graduates and imbues them with entrepreneurial zeal.

In the US it has been found that up to 20 per cent of students who participate in an entrepreneurship-training program in secondary school will start their own company – a rate about five times that of the general population.

The dividends to Queensland from the Wotif brand have been enormous in employment terms alone. Serial entrepreneurialism is the hallmark of a successful start-up culture, and we have also seen Wotif founders reinvest the gains from this business into multiple other ventures.

Imagine the shift in our state fortunes if we were to see more Wotif’s emerging from our Queensland business community in the next five years.

Let’s use Wotif’s recent success as inspiration to help position Queensland as a state that produces high quality entrepreneurs and thriving, scalable, global businesses.

This article first appeared on The Courier Mail. View the original here.

Dream big or go home

This week, the StartupAUS Crossroads report underlined the pressing need to fix our start-up eco-system, or risk losing out on the huge opportunity presented by high growth technology companies such as Atlassian, Freelancer and 99designs.

We know Australia’s economy is far too reliant on our all-too-finite resources and tourism industries. These are plagued by fluctuating commodity prices and currencies, and weather — factors that we have little positive control over. High-growth tech start-ups could account for $US109 billion and 540,000 new jobs by 2033. To say it is a huge opportunity is an understatement.

So what’s holding Australia back?

While the Crossroads report outlines a whole heap of areas, there is one area which for me is vital. And it’s all too simple: We just don’t have enough young people willing to dream big, give it a go and start up their own venture.

In Australia, a large share of our first-time entrepreneurs (in the high-tech global growth potential area otherwise known as ‘tech start-ups’) are in their 30s and 40s. In fact, far too few young Australian’s start their own venture. In the US and Israel — two leading countries when it comes to high-growth tech firms — a large proportion of entrepreneurs launch their business directly following their undergraduate degree. At Caltech, Stanford and Berkeley, it is estimated that 20 per cent of all graduates form a start-up before they even graduate.

Yet here in Australia (see table below) our leading universities are spawning just a handful of start-up founders compared to other nations.

infographic - startup founders by university

A main part of the problem is that the Australian education system is geared towards preparing students for the workforce, not towards equipping them with the skills, knowledge and encouragement to start their own business. We need to imbue them with wanderlust for a life of beating their own path and leading the world from our great nation.

The first step to reverse this actually starts younger than you might think. It is essential that we encourage kids, parents and teachers to view business creation as a valid career path rather than the current expectation that kids will get a good education in order to get a good job.

Australia is held back by the limited exposure the general public has to entrepreneurship, combined with a culture that does not celebrate or promote an entrepreneurial mindset.

Entrepreneurship is seen as an unusual career path, and even when children are exposed to the notion of starting their own company they are generally guided toward small business creation, and not towards the idea of creating the next Google, Facebook or Apple.

Currently there are no widely implemented entrepreneurship programs in Australian high schools — this needs to change. The creation of an entrepreneurship elective in high schools would put Australia on par with the education systems in much of Europe, the US and Singapore where entrepreneurship is increasingly seen as an essential component of the secondary curriculum. In the US it has been found that up to 20 per cent of students who participate in an entrepreneurship training program in secondary school will later start their own company — a rate about five times that of the general population.

In addition to opening the minds of our younger generations, and opening up our wallets to support them, we also need to focus on providing students with the core technical skills they need to build technology. Australia is currently facing a significant skills shortage in the ICT sector, with demand for ICT workers having doubled over the period 1999 to 2012, whilst applications for tertiary ICT courses have dropped by approximately 60.

A number of promising initiatives are underway in Australia to try to boost participation of students in ICT education, but these are at a small scale and with little co-ordination. If we are going to actually make an impact, we need to make some serious changes:

The government needs formally adopt and extend the updated Digital Technologies Curriculum to make computer science and computational thinking a mandatory component running to year 10, and an elective subject in years 11 and 12.This would help bring Australia up to speed with countries like New Zealand, the Netherlands and Vietnam.
We need a campaign to drive awareness of the value of computer science. Particular effort should go to engaging girls in high school, as girls currently comprise only 12 per cent of university computer science students.
If Australia is going to avoid missing out on the global tech revolution and really build a diverse and strong economy, we need to do something now to give our kids the push they need to start their own business.

As I found out myself when I launched my first tech start-up in 1994 (almost 24 years old), when you’re young you are far more willing to take the risks you need to succeed. We need to equip our own young people with the drive and desire and technical skills to be the next Bill Gates or Mark Zuckerberg.

We’ve got to dream big, or go home.

This article first appeared on BusinessSpectator. View the original here.